Aggregate Planning at Service-Oriented Firms

Aggregate Planning at Service-Oriented Firms and Traditional Manufacturing Firms

Aggregate planning is said to be more difficult in service-oriented firms than in traditional manufacturing firms. Service-oriented firms have additional difficulties because products cannot be produced early and stored, because the service is rendered at the same time the service is rendered, and because demand can be difficult to predict. This will now be considered further by comparing aggregate planning at Dell Computers and McDonald's.

Schermerhorn (1989, p. 491) notes that manufacturing firms have options when scheduling based on a demand forecast, including that they can "produce early and store products in inventory until demanded." This is a strategy that Dell could utilize, with their products or components of their products able to be produced and stored. This is not the case for McDonald's since their products cannot be made in advance and stored, but must be produced at the time that the product is demanded. This makes it more difficult for McDonald's to meet demand since storing products is not an option available. Another issue is that McDonald's needs to be able to provide all the components of a product at all times. For example, McDonald's needs to be able to provide all ingredients necessary for every item sold and have them available at the same time. A lack of any one ingredient makes the overall product incapable of being supplied. This is not the case for Dell, since a lack of one item can be dealt with by storing other items until they are all available. Overall, this makes any deficiency at any time more concerning for McDonald's. This makes it necessary for McDonald's to oversupply products to ensure that demand is always met, with it being preferable for demand to be exceeded than for products to be undersupplied.

Stevenson (2005, p. 201) notes that aggregate planning differs for service-oriented firms because service occurs at the time it is rendered. This creates a need to plan for the resources needed at any given time. This includes that there is a need to plan for the human resources necessary. This would be one of the needs of McDonald's, with restaurants needing to supply the human resources needed to meet consumer demand at all times. This includes all times of all days. This would be different for Dell, since human resources are needed to meet overall demand, but not on an ongoing basis. For example, a decreased amount of human resources on a given day would not limit the ability of Dell to meet production demand, since the decrease could be noted and action taken. This would allow overall demand to be met. In contrast, a decreased amount of human resources even for a short time would limit the ability of McDonald's to meet ongoing demand.