Literature Review of the Effectiveness of Using Aggregate Planing in the Msme Industry

This research investigates the effectiveness of using Aggregate Planning in the Micro, Small and Medium Enterprises (MSME) industry. Through a literature review using national and international scientific journal articles from 2018-2023, this research identified three main approaches to aggregate planning: Level Strategy, Chase Strategy


INTRODUCTION
In preparing production plans, one of the problems that management often faces is insufficient inventory or product inventory that is too large (overstock), as well as not being able to complete the production process on time.Output volume is influenced by market size and consumer demand .When the company's production numbers and market demand do not match, finished goods inventories can pile up in the company's warehouse.This can have an impact on the storage costs for finished goods that the company must pay each period.This can also cause losses due to the company's inability to meet consumer demand.Therefore, forecasting is a key stage in a company's production planning in order to reduce losses.(Nugroho & Andrean, 2021) Design plays a critical role in proper supply chain performance.An issue that makes the design of supply chain procedures even more important is how waste products are managed efficiently.In other words, in supply chain design, special attention must be paid to returned products, a problem that demands the creation of a reverse supply chain.Furthermore, a suitable supply chain is a competitive advantage for companies and factories and helps them survive in the competitive market.Investigations carried out on supply chain models show that most of the research is devoted to studying progressive supply chains.If the forward supply chain is concerned with the flow from raw materials to the final product and from the producer to the consumer, then the reverse supply chain is concerned with the reverse flow from the consumer to the producer.In addition, some supply chains pay attention to reverse flow and forward flow (Yousefi et al., 2023) aggregate planning method is one way to help MSMEs overcome challenges and prevent unnecessary expenditure.By applying this method, businesses must be able to estimate the amount of production, capacity and resources needed to meet demand in the coming period while spending as little as possible, thereby ultimately minimizing production costs.Referring to this background, this research aims to examine the effectiveness of using aggregate planning in the MSME industry.

METHODS
The method used in this research is a literature review which was carried out using the online search method for national and international scientific journal articles in several journal search engines such as Google Scholar, Science Direct, and the Garuda Portal.Article searches are based on the subject (title) with the keywords "aggregate planning" "UMKM" "Aggregate Planning".The articles used are limited to journals published in the last five years (2018)(2019)(2020)(2021)(2022)(2023).

Aggregate Planning
A typical supply chain consists of sequential production, inventory and distribution operations (Hrabec et al., 2022) .Aggregate production planning simultaneously establishes optimal levels of production, inventory, and employment within a limited planning period to meet total demand for all products using the same limited resources (Cheraghalikhani et al., 2019) .Aggregate planning is a complex problem primarily because of the need to coordinate interacting variables so that the company can respond to demand in an effective manner.The general overview of the assumptions of the aggregate planning model is that market demand is deterministic, production costs in a certain planning period are linear or piecemeal.Then the costs that arise due to changes in the rate of production in a certain period are also linear or piecemeal.There are restrictions on the overall planning period because it varies for each planning period.Back orders may or may not be permitted, and other assumptions applicable to a particular model are introduced as necessary.

MSMEs
MSMEs are basically companies or businesses run by families, households, organizations or individual entrepreneurs.Due to their significant contribution to economic growth, MSMEs are very important in Indonesia.The food industry employs the majority of micro and small industries (IMK) in Indonesia.The Central Statistics Agency (BPS) reported that in 2020, there were 1.51 million IMK business units in the food industry.The food industry contributes 36 percent of all national IMK or 4.21 million business units.With a total of 632 thousand business units or 15% of the total national IMK, the wood industry and cork, rattan and bamboo commodities (apart from furniture) are the next most dominant sectors.With less than a thousand company units per sector, the two business fields that IMK has entered the least are computers and electrical equipment.- Based on the findings of production planning and control using a heuristic aggregate planning approach, it provides maximum total production with minimum total production costs by regulating maximum overtime utilization.Total production using the heuristic aggregate planning approach with overtime control was 3,953,498 packs of bread/year, 2.8% higher than the total output in the previous period of 3,845,714 packs of bread/year.The total production costs using the heuristic aggregate planning approach with overtime control are IDR 1,069,040,000/year, lower than the company's total production costs in the previous year, namely IDR 1,153,714,000/year, and the company can save production costs of 7. 3%.Due to its ability to reduce warehousing expenses, this research shows that Chasing strategy is the most cost effective.The weakness of implementing the Chasing strategy , namely employing temporary or contract workers, must still be taken into account.The business world may face risks due to substandard staff performance as well as possible production failures caused by high levels of human error.
Based on future demand projections, aggregate planning allows companies to design optimal strategies for using their resources to achieve effective and efficient capacity.Effectiveness is a balance between planning and results, while efficiency is the capacity to produce a certain output with the fewest resources .(Patrobas et al., 2021) Planners must select a facility's production levels for the next three to eighteen months based on projected demand, facility capacity, inventory levels, staffing, and related inputs.In aggregate planning, the quantity of goods produced, independent of the type of product, determines the production plan, rather than reducing it per product.There are generally three approaches that can be used for aggregate planning, depending on the trade-Page 1487 of 1491 off between costs associated with production capacity, inventory costs, and backlog costs.(Frenia & Rusdianto, 2023) , In large industrial enterprises, the aggregate planning method is often used to plan and control production.Aggregate planning can be used to control output not only in large industries, but also in small and medium-sized businesses.Several previous research sources also show that this strategy can be combined with other strategies to obtain complex research results.Aggregate planning is often integrated with algorithms to produce good models capable of solving all types of aggregate production planning efficiently and effectively.By using two-level particle swarm optimization, this strategy can eliminate product shortages in manufacturing supply.(Setiawan et al., 2022) .
Meanwhile. in research (Sari et al., 2022) on MSME Makmur Jaya, namely when demand exceeds overall production capacity, a way to reduce company expenditure costs is found through aggregate planning calculations.The cheapest estimated cost for planning production for the next 12 months is IDR 80,916,600.00 which can be used to apply the Level Strategy technique .Furthermore, according to (Jufriyanto, 2023) there are three marketing strategies, namely using and improving promotions through existing online media, improving services to consumers, and participating in marketing activity training.

Aggregate Planning Strategy
In aggregate planning, the company carries out calculations using three main strategies: pursuit strategy, level strategy, and mixed strategy, based on the results of previous forecast calculations.This strategy helps MSME companies determine how production, number of workers, and material costs will be adjusted to fluctuations in market demand.Decision making in aggregate planning is based on collected data, including labor quantities, labor costs, and material costs, which are documented in Table 2.By considering these data, companies can optimize their production strategies, manage costs efficiently, and respond to changes market properly.Currently, the company has 10 workers with a salary cost per worker of IDR 3,500,000 per month.The cost of raw materials per unit is IDR 500.Although hiring costs, firing costs and inventory costs are not mentioned, these costs must be considered in aggregate planning to calculate total production costs .In addition, the company pays an overtime salary of IDR 100,000 per day, which is an important factor in calculating additional production costs due to overtime.The products that can be produced by each worker per day are 1000 units, giving an idea of the level of worker productivity.This data provides the basis for calculating production costs, determining aggregate planning strategies, and optimizing company operations in the face of fluctuations in market demand.

Level Strategy
In Level Strategy, the company's production volume is maintained at a constant level, and the inventory formed during the production period can be used to meet excess demand for products at certain times.In other words, the company maintains production at a stable level, even though market demand fluctuates.The inventory that forms can act as a buffer to deal with unexpected spikes in demand, so that customers can still be served without experiencing stock shortages.Table 3 likely contains calculation results showing constant production levels and inventory built up over a certain period, providing a clear picture of how the company manages production and inventory to maintain a balance between product supply and demand.Data on production, demand, inventory, production costs, inventory costs, and payroll costs are calculated based on the Level strategy, where production is kept at a constant level and inventory is used to offset fluctuations in demand.Total costs are the result of production costs, inventory costs, and salary costs during the period in question.The total production costs for aggregate planning using the Level Strategy method are IDR 52,650,000.

Chase Strategy
The chase strategy is a method used to organize production in such a way that inventory can be minimized and stable.In this strategy, production is adjusted directly to fluctuating market demand, so the company does not need to keep large inventories.Thus, inventory storage costs can be minimized.Table 4 may contain calculation results using a chase strategy, which includes production adjusted to market demand in each specific period.This data provides an overview of how companies use chase strategies to keep inventory at minimal levels, increase operational efficiency, and reduce inventory costs in order to appropriately meet customer demand.Table 4 displays the calculation results using the Chase Strategy for the last six months.In this strategy, the number of workers and production is adjusted according to market demand each month, keeping inventory at a minimum level.In February 2023, with five workers, production of 10,000 units meets demand for 9,500 units with an inventory of 500 units.During March through July, the number of workers and production remains constant, but inventory fluctuates to adjust to variations in demand.Production costs, inventory costs, and salary costs are calculated, resulting in total costs of IDR 52,650,000 for the period.This table provides an overview of how companies use Chase Strategy to maintain inventory as efficiently as possible, minimize inventory costs, and meet market needs in a timely manner, creating efficient and cost-effective operations in the process.

Mixed Strategy
Mixed Strategy is an approach that involves changing more than one controllable variable, including a combination of Chase Strategy and Level Strategy.In this strategy, companies can adjust production, number of workers, and inventory according to fluctuations in market demand.A company may maintain a fixed production Page 1489 of 1491 level (Level Strategy) to meet steady demand, while also allowing for production adjustments (Chase Strategy) at certain times in case of sudden spikes in demand or market changes.Table 5 is the result of calculations using this strategy, which may include data on how production, headcount, and inventory are organized in response to changes in demand, providing a comprehensive picture of how Mixed Strategy is used to optimize production, reduce inventory costs, and maintain customer satisfaction by face variations in market demand.Tables 5 and 6 show the calculation results using Mixed Strategy for the last six months.In this strategy, a combination of Chase Strategy and Level Strategy is implemented by maintaining regular production at a certain level (Level Strategy) while also allowing workers to work overtime (Chase Strategy) to respond to fluctuations in market demand.Each month, the number of regular and overtime working days, regular production per worker, overtime production per worker, number of regular workers, and number of overtime workers are set to meet different demands.Total total production, demand, inventory, production costs, inventory costs, overtime costs, worker salaries, and total costs are calculated by considering these variables.Thus, Mixed Strategy allows companies to optimize production, minimize inventory costs, and maintain customer satisfaction by responding Page 1490 of 1491 with flexibility to variations in market demand.The total costs during this period were the result of production costs, inventory costs, overtime costs, and worker salaries, reaching a total of IDR 124,900,000.

CONCLUSION
Based on the results of calculations and analysis using three main strategies in aggregate planning, namely Level Strategy, Chase Strategy, and Mixed Strategy, it can be concluded that the choice of aggregate planning strategy has a significant impact on the operational efficiency and production costs of MSME companies in the Children's Clothing Industry.In a Level Strategy, production is maintained at a constant level, with inventory acting as a buffer to deal with fluctuations in market demand.On the other hand, Chase Strategy allows companies to adjust production directly to fluctuations in market demand, reducing the need for large inventories.Therefore, even if inventory costs are low, production costs and worker salaries can increase significantly.
The Mixed Strategy approach combines elements of Level Strategy and Chase Strategy, allowing for flexibility in addressing variations in market demand.In this strategy, regular production is maintained at a certain level, while overtime production is used to respond to spikes in demand.Although inventory costs and production costs are relatively low, overtime costs must be taken into account, which can increase total production costs.Overall, the selection of an aggregate planning strategy must consider the trade-off between production costs, inventory costs, and labor costs.Companies need to carefully evaluate their market needs and production capacity to choose the most suitable strategy.In the context of MSMEs in the Children's Clothing Industry, Mixed Strategy may be the best choice because it provides flexibility in responding to fluctuations in demand without sacrificing production stability and optimizing the use of human resources.However, companies must continue to monitor and manage overtime costs carefully to ensure operational sustainability and company profits in the long term.