The MRP II Hierarchy
At the top of the hierarchy we have long-range
planning. This involves three functions:
resource planning, aggregate planning, and
forecasting. The length of the time horizon for
long-range planning ranges from around six
months to five years. The frequency for
replanning varies from once per month, to once
per year, with two to four times per year being
typical. The degree of detail is typically at the
part family level.
The forecasting function seeks to predict
demands in the future. Long-range
fore-casting is important to determining the
capacity, tooling, and personnel
requirements. Short-term forecasting
converts a long-range forecast of part
families to short-term fore-casts of
individual end items. Both kinds of
forecasts are input to-the intermediate-
level function of demand management.
Resource planning is the process of
determining capacity requirements over the long
term. Decisions such as whether to build a new
plant or to expand an existing one are part of the
capacity planning function. An important output
of resource planning is projected available
capacity over the long-term planning horizon.
This information is fed as a parameter to the
aggregate planning function.
• Aggregate planning is used to determine levels
of production, staffing, inventory, overtime, and
so on over the long term. The level of detail is
typically by month and for part families. For
instance, the aggregate planning function will
determine whether we build up inventories in
anticipation of increased demand (from the
forecasting function), "chase" the demand by
varying capacity using overtime, or do some
combination of both. Optimization techniques
such as linear programming are often used to
assist the aggregate planning process.
Included production planning functions:
• demand management
• rough-cut capacity planning
• master production scheduling
• material requirements planning
• capacity requirements planning
The process of converting the long-term
aggregate forecast to a detailed forecast
while tracking individual customer orders
is the function of demand management.
The output of the demand management
module is a set of actual customer orders
plus a forecast of anticipated orders. As
time progresses, the anticipated orders
should be "consumed" by actual orders.
Demand management is accomplished
with a technique known as available to
promise (ATP). This feature allows the
planner to know which orders on the MPS
are already committed and which are
available to promise to new customers.
ATP combined with a capacity-feasible
MPS facilitates negotiation of realistic due
If more orders than expected are received,
so that quoted lead times become
excessive, additional capacity (e.g.,
overtime) might be required. On the other
hand, if fewer than expected orders arrive,
sales might want to offer discounts or
some other incentives to increase
demand. In either case, the forecast and
possibly the aggregate plan should be
Master production scheduling
Master production scheduling takes the
demand forecast along with the firm orders from
the demand management module and, using
aggregate capacity limits, generates an
anticipated build schedule at the highest level of
planning detail. These are the "demands" (i.e.,
part number, quantity, and due date) used by
MRP. Thus, the master production schedule
contains an order quantity in each time bucket
for every item with independent demand, for
every planning date.
Rough-cut capacity planning (RCCP) is used
to provide a quick capacity check of a few critical
resources to ensure the feasibility of the master
production schedule. Although more detailed
than aggregate planning, RCCP is less detailed
than capacity requirements planning (CRP),
which is another tool for performing capacity
checks after the MRP processing. RCCP makes
use of a bill of resources for each end item on
the MPS. 1
Capacity requirements planning (CRP)
provides a more detailed capacity check on
MRP-generated production plans than RCCP.
Necessary inputs include all planned order
releases, existing WIP positions, routing data, as
well as capacity and lead times for all process
centers. In spite of its name, capacity
requirements planning does not generate finite
capacity analysis. Instead, CRP performs what
is called infinite forward loading.2
The plans generated in the long- and
intermediate-term planning functions are
imple-mented in the short-term control
modules, of job release, job dispatching,
and in-put/output control.
Job release converts planned order
releases to scheduled receipts. One of the
impor-tant functions of job release is
allocation. When there are several high-
level items that use the same lower-level
part, a conflict can arise when there is an
insufficient quantity on hand. By allocating
parts to one job or another, the job release
function can rationalize these conflicts.
The basic idea behind job dispatching is
simple: Develop a rule for arranging the
queue in front of each workstation that will
maintain due date integrity while keeping
machine utilization high and manufacturing
times low. Many rules have been
proposed for doing this.
• 1. Monitor the WIP level in each process center.
• 2. If the WIP goes above a certain level, then
the current release rate is too high, so reduce it.
• 3. If it goes below a specified lower level, then
the current release rate is too low, so increase it.
• 4. If it stays between these control levels, the
release rate is correct for the current conditions.