The MRP II Hierarchy

Long-Range Planning 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.

Forecasting 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 fore­casts of individual end items. Both kinds of forecasts are input to-the intermediate- level function of demand management.

Resource planning 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 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.

Intermediate Planning Included production planning functions: demand management rough-cut capacity planning master production scheduling material requirements planning capacity requirements planning

Demand management 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.

ATP 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 dates.

ATP 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 revised.

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.

RCCP 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

CRP 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

Short-Term Control The plans generated in the long- and intermediate-term planning functions are imple­mented in the short-term control modules, of job release, job dispatching, and in­put/output control.

Job release Job release converts planned order releases to scheduled receipts. One of the impor­tant 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.

Job Dispatching 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.

Input/Output Control 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.