Production planning in the case of uncertain individual demand extension for an MRP II concept

To gain competitive advantage, firms have increased their number of variants in recent years. But as a consequence it has become more and more difficult to forecast demand data at the level of individual products over the planning horizon. However, practical experience shows that forecasts of aggregate demand are quite accurate. Exact data for individual products can be determined for the current but not for the remaining periods. For the remaining periods only upper and lower bounds of the demand data for individual products can be predicted with certainty in many cases. This means that production planning should follow a hierarchical planning concept: First, production planning should be conducted at the aggregate level over the planning horizon to determine simultaneously resource requirements (regular capacity and overtime) and the quantities of the product groups in order to satisfy aggregate demand. Second, for the immediate scheduling period and detailed planning level should determine how available production resources have to be allocated to the individual products subject to some constraints imposed by the aggregate plan. MRP II (Manufacturing Resource Planning) is a production planning system which is based on a hierarchical concept and has been developed for such complex production situations. The paper concludes that the MRP II concept is only partially suited to production planning in the case of uncertain demand. A hierarchical model, which can be incorporated into the MRP II concept, is therefore proposed for uncertain demand. An alternative method for uncertainty reduction is also briefly discussed.