Integral Logistics Management — Operations Management and Supply Chain Management Within and Across Companies

5.1.1 The MRP II Concept and Its Planning Hierarchy

Intended learning outcomes: Explain the business processes in logistics and operations management of an enterprise, structured according to temporal range. Describe the different degrees of detail in planning. Disclose the aim of data management.


The MRP II concept (manufacturing resource planning)[note 501] encompasses a set of processes, methods, and techniques for effective planning of all resources of a manufacturing company (compare [APIC16]).

Often, design and manufacturing must be planned long before there is custo­mer demand. Therefore, a typical feature of the MRP II concept is the three-level planning according to temporal range as shown in Figure 5.1.1.1.

Fig. 5.1.1.1        Business processes in logistics and operations management of an enterprise, structured according to temporal range, with data management.

The aim of long-term planning is, firstly, to forecast the total demand for products and processes that will be placed on the enterprise or on the supply chain from the outside, and secondly to derive quantities and gain the resources — persons, production infrastructure, or deliveries from third parties — necessary to fulfill demand.
  • Master planning is another term used for long-term planning. Both terms emphasize that this type of planning sets the cornerstones for logistics. These cornerstones determine the marginal conditions and limitations of shorter-term planning.
The aim of medium-term planning is to forecast demand more precisely along the time axis. Demand must correspond to the resources probab­ly available at certain times. Thereby, sourcing agreements that were reached during long-term planning might have to be precision-tuned or modified.
  • Detailed planning and scheduling is another name for medium-term planning. It emphasizes the more detailed level of medium-term planning. It often involves only certain areas of production — assembly or parts production, in industry, for example — and of procurement. But it may also involve the areas of product and process design — particularly for customer order production.
Short-term planning and control concerns the actual servicing of orders. Within this time horizon also fall capital-intensive investiture in bought goods and value-added from the consumer’s view.
  • Execution and control of operations is another name for short-term planning & control. During execution, the controlled system does yield feedback to the persons controlling the system. Thus, control takes the form of coordination, which is performed by all persons involved. With a view to the company as a socio­technical system, however, more apt terms are “coordination” or “regulation.”

Long-term and medium-term planning are reviewed cyclically or periodi­cally, to adjust planning to the changing estimates of demand. The planning process should be appropriate for each domain. Particularly short-term planning must take account of the actual flow of goods (e.g., in sales and distribution, R&D, production [shopfloor], or purchasing). A natural solution for the three temporal ranges of planning is to distribute the associated tasks among different persons. This ensures that the various perspectives are taken into account in the planning. This can contribute to quality and feasibility of the planning.

The different temporal ranges in planning are not equally important in all supply chains. Although the tasks are basically the same, they vary in con­tent. Thus business processes will also vary. In addition, the degree of detail in planning is not the same as the temporal ranges.

Rough-cut planning refers to rough-cut business objects. Detailed objects planning refers to detailed business objects.

Rough-cut planning of goods aids rapid determination of the procurement situation for critical item families. Rough-cut planning is indispensable where there are numerous orders to plan. It allows quick calculation of different variants in long-term planning.

In general, the level of detail of planning increases with decreasing temporal range. While rough-cut planning is usually conducted in long-term planning, short-term planning refers to detailed objects. This is not always the case, however. At least some short-term planning can be conducted in a rough-cut manner. In sales, for example, checking the load on rough-cut work centers and the availability of item families of raw materials allows quick decisions on whether to accept customer order production. Conversely, long-term planning in process industry often refers to detailed objects.[note 502]

Rough-cut and detailed business objects are also objects of data mana­ge­ment. See Section 1.2, in particular Section 1.2.5, and Chapter 17.

Data management ensures that the necessary data on objects is available at all times in a detailed and up-to-date form.

The animation shows a Planning Hierarchy, namely three-level planning according to temporal range, a typical feature of the MRP II concept.
To see further information about the different processes, please press the appropriate arrow.



Quiz on Chapter 5.1.1. : not yet available

The MRP II Concept and its Planning Hierarchy[kml_flashembed movie="https://opess.ethz.ch/wp-content/uploads/elements/Quiz_5_1_1.swf" height="75%" width="100%" /]



Course section 5.1: Subsections and their intended learning outcomes

  • 5.1 Business Processes and Tasks in Planning & Control

    Intended learning outcomes: Describe the MRP II concept and its planning hierarchy. Explain the part processes and tasks in long-term, medium-term planning as well as in short-term planning & control. Present the reference model of processes and tasks in planning & control. Produce an overview beyond MRP II: DRP II, integrated resource management, and the “theory of constraints”.

  • 5.1.1 The MRP II Concept and Its Planning Hierarchy

    Intended learning outcomes: Explain the business processes in logistics and operations management of an enterprise, structured according to temporal range. Describe the different degrees of detail in planning. Disclose the aim of data management.

  • 5.1.2 Part Processes and Tasks in Long-Term and Medium-Term Planning

    Intended learning outcomes: Present long-term planning, also called master planning, Differentiate between master planning and master scheduling. Disclose medium-term planning & control, also called detailed planning and scheduling. Produce an overview on bid processing, customer blanket order, sales and operations planning, (detailed) resource requirements planning, requests for quotations, blanket order processing, and order proposal.

  • 5.1.3 Part Processes and Tasks in Short-Term Planning & Control

    Intended learning outcomes: Present in detail short-term planning & control, also called execution and control of operations. Produce an overview on order release, order coordination, order monitoring and order checking, delivery, job-order costing, and billing.

Print Top Down Previous Next