Hierarchical integration in production planning: Theory and practice

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Abstract
This paper discusses the issue of integrating various decision levels in hierarchical production planning systems. First the theory is briefly reviewed and then two case studies are presented. It is argued that it is not sufficient to have a good decision model at every level of the decision hierarchy. The different models should be carefully integrated. The potential problems resulting from a lack of integration are discussed. These problems are then illustrated in two case studies in order to be able to focus on actual managerial issues. It is shown how different decision levels supported by decision models were integrated in these two applications. Two important features are the crucial role of crossfunctional managerial committees in the integration process and the introduction of slack to avoid disaggregation problems.We do not claim to be exhaustive in presenting the problems related to integration nor do we claim that the solutions to the cases are the best possible ones. We do, however, hope that this paper motivates production managers to take a serious look at their hierarchical planning procedures.