Hierarchical material requirements planning

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Abstract
This paper reports on a simulation study of hierarchical planning methods, which can be utilized in connection with material requirements planning. The company considered produces one final product having a complex structure. The factory is functionally organized. Two different cases have been studied. In the first case there were both seasonal and independent stochastic variations in demand and in the second case only stochastic variations. Aggregate decisions are based on a simple model in which all items are aggregated into one product group and all machines into one machine group. The aggregate plan is disaggregated by changing the detailed production plans obtained from the material requirements planning system. Two different methods involving changes of order release times and changes of order quantities have been used. Simulation results indicate that even very simple hierarchical planning processes can give significant cost reductions compared to using material requirements planning based on predicted demand.

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