2.4 The Planning Hierarchy

Manufacturing stability relies on converting volatile market signals into a deterministic production schedule. Confusion between "Forecast" (what might happen) and "Firm Order" (what must happen) leads to excess inventory or line stoppages. This section delineates the planning horizons and the mechanics of the Master Production Schedule (MPS).

2.44.1 The Planning Hierarchy

• Forecast vs. Firm Demand:Demand

• Soft Forecast: HowUncommitted wedemand translateused customerfor "hopes"driving long-lead time (softLLT) forecast)procurement. intoLiability factoryis "reality"limited (firmto orders).the raw material authorization.
• MRPFirm (Order: Committed production slots with allocated capacity and labor. Cancellation triggers immediate financial penalties.

2.4.2 Material Requirements Planning)Planning (MRP) 

The MRP engine is the single source of truth for purchasing signals.

• Regenerative Frequency: MRP runs nightly to capture inventory changes.
• Exception Management: Planners must address MRP "Action Messages" daily:
  • Reschedule In (Pull): TheDemand enginehas thatmoved drivesup; purchasing.
    • Regenerativematerial MRP:will Runningbe the calculation daily/weekly.late.
    • ExceptionReschedule Messages:Out (Push): HowDemand plannershas managedelayed; "Pushdefer Out"delivery (tooto muchprevent inventory)cash andflow "Pulldrain.
    • Cancel: In"Demand (shortagehas risk)vanished; signals.terminate PO immediately.

  Final Checklist

  Planning Signal	Action	Liability
  Forecast	Drive LLT Procurement	Material Cost Only
  Firm Order	Drive Labor & Assembly	Full FG Price
  MRP Push	Defer Supplier Delivery	Inventory Carrying Cost
  MRP Pull	Expedite Supplier	Line Down Risk