Traditional production control systems based on the manufacturing resource planning concept do not sufficiently support the planner in solving capacity problems, ignore capacity constraints and assume that lead times are fixed. This leads to problems on the shop floor, that cannot be resolved in the short term. This paper focuses on solving these capacity problems by improving capacity planning at the material requirements planning MRP level through integration of MRP and finite capacity planning. This results in a planning method for simultaneous capacity and material planning. The planning method is based on a new and more accurate primary process model, giving the planning algorithm more flexibility in solving capacity problems. The algorithm is based on advanced scheduling techniques and uses aggregated information, thus combining speed and accuracy. The algorithm is designed to use the available flexibility: alternative routeings, safety stock, and replanning of production orders and requirements. This paper also discusses such related issues as robustness, memory and the role of the human planner.