Chapter 4 - The Master Schedule

4.1 Background and links to the S&OP

4.2 Master schedule horizon
4.3 Time fences
4.4 Sources of demand
4.5 Basic methodology
4.6 Impact of product environment
4.7 General approach to master schedule development
4.8 Available-to-promise logic
4.9 Planning options in an ATO environment
4.10 The two-level master schedule
4.11 Some notes on the master scheduling responsibility
4.12 Demand management overview
4.13 Elements of demand management
Visual

4-

Introduction

Developing and managing the master schedule

It is the next step in production planning
Assumes that S&OP has properly planned resources
Contains more detail than the S&OP
The time horizon is typically shorter than S&OP
S&OP plans in terms of families
Master schedule represents final, sellable items
is a major interface between prodn and customer

Service firms may not have one

master scheduled operating rooms???
Visual

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4.1 Background and Links to S&OP

S&OP lines up the proper resources
S&OP aggregates forecast demand

seldom includes actual input from customer orders

planning is not done on the final product level

More planning is then needed to

Visual

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4.1 Background and Links to S&OP

Break down the aggregated plans

into buildable products

Serve as a plan to include forecast and actual

orders
Serve as a source of info to develop capacity
plans
Serve as a vehicle to translate customer orders
into effectively timed factory orders
Serve as a tool to plan inventory levels
especially finished goods
Visual

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4.1 Background and Links to S&OP

This planning activity is the master schedule
It starts with a detailed product forecast
Develops a set of rules for the consumption of
the forecast
Translates the requirements into actual orders
The master schedule has more detail than S&OP
The master schedule has a shorter time horizon
The master schedule quantities or values should
equal those developed in the S&OP

Visual

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S&OP Relationship to MPS

Product Group A July
Working Days/
Month
Approved
Production Plan
from S&OP

MPS Week

August

September

October

November

22

21

23

20

19

22,000

21,000

23,000

20,000

19,000

40

41

42

43

Product A1

1,000

1,000

1,000

1,000

Product A2

500

1,000

1,500

2,000

Product A3

1,500

500

500

1,500

Product A4

2,000

2,500

2,000

500

Total

5,000

5,000

5,000

5,000

Visual

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Product Groups/Families
Represent how the product or service is
presented to the market

Logical groupings based on similar sales

and manufacturing requirements

Should be meaningful in terms of volume

of sales generated
Ideally should be no more than 6-12
product groups per business unit

Source: Wallace, Tom F. Sales and Operations Planning, A How-To Guide, T.F. Wallace & Co. 1999.

Visual

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Definition of a Master Schedule

The anticipated build or buy

schedule
For specific products and
services
A set of planning numbers
that drives detailed
scheduling and planning
MPS
Master scheduling

Visual

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Master Planning of Resources Model

Business Planning

Demand Management

Master Planning
of Resources

Sales and Operations Planning

Resource Planning

Master Scheduling

Rough-Cut Capacity Planning

Detailed Scheduling & Planning

Visual

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Planning for Production

F
O
R
E
C
A
S
T
I
N
G
&
D
E
M
A
N
D

Business
Planning

C
A
P
A
C
I
T
Y

Sales
Planning
Production
Planning

P
L
A
N
N
I
N
G

Master
Scheduling
Detailed Planning
& Scheduling
4-

Visual

Source: Wallace, Tom F. Sales and Operations Planning, A How-To Guide, T.F. Wallace & Co. 1999.

Master Scheduling
Input: The approved Sales and Operations Plan
Sales and
Operations Plan

Master Schedule

Rough Cut
Capacity Planning

Master Production
Schedule

Output: The approved Master Production Schedule

Visual

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The Master Scheduling Process

5
4
3
2
Production plan
from S&OP

Publish master schedule

Re-evaluate using RCCP
Revise master schedule
Evaluate using RCCP

Develop preliminary
master schedule
Visual

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4.2 Master Schedule Horizon

The master schedule must have a horizon that
is equal to or longer than the cumulative lead
time of the product or service being planned.

First examine the bill of material

shows components required to assemble a
product
shows the relationship between products
shows the quantity to build one product
contains lead times
Visual

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4.2 Master Schedule Horizon

Cumulative lead time is the amount of time it
takes to make a product from start to finish

Figure 4.1

Visual

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Bill of Materials
Single
Level

B e a r in g
A 1218E1
In n e r
B 1218W 1

O u te r
B 1218W 2

B e a r in g
A 1218E1

Multilevel
H a rd w a re
K it
B a lls

H a rd w a re
K it

S eal

In n e r
B 1218W 1
g re a s e

f o r g in g

B 1218W 2
O u te r

fa s te n e rs

Visual

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Problem 4.1

Number of Gs needed?
Which are purchased components?
Visual

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Traditional Single Level Bill of Material

Level
0

Packaged Product

Label

Bulk Solution

Cap

Bottle

Visual

6-20

Multi-Level Bill of Material

Level
0

Packaged Product

Label

Active

Bulk Solution

Filler

Cap

Bottle

Base

Visual

6-21

Typical Planning Bill for a Hotel

Hotel Room

View Preference

Smoking Preference
20%

Smoking

80%

Non-Smoking

Bed Preference

60%

Ocean

40%

Lagoon

Meal Preference

40%

King

35%

Breakfast

40%

Two Doubles

40%

No Meals

20%

One Double

25%

All Meals
Visual

6-22

Advantages of Planning Bills

More accurate forecasting

Reduced number of end items

A more accurate scheduling and planning

process

Simplified order entry

Permits two-level scheduling

A more accurate method of product costing

A more efficient and flexible data storage and

maintenance system

Visual

6-30

4.2 Master Schedule Horizon

We must plan beyond the cumulative lead

time
promise of 1 product in week 14
what about other components?

Visual

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4.2 Master Schedule Horizon

Without adequate inventory

start product in week 12

2 week LT

start subassembly C in week 8

4 week lead time

start subassembly G in week 3

5 week lead time

buy component H in week minus 4

cumulative lead time is...

Visual

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4.3 Time Fences

One problem with using forecasts

they are almost always wrong

The master schedule uses time fences

they establish rules to manage the master

schedule
Demand time fence
Planning time fence

Visual

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4.3 Time Fences

Within the demand time fence...
The forecast data is ignored
Actual customer orders are used
Schedule is considered frozen
no changes to the schedule
impossible or impractical
bake a loaf of bread and change the schedule during baking

The demand time fence is the closest to the

present time in the schedule

Visual

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4.3 Time Fences

Within the planning time fence...
Is set equal to or longer than the cumulative lead time
of the product.
Beyond this time there is adequate time to react to changes
additions, deletions
modifications to product
modifications to schedule

Schedules are free or float with actual demand

Between demand and planning the schedule is
flexible or slushy
changes may be made but must be analyzed

Visual

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Time Fences
Demand Time Fence

Sets the period of the

master schedule where
changes are seldom
permitted
Covers period of actual
customer demand
Usually set to cover the
production and assembly
time for a product or the
delivery time for a service

Planning Time Fence

Sets the period within

which changes to the
master schedule must be
made by the master
scheduler
Combination of actual
demand plus forecasted
demand
Usually set to include
material and components
acquisition time
Visual

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MPS Time Zones

Impact
of change

DEMAND

Frozen

Flexible

Free
Forecast

Customer Order
Backlog
TIME
Visual

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Demand

DEMAND

Planning

Defining Time Fence Policies

Emergency
Changes
Only

Trade Off
Changes
Only

Frozen

Flexible

Time Fences

Virtually
Any Change
Allowed

Time
Zones

Free

Visual

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Creating Firm Planned Orders

DEMAND

Frozen

Released
Orders

Flexible

Firm
Planned
Orders

Free

Computer
Generated
Planned
Orders

TIME
Visual

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4.4 Sources of Demand

The master schedule is said to disaggregate the
S&OP...
Important that the numbers must agree with the
S&OP numbers
The forecasting methods are often different
S&OP are long-range, often using causal
techniques
Master schedule is shorter and typically
would use quantitative methods
actual customer orders
Visual

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4.5 Basic Methodology

The master schedule uses demand (orders and
forecast) in its development

It considers
inventory plans
labor plans
new product introductions

Now considers
meeting the customers needs per the S&OP
balancing demand v. capacity
establishing inventory levels per the S&OP
Visual

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4.5 Basic Methodology

Figure 4.4 shows a simple master schedule.

The actual schedule that includes specific

quantities and models is the master
production schedule or MPS

review of schedule
on hand = 70
lot size = 80
dates are completion dates

Visual

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4.6 Impact of Product Environment

The master schedule may need to be
developed and managed very differently
depending on the product environment...

Make-to-Stock (MTS)

Assemble-to-Order (ATO)

Make-to-Order (MTO)

Visual

4-

Scheduling Decisions
Make-to-Stock
Design

Supply

Production

Delivery

Assemble-to-Order
Design

Supply

Production

Delivery

Make-to-Order
Design

Supply

Production

Delivery

Supply

Production

Delivery

Engineer-to-Order
Design

Visual

6-18

4.6 Impact of Product Environment

Make-to-Stock environment...

Customer has no influence on final design

Master schedule serves as a final

assembly schedule (FAS)

Relatively few final products

significant raw materials or components

Order promising not done through MPS

orders filled directly from stock

Visual

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4.6 Impact of Product Environment

Assemble-to-Order environment...

Customer has influence over final outcome

automobiles, computers

Many raw materials and components

Final products not scheduled on the master

schedule

too many options

Master schedule the options

bicycles with different colors, seats, tires
Visual

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4.6 Impact of Product Environment

Make-to-Order environment...

Customer has large influence over design

Companies may use standard components

are assembled differently

Typically few number of raw materials but a

large number of final products

Typical of service organizations

This MPS reflects capacity and raw material

needs

Visual

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4.7 General Approach to Development

Forecast and master schedule MTO bakery

easier to develop forecast for raw materials
plan to make 100 loaves of bread
plan to make 100 cakes

Forecast and master schedule ATO

12,960 forecasts and master scheduled bicycles
for one bicycle types
develop schedule at option level
forecast common assemblies
seats, wheels, frames
order placed at FAS (final assy schedule)
Visual

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4.7 General Approach to Development

Figure 4.5 master schedule development

The master schedule is usually designed to
operate at the level that has the fewest
items that need to be scheduled.

Visual

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4.8 Available-to-Promise Logic

Available-to-promise (ATP) allows a firm to

quickly and realistically promise delivery of
product to customers
typically not used in MTS environment
not used as much in the MTO environment
very valuable in the ATO environment

For any MPS, the ATP is how many items

are not promised to specific customer orders
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The Projected Available Balance

The projected available balance (PAB) is the
projected inventory position in a particular time
period.
It is similar to a projected bank balance on a
projected cash flow statement.
Prior to the Demand
After the Demand
Time Fence :
Time Fence:
PAB = Prior period PAB

+ MPS
+ MPS
- Customer orders

PAB = Prior period PAB

- (> Forecast or Cust. orders)

Visual

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Figure 4.6 ATP

product: A
lead time: 2 weeks
Lot size: 60
Period
Forecast
Customer orders
projected avail. Balance
ATP
MPS

demand time fence: 2 weeks

on hand: 56

1 2 3 4 5 6 7 8 9 10
22 25 20 20 18 18 32 30 28 28
24 23 17 22 15 14 17 16 12 16
32 9 49 27 9 51 19 49 21 53
60

60

60

60

Visual

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11
29
13
24

12
35
11
59
60

Figure 4.6 ATP Solution

product: A
lead time: 2 weeks
Lot size: 60
Period
Forecast
Customer orders
projected avail. Balance
ATP
MPS

demand time fence: 2 weeks

on hand: 56

1 2 3 4 5 6 7 8 9 10 11 12
22 25 20 20 18 18 32 30 28 28 29 35
24 23 17 22 15 14 17 16 12 16 13 11
32 9 49 27 9 51 19 49 21 53 24 59
9
6
29
32
20
60
60
60
60
60

Visual

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4.8 Available-to-Promise (ATP)

Available-to-promise (ATP) is the uncommitted portion of the

current inventory or future planned supply

ATP is similar to the uncommitted amount of your current bank

balance and future paychecks

ATP (period 1) = On-hand balance + MPS Sum of customer

(1st period only)
orders before next MPS
ATP = MPS Sum of customer orders before next MPS
(all future periods that contain an MPS planned receipt)

Visual

6-16

Available-to-Promise
Item: 78100

Demand Time Fence: 3

Description: Commercial Generator Unit

Planning Time Fence: 8

Lot Size: 50 On Hand: 50

Lead Time: 2 periods

Period

Forecasted sales

20

22

21

25

24

23

21

21

25

Customer orders

19

17

15

11

Projected avail. balance 50

31 14

49

24

27

35 10

Available-to-promise
Master production schedule

Calculate the available-to-promise for periods 19

Visual

6-17

Available-to-Promise (Solution)
Item: 78100

Demand Time Fence: 3

Description: Commercial Generator Unit

Planning Time Fence: 8

Lot Size: 50 On Hand: 50

Lead Time: 2 periods

Period

Forecasted Sales

20

22

21

25

24

23

21

Customer Orders

19

17

15

11

Projected Avail. Balance 50 31 14

49

24

27

6 35 10

Available-to-Promise

15

43

49

50

50

50

Master Production Schedule

14

21 25
1

Visual

6-17a

4.8 Available-to-Promise Logic

Key points about ATP

It is calculated from customer orders, not

from forecasts at any time

the idea is it shows the availability to promise

a product to customers, not to forecasts

ATP provides a valuable tool to

communicate immediately and honestly
with customers

Visual

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4.9 Planning Options in ATO

Forecasts are done for the end items
Master schedules are done for the
components

A special bill of material is used

Planning bill
super bill

Figure 4.8
overplanning
mix hedge
market hedge
Visual

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4.10 The Two-Level Master Schedule

Figure 4.9 sample two-level master

schedule

Visual

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4.11 Master Scheduling Responsibility

Master Scheduler job is high visibility and
very important

The master schedule is a major link to the

customer orders

It should reflect policy issues tied to the

S&OP such as Chase, Level, or
Combination strategies

The MPS reflects the completion of an order

It must be realistic

Visual

4-

4.11 Master Scheduling Responsibility

Lot sizes are established

a tradeoff between carrying costs and customer
service
ordering just what is needed is lot-for-lot

Safety stocks can be planned as an absolute

number or a percentage of orders
avoid system nervousness

firm planned orders

orders that are firm planned and no changes to the
order are permitted
the system may suggest a change
Visual

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4.12 Demand Management Overview

Some demand is internal to the company

service requirements
new product prototypes
quality assurance testing
internal repairs
distribution requirements

marketing and sales are flexible

changing capacity
changing human capacity

suppliers, inventory, phased out designs

Visual

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4.11 Master Scheduling Responsibility

Valuable for what-if scenarios

evaluate major changes to production volume
or mix change requests

MPS represents a major part of the

planning system for a company
generates production orders
generates purchase orders
recommended to be operated by computer
control
Visual

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Types of Supply Orders

Planned Orders

Firm Planned Orders

Released Orders

Production Orders

Purchase Orders
Visual

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4.13 Elements of Demand Mgmt.

Four major elements of demand:

prediction

communication

influence

prioritization and allocation

Visual

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4.13 Elements of Demand Mgmt.

Prediction...
forecasting customer demand
different methods may be used
track the forecast
lessen the impact of error

communication
influence
lead time reduction
production flexibility
S&OP / Master Schedule policies
safety stock
Visual

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4.13 Elements of Demand Mgmt.

Prediction...

Set safety stock levels

must be aligned with customer service levels
set by S&OP
must be understood by all employees

Visual

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4.13 Elements of Demand Mgmt.

Prediction...

Track and compare actual v. planned

make adjustments and forecast more
accurately

Visual

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Bill of Resources

A bill of resources is a listing of the required

amount of constraining resources needed to
manufacture one unit of a selected item or family.
These could include:

Labor
Materials or components
Facilities
Equipment
Research and development assets
Finances

Visual

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Master Scheduling Policy

Master scheduling policy

Describes organizational responsibilities
Defines approval cycle for the master schedule
Establishes time fences and change management
procedures

Establishes methods of forecast review

Establishes methods of forecast relief
Defines forecast review guidelines

Defines master scheduling techniques

Order promising guidelines
Make-to-stock, make-to-order strategies
Visual

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What Is an Effective Schedule?

Manufacturing efficiency
(schedule)

Inventory
usage
(costs)

Production
System
Trade-Offs
Customer
delivery
Visual

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The Goals of Master Scheduling

To balance supply and demand priorities

To develop practical solutions to supply

constraints

To prioritize and allocate supply to customer

demands

To establish a strategy to avoid overloaded

schedules and unbalanced conditions

To create a schedule with attainable

completion dates that satisfy customer needs

Visual

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Master Scheduler Functions

Understand the forecasting approach and its limitations

Participate in the development of the sales and
operations plan
Manage the constraints of supply capacity
Maintain a realistic master schedule
Monitor consistency with the sales and operations plan
Execute master schedule policies, such as time fences,
safety stocks, subcontracting, and lot-sizing
Identify, negotiate, and resolve conflicts

Visual

6-32

Master Scheduler Job Qualifications

Experienced with products and customers

A good communicator
Good with numbers
Cool under pressure
Disciplinedmaintains data accuracy
Assertivemakes things happen
A problem solver rather than a firefighter
Creativefinds innovative ways to balance supply and
demand
Genuinely interested in products and customer service

Visual

6-33

Who Brings What to the Table?

Engineering

Human
Resources

Product
Definition

Product
Demand

Workforce
Availability

Marketing

Capital

Master
Capacity
Schedule
Business
Plan

Finance

Materials

Operations
Management

4-

Visual

Source: Launchbury, Keith J. Principles of Planning Omeric, 1999.

Symptoms of Poor Master Schedules

Unreliable delivery promises

Persistent past due orders
Excess inventory
Expediting selected orders
Excessive schedule changes
Upper management
scheduling intervention
Excessive overtime or idle time
End of month shipping surge
Lack of accountability

Visual

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MPS Performance Measurements

Customer service
Inventory turns
Schedule reliability
Respect for time fences
Excess and slow moving
inventory
Level of backlog
Lead time reduction
Cycle time reduction
Credibility of promise information

Visual

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Keeping the MPS Realistic

Adapting the MPS to changing demand
conditions

Adapting the MPS to changing supply

conditions

Rescheduling

Bottom-up replanning and pegging

Testing for feasibility

Regular review and revisions

Visual

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Common Changes in Demand

Customer schedule changes

Rush orders

Order cancellations

Changes to specifications

Visual

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Common Changes in Supply

Nonconformance to schedule
Production downtime
Capacity availability
Over- or undersupply

Nonconformance to specifications
Scrap
Effect of quality

Visual

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Engineering Changes
Mandatory or immediate
Phased-in or optional
Process

Set up a review board

Determine the procedure for instituting change
Set effective dates
Ensure change process deals with multiple items
Assess the cost and impact of the change
Maintain the status for each revision

Visual

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Managing Change

Is the change
necessary?
Is the change
feasible?
Are resources
available?
What are the costs
and the risks?

Visual

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The S&OP and the Master Schedule

Definition
Item
planned
Planning
Horizon
Constraints

Time
Periods
Planning
Focus

Sales and
Operations Plan
Supply Rate
by Product Group

Master
Schedule
Anticipated Build
or Buy Schedule
Product Group
End Item or Specific
Level in Bill of
Materials
Longest Lead-time Cumulative Lead-time
Resource
for Components
Resource
Capacity
Monthly

Material/Capacity/
Sales and Operations
Plan
Weekly or Daily

Product Volume

Product Mix
Visual

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Uses of the Master Schedule

The anticipated build or buy schedule

For independent demand items

Projects inventory/backlog position

Drives material and capacity plans

Order promising

Assigning priorities

NOT a sales forecast!

Visual

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The Inputs to the Master Schedule

Production plan line from the sales and operations plan

Detailed sales forecast
Inventory position and targets
Backlog position and targets
Time fence policies
Customer orders
Interplant orders
Service parts orders
Distribution requirements
Planning bills of material
Production and supply position
Visual

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The Outputs from the Master Schedule

Master production schedule

Master purchasing schedule

Projected inventory position

Projected backlog position

Product availability information

Valuable order promising information

Visual

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Possible Solutions
Overloading

Overtime
Extra shifts
Transfer people
Reroute work
Subcontract
Hire temporary help
Install more equipment
Add additional capacity
Visual

7-23

Possible Solutions
Underloading

Increase sales demand

Use time for training
Use time for maintenance
Reduce shifts
Transfer people
Reroute work
Reduce subcontracting
Lay off temporary help
Reduce capacity
Visual

7-24

Chapter 4 Homework
Problem 5

Visual

4-