Chapter 3- Master scheduling

INTRODUCTION
• It is a planning tool and forms the basis for
communication between sales and
manufacturing
• Forms basis for calculating the capacity and
resources needed
• MPS drives the material requirement plan
• As a schedule of items to be made, the MPS
and BOM determine what components are
needed from manufacturing and purchasing
• MPS is priority plan for manufacturing
Master production schedule (MPS)
• Production plan deals in families of products
while MPS deals with end items
• It breaks the production plan into the
requirements for individual end items, in each
family, by date and quantity
• Total no. of items in MPs should not be different
from the total shown on the production plan
• MPS is a plan for manufacturing
• It reflects the needs of the market place and the
capacity of manufacturing and forms a priority
plan for manufacturing
The MPS forms a vital link between
sales and production as follows:
• It makes possible valid order
promises. The MPS is a plan of what
is to be produced and when. As such,
it tells sales and manufacturing when
goods will be available for delivery.
• It is a contract between marketing
and manufacturing. It is an agreed-
upon plan.
The information needed to develop an MPS
is provided by:
• The production plan.
• Forecasts for individual end items.
• Actual orders received from customers
and for stock replenishment.
• Inventory levels for individual end items.
• Capacity restraints
RELATIONSHIP TO PRODUCTION PLAN
Suppose the following production plan is
developed for a family of three items:

Opening inventories (units) are:

Product A 350
Product B 100
Product C 50
Total 500
The next step is to forecast demand for each
item in the product family
With these data, the master scheduler must
now devise a plan to fit the constraints. The
following illustrates a possible solution
This schedule is satisfactory for the following
reasons:
• It tells the plant when to start and stop production
of individual items.
• Capacity is consistent with the production plan.

It is unsatisfactory for the following reasons:

• It has a poor inventory balance compared to total
inventory.
• It results in a stockout for product C in periods 2
and 3.
EXAMPLE :
• The Hotshot Lightning Rod Company makes a
family of two lightning rods, Models H and I. It
bases its production planning on weeks. For the
present month, production is leveled at 1000
units. Opening inventory is 500 units, and the
plan is to reduce that to 300 units by the end of
the month. The MPS is made using weekly
periods .There are 4 weeks in this month, and
production is to be leveled at 250 units per
week. The forecast and projected available for
the two lightning rods follows. Calculate an MPS
for each item.
Answer:
 Link b/w sales and production

• MPS makes possible valid order promises.

It is a plan of what is to be produced and
when
• It is a contract b/w sales and
manufacturing
 What are the requirements?

• The production plan

• Forecasts for individual end items
• Actual orders received from customers
and for stock replenishment
• Inventory levels for individual end items
• Capacity restraints
DEVELOPING A MASTER PRODUCTION
SCHEDULE
Objectives
– To maintain the desired level of customer
service by maintaining finished goods
inventory levels or by scheduling to meet
customer delivery requirements.
– To make the best use of material, labor, and
equipment.
– To maintain inventory investment at the
desired levels.
Three steps in preparing MPS

1. Develop a preliminary MPS

2. Check the preliminary MPS against

available capacity.

3. Resolve differences between the

preliminary MPS and capacity
availability.
 Preliminary Master Production S
On hand = 80 units
Lot size = 100 units

Once the preliminary master production

schedules are made, they must be
checked against the available capacity.
Amalgamated Nut Crackers, Inc., makes a
family of nut crackers. The most popular
model is the walnut, and the sales department
has prepared a 6-week forecast. The opening
inventory is 50 dozen (dozen is the unit used
for planning). As master planner, you must
prepare an MPS. The nutcrackers are made in
lots of 100 dozen.
 Planning horizon for MPS
• It is the time span for which plans are made
• It must cover period at least equal to the time
required to accomplish the plan
• The min. planning horizon is the longest
cumulative or end- to-end lead time
• The longer the planning horizon, the greater
the visibility
• As a min., the planning horizon for a FAS
must include time to assemble customer’s
order
 Rough-Cut Capacity Planning
• It checks whether critical resources are
available to support the preliminary master
production schedules
• Critical operations include bottleneck
operations, labor, and critical materials
• Similar to resource requirement planning
used in production planning process
• Difference is that now we are working with
product instead of family
 Example:

The Acme Tweezers Company makes tweezers in

two models, medium and fine. The bottleneck
operation is in work center 20. Following is the
resource bill (in hours per dozen) for work center 20.
Using the resource bill and the master production
schedule, calculate the number of hours required in
work center 20 for each of the 4 weeks. Use the
following table to record the required capacity on the
work center.
Answer:
 Resolution of differences
• Next step is to compare the total time required to
the available capacity of the work center

• If the available capacity is greater than required

capacity, the MPS is workable.

• MPS must be judged by:

 Resource use

 Customer service

 Cost
 Master Schedule Decisions
• MPs must represent as efficiently as
possible what manufacturing will make
• If too many items are included , it will lead
to erroneous forecasting and managing the
MPS
MTS MTO ATO
FAS
End pro. End Pro. FAS End Pro.
MPS MPS

MPS
Raw
Raw Raw
material
material material
Different MPS Environments
 Master Schedule Decisions
• Make-to-stock products
• Make-to-order products
• Assemble-to-order products.
• Final assembly schedule (FAS).
Master Schedule Decisions

Different MPS
environments
 Final Assembly Schedule
• Is is the last step to forecast
• Assembly to customer order is generally
planned using a FAS
• Is a schedule of what will be assembled
• It is used when there are many options and it is
difficult to forecast which combination the
customers will want
• MPs is done at component level
• FAS schedules customer orders as they are
received and is based on components planned
in MPS
Relation b/w MPS,FAS and other activities
 Planning Horizon
• The planning horizon is usually longer for several
reasons. The longer the horizon, the greater the
“visibility” and the better management’s ability to avoid
future problems or to take advantage of special
circumstances.
• As a minimum, the planning horizon for a final assembly
schedule must include time to assemble a customer’s
order. It does not need to include the time necessary to
manufacture the components.
• That time will be included in the planning horizon of the
MPS.
Product structure: critical lead
time.
 PRODUCTION PLANNING,
MASTER SCHEDULING, AND
SALES
• The production plan and the MPS
uncouple the sales forecast from
manufacturing by establishing a
manufacturing plan.
• The MPS is a plan for what production can
and will do.
• The MPS is a plan for specific end items
or “buildable” components that
manufacturing expects to make over some
time in the future.
Sales forecast, production plan,
and master production schedule
 The MPS and Delivery
Promises
• Using the MPS, sales and distribution can
determine the available to promise (ATP).
• The ATP is calculated by adding scheduled
receipts to the beginning inventory and then
subtracting actual orders scheduled before the
next scheduled receipt.
• A scheduled receipt is an order that has been
issued either to manufacturing or to a supplier.
 MPS and delivery promises
• In make-to-order or assemble-to-order
environments, demand is satisfied from productive
capacity
ATP is that part of inventory
and planned production that is
not already committed and is
available to customer
ATP is calculated by adding scheduled
receipts to the beginning inventory and then
subtracting actual orders scheduled before
the next scheduled receipt

Scheduled Receipt is an order that has been issued either

to manufacturing
or to a supplier
ATP for period 1 = on hand - customer orders due before
next MPS = 100 - 80 = 20 units

ATP for period 2 = MPS scheduled receipt - customer

orders due before next MPS
= 100 – (10 + 10) = 80 units
ATP for period 4 = 100 - 30 = 70 units
 Delivery Promises

• MPS is a plan for what production can and

will do
• Sales delivery promises can be made from
– “Consumption” of forecasts – Projected
available balance
– Available to Promise calculations
• MPS values for a given time period left after actual
customer orders are subtracted.
Continuing with the example problem,
Amalgamated Nut Crackers,
Inc., has now received customer orders.
Following is the schedule of orders received
and the resulting available-to-promise
calculation:
Sometimes, customer orders are greater than the
scheduled receipts. In this case, the previous ATP is
reduced by the amount needed. In this example can
the master planner accept an order for another 20
for delivery in week 3? Ten of the units are available
from week 3, and 10 can be taken from the ATP in
week 1, so the order can be accepted as shown in
the following.
Calculate the available to promise for the following
example. Can an order for 30 more
be accepted for delivery in week 5? What will be the ATP if
the order is accepted?
 Projected available balance (PAB)
• It is calculated depending on whether the period is
before or after the demand time fence
• Demand time fence is the number of periods ,
beginning with period 1, in which changes are not
expected due to excessive cost caused by
scheduled disruption

• PAB=prior period PAB or on hand balance +

MPS – customers orders

• PAB= prior period PAB + MPS - greater of

customer orders or forecast
Given the following data, calculate the projected available balance.
The demand time fence is the end of week 3, the order quantity is 100,
40 are available at the beginning of the period
So far we have considered how to calculate projected
available balance and available to promise. Using the
Amalgamated Nut Cracker, Inc., example, we now combine
the two calculations into one record. The demand time
fence is at the end of 3 weeks
 Time Fences
• In the following product structure
A
A is Master schedule Item
LT=2

B C D
LT=6 LT=5 LT=8

E
LT=16
The longest cumulative lead time is 26 i.e. A+ D+E
MPS must have a planning horizon of at least 26 weeks
Changes to the master production schedule
will occur. For example
• Customers cancel or change orders.
• Machines break down or new machines
are added, changing capacity.
• Suppliers have problems and miss
delivery dates.
• Processes create more scrap than
expected.
Changing production Schedule
• Cost increases due to rerouting,
rescheduling , extra setups, expediting.
and build up of work in progress inventory
• Decreased customer service . A change in
quantity of delivery can disrupt schedule of
other orders
• Loss of credibility for the MPS and the
planning process
 Zones and Time Fences
• Frozen Zone: senior managements approval is
required to make changes in MPS. It is defined by
demand time fence, within this demand is usually
based on customers orders , not forecast
• Slushy zone: priorities are easier to change than
materials ordered and capacity established. It is
defined by planning time fence. Within this time fence
the computer will not reschedule MPs orders
• Liquid Zone: any change can be made to the MPs as
long as it is within the limits set by the production plan.
Changes are routine and are often made by the comp.
prog.
 Time Fences
• Points in the planning horizon to define the
flexibility allowed in the MPS
– Frozen Zone (closest to current date)
• Capacity and materials committed to customer orders,
forecast generally ignored
• Senior management approval for changes
– Slushy Zone
• Less commitment of materials and capacity
• Tradeoffs negotiated between marketing and manufacturing
– Liquid Zone – All changes allowed within limits of the
Production Plan
MPS and time fences
 Error Management
• Errors in customers orders occur all the
time and require constant attention
• Three general types of errors occur:
1) Wrong product specification
2) Wrong amount
3) Wrong shipping date( too early or too
late)
 Summary
• MPS is a plan for the production of
individual end item.
• It must match demand for the product in
total, but it is not a forecast of demand.
• MPS must be realistic, reflect balance
between required and available capacity.
• MPS is meeting ground for sales and
production.
 Cont…
• Form the link between production planning
and what manufacturing builds.
• Plan/determine capacity requirements.
• Plan material requirement. Drives MRP.
• Keep priorities valid. Priority plan for
manufacturing.
• MPS is a plan for what is to be produced
and when
• Be a contract between marketing and
manufacturing.
 Cont…
• If MPS is not realistic
– Overload or under-load of plant resources.
– Unreliable schedule resulting in poor delivery
performances.
– High WIP.
– Poor customer service.
– Loss of credibility in the planning system.
END OF LECTURE