LESSON 4 Master Production Scheduling 06January2014

Lesson Objectives Upon completion of this lesson, you should be able to: Distinguish the Master Production Scheduling (MPS) process as part of Production Planning and Control (PPC) Describe MPS Integration Explain key benefits of MPS process Analyze pros/cons/differences of production strategies captured in an MPS Given a scenario, demonstrate Rolling Through Time Explain a stable MPS and Performance Measures Explain the purpose of a Bill of Materials (BOM)

Lesson Topics This lesson will cover the following topics: MPS within the PPC System Framework MPS Inputs and Outputs MPS Benefits Production strategies captured in the MPS Rolling Through Time MPS Stability and Performance Measures Bill of Materials (BOM)

What’s In It For Me? Your ability to interpret a contractor’s MPS enables you to anticipate the specific times at which products will be manufactured and to verify the planned delivery schedule meets contract requirements

Lesson Introduction How is an MPS tracked and measured?

MPS within the PPC System Framework Lesson Topics: MPS within the PPC System Framework MPS Inputs and Outputs MPS Benefits Production strategies captured in the MPS Rolling Through Time MPS Stability and Performance Measures Bill of Materials (BOM)

MPS within the PPC System Framework Resource Planning Material and Capacity Plans Detailed Capacity Planning Sales and Operations Planning Demand Management Master Production Scheduling Detailed Material Planning Shop-floor Systems Supplier Systems Enterprise Resource Planning (ERP) Systems Front End (Strategic) Engine (Tactical) Back End (Operational) Material Requirements Planning

MPS The MPS moves between all levels of the PPC. This provides information to all functional areas before the final production schedule is released. MPS adjustments can be based on: capacity needs, material order changes, production requirements, other The PPC process is iterative in large part due to this.

Strategic Level The MPS is a statement of an anticipated build schedule based indirectly on actual and forecasted future customer demand: Includes the specific periods in which the planning process determined products should be manufactured Provides information for coordination with sales Forms the basis for promising customers delivery times for ordered items

Strategic Level (cont.) The MPS document is developed to be compatible with the Materials Requirement Planning (MRP) system

Sales and Operations Planning Master Production Scheduling PPC System Framework Resource Planning Sales and Operations Planning Demand Management Disaggregation Front End Master Production Scheduling MPS is the disaggregated version (details end items by period) of the aggregate plan produced by the Sales and Operations Planning (S&OP) process

MPS Inputs and Outputs Lesson Topics: MPS within the PPC System Framework MPS Inputs and Outputs MPS Benefits Production strategies captured in the MPS Rolling Through Time MPS Stability and Performance Measures Bill of Materials (BOM)

MPS Inputs and Outputs Using several variables as inputs, the MPS generates outputs used for decision making MPS Inputs Forecast Demand Inventory Levels Production Costs Supply Inventory Costs Lot Size Customer Orders Capacity Spare Part Orders Scrap Rates MRO Orders Demo Orders MPS Outputs Anticipated Amounts to be Produced Product Mix to be Produced Quantity Available to Promise Projected Available Delivery Date

MPS Benefits Lesson Topics: MPS within the PPC System Framework MPS Inputs and Outputs MPS Benefits Production strategies captured in an MPS Rolling Through Time MPS Stability and Performance Measures Bill of Materials (BOM)

MPS Benefits An effective MPS: Gives information to plan and control production Ties the overall business planning and forecasting to detail operations Enables marketing to make legitimate delivery commitments Increases the efficiency and accuracy of a company’s production Takes into account inventory and safety stock. This means that manufacturing does not build exactly to customer orders or forecasts. Has a planning horizon that considers longest cumulative lead time for end items.

Question and Answer The MPS states: The aggregated items to be manufactured Which end items or product options manufacturing will build in the future The schedules for ordering of materials required for production

Question and Answer What is the relationship between MPS and S&OP? MPS aggregates the plans produced by the S&OP process MPS disaggregates the aggregate plan produced by the S&OP process S&OP disaggregates the aggregate plan produced by the MPS process

Question and Answer What are the benefits of using an MPS? Allows for shortages Facilitates expediting Facilitates last-minute scheduling Promotes efficient allocation of resources

Exercise: MPS Integration Small Group Exercise: Find a partner or work in a trio Refer to Module 2, Lesson 4, Exercise 1 CMM100_M2_L4_E1_Exercise_FINAL.docx Read the directions in the exercise Complete the activity; be prepared to share your responses Time allowed: 30 minutes

Exercise 1: MPS Integration SCENARIO Using the cable manufacturing scenario, explain MPS concepts and benefits. Illustrate how they fit into PPC. OBJECTIVES Interpret the MPS process as part of the PPC. Identify the MPS Integration. Explain the key benefits of the MPS Process. INSTRUCTIONS Sketch how MPS fits into the PPC front end. identify MPS inputs and outputs Add bullet points identifying benefits

MPS Strategies Lesson Topics: MPS within the PPC System Framework MPS Inputs and Outputs MPS Benefits Production strategies captured in the MPS Rolling Through Time MPS Stability and Performance Measures Bill of Materials (BOM)

Make/Assemble-to-Order (MTO) Engineer-to-Order (ETO) MPS Strategies Make-to-Stock (MTS) Make/Assemble-to-Order (MTO) Engineer-to-Order (ETO) Usually built in advance of customer orders being placed Final assembly is completed on a per-order basis Builds each customer order as needed Does not allow for customization Allows for partial customization Allows for customization Shorter lead times Lead times between MTS & ETO Longer lead times

Make/Assemble-to-Order (MTO) MPS Strategies (cont.) Make-to-Stock (MTS) Make/Assemble-to-Order (MTO) Engineer-to-Order (ETO) Large inventories of finished goods No inventories of finished goods May be some Inventories of raw material in anticipation of future demand Higher inventory carrying costs Lower inventory carrying costs Long lead times e.g., stock pampers e.g., order dell computers e.g., engineer unique/special equipment

Question and Answer Which production strategy is most appropriate for the aircraft simulators? Make-to-Stock Make/Assemble-to-Order Engineer-to-Order

Question and Answer Which production strategy is most appropriate for cable adapters with common or interchangeable parts? Make-to-Stock Make/Assemble-to-Order Engineer-to-Order

Question and Answer Which production strategy is most appropriate for smart phones? Make-to-Stock Make/Assemble-to-Order Engineer-to-Order

Case Study Activity Individual Activity Refer to the Toyota: Demand Chain Management case study The Scion Experience section. (pages 14-18) Identify which of the three MPS strategies are used to produce the Scion Develop supporting justification of your selection Be prepared to share your response

Rolling Through Time Lesson Topics: MPS within the PPC System Framework MPS Inputs and Outputs MPS Benefits Production strategies captured in the MPS Rolling Through Time MPS Stability and Performance Measures Bill of Materials (BOM)

The MPS is a dynamic document Rolling Through Time MPS records are updated through time as products are completed and used to satisfy customer orders Process called “Rolling through time” Periodic review and potential update cycle MPS may be changed to reflect emerging conditions in both supply and demand The MPS is a dynamic document

Production Strategies – Level Forecast Planning Horizon Level Forecast Wk 1 Wk 2 Wk 3 Wk 4 Wk 5 Wk 6 Wk 7 Sales Forecast 10 Available End of Week 20 MPS On Hand

Seasonal Demand on Level Production Strategy Planning Horizon Seasonal demand with a level strategy Wk 1 Wk 2 Wk 3 Wk 4 Wk 5 Wk 6 Wk 7 Sales Forecast 5 15 Available End of Week 25 30 35 40 45 50 MPS 10 On Hand 20 Seasonal demand using a level strategy results in inventory buildup/depletion cycles

Seasonal Demand on Chase Production Strategy Planning Horizon Seasonal demand with a chase strategy Wk 1 Wk 2 Wk 3 Wk 4 Wk 5 Wk 6 Wk 7 Sales Forecast 5 15 Available End of Week 20 MPS On Hand Seasonal demand using a chase strategy eliminates the inventory buildup/depletion cycles

Lot-Sizing Planning Horizon Lot Sizing in the MPS Wk 1 Wk 2 Wk 3 Wk 4 Sales Forecast 5 15 Available End of Week 10 30 25 20 MPS On Hand MPS strategies frequently use “lot sizing” strategies to reduce the frequency of orders (at the expense of inventory buildup).

Lot-Sizing (cont.) Planning Horizon Lot-sizing with Forecast Change Wk 1 Wk 2 Wk 3 Wk 4 Wk 5 Wk 6 Wk 7 Sales Forecast 10 15 Available End of Week (-10) (-25) MPS 30 On Hand Week 1 sales are 10 units – the Marketing group changes the weekly forecast for week 2 onward; forecast can not be met without changing the MPS

Lot-Sizing (cont.) Planning Horizon Lot-sizing with MPS Change Wk 2 Sales Forecast 10 15 Available End of Week 30 20 5 MPS On Hand The MPS lot-sizing rule changes the MPS from week 2 onward to reflect the new circumstances

Example: Lot Sizing Planning Horizon Exercise Week 1 Week 2 Week 3 Sales Forecast 5 10 20 Available End of Week MPS On Hand   Exercise Key 15 (-5) Based on these rules, what corrections would you recommend in the MPS below?

MPS Stability and Performance Measures Lesson Topics: MPS within the PPC System Framework MPS Inputs and Outputs MPS Benefits Production strategies captured in the MPS Rolling Through Time MPS Stability and Performance Measures Bill of Materials (BOM)

MPS Stability and Performance Measures A stable MPS translates into stable component schedules, which means improved performance in plant operations Too Many Changes Too Few Changes Results in lower productivity Results in lower customer service levels Nervous MPS due to canceling existing setups, introducing new setups, and altering the production volumes Unresponsive production systems

MPS Measures Measure MPS performance in terms that reflect the firm’s internal fundamental goals—delivery times, costs, etc. Measure customer service fill rates Keep records of backorder supply time to set as benchmarks, then work to improve them Compare actual production vs. planned production

Bill of Materials (BOM) Lesson Topics: MPS within the PPC System Framework MPS Inputs and Outputs MPS Benefits Production strategies captured in the MPS Rolling Through Time MPS Stability and Performance Measures Bill of Materials (BOM)

Bill of Materials (BOM) Bill of Materials (BOM) – an engineering document that specifies the ingredients (or subordinate components) required to make each part number or assembly.

Bill of Materials (cont.) Single-level BOM Indented BOM Specifies only those subordinate components that are immediately required (not the components of the components) List of components from the end-item down to the raw materials (it does show components of the components)

Purpose of the BOM The BOM is used for various purposes: To manufacture assemblies and sub-assemblies To configure sales orders that deal with customers ordering replacement/service parts when they do not know the part number or possibly the name of the component needed To calculate standard cost To forecast (planning) To document engineering builds

Question and Answer What may occur if the MPS is changed too often? Reduced customer service levels Reduced productivity Unresponsive production systems

Question and Answer What may result if the MPS is not changed often enough? Altered production volumes Reduced customer service levels Reduced productivity

Question and Answer What does a BOM specify? Components needed to make a given assembly Quantities of components needed to fulfill an order Sourcing information for a given component

Summary Having completed this lesson, you should now be able to: Distinguish the MPS process as part of PPC Describe MPS Integration Explain key benefits of MPS process Analyze pros/cons/differences of production strategies captured in an MPS Given a scenario, demonstrate MPS using the Rolling Through Time process Explain a stable MPS and Performance Measures Explain the purpose of a BOM

Summary (cont.) Your understanding allows you to: Determine when your contract production is anticipated, See when changes occur over time, Review BOMs, Understand more fully what your contractor must accomplish.