1. Lecture 8 Master Product Scheduling (Revisited)
Books
Introduction to Materials Management, Sixth Edition, J. R. Tony Arnold, P.E., CFPIM, CIRM, Fleming College, Emeritus, Stephen N. Chapman, Ph.D., CFPIM, North Carolina State University, Lloyd M. Clive, P.E., CFPIM, Fleming College
Operations Management for Competitive Advantage, 11th Edition, by Chase, Jacobs, and Aquilano, 2005, N.Y.: McGraw-Hill/Irwin.

2. Objectives Master product scheduling Round cut capacity planning
Planning horizons
Types of Production-Planning and Control Systems
Developing MPS
Evaluation MPS
Planning links to MPS

3. Purpose
The master production schedule states the requirements for individual end items by date and quantity. It is limited by the production plan and must “disaggregate” the production plan.
Master planning seeks to plan and control the impact of independent demand on material and capacity.

4. Purpose
The master production schedule is a vital link between sales and production
It makes possible valid order promises
It represents a contract between sales and production.

5. Inputs Inputs to the master production schedule include
The production plan
The forecast
Orders from customers
Additional independent demand
Inventory levels
Capacity constraints

6. Objectives The objectives of a master production schedule are to
Maintain the desired level of customer service
Make the best use of resources
Keep inventories at the desired level

7. Preparing an MPS Make a preliminary MPS
Perform rough-cut capacity planning
Resolve differences

8. Rough-cut Capacity Planning
Rough-cut capacity planning checks whether critical resources are available to support the preliminary master schedule.
A resource bill shows the time required for individual items on a critical resource.
What are some possible critical resources?

9. Resolving Differences
The third step in developing an MPS is to resolve any differences between the priority plan and available capacity. Available capacity must be equal to or greater than required capacity
If required capacity exceeds available capacity
Capacity must be increased or
Plan must be altered
How can capacity be increased or demand be decreased?

10. Resolving Differences
The master production schedule must be judged by three criteria
Resources use. Is the MPS within capacity restraints in each period of the plan? Does it make the best use of resources?
Customer service. Will due dates be met and will delivery performances be acceptable?
Cost. Is the plan economical, or will excess cost be incurred for overtime, subcontracting, expediting, or transportation?

11. Production Scheduling and Sales
An MPS is not a sales forecast, it is instead a forecast of production. It may not necessarily be what we want; it should be what we can do.
The MPS must be realistic and achievable. Otherwise, the plan fails, deliveries are not met, and manufacturing has to react to circumstances rather than planning for them.

12. MPS and Delivery Promises
Customer
Orders
Available-to-
Promise
Time
Units
Production Capacity or Inventory
As orders are received, they “consume” available production and inventory
Any part not consumed is available-to-promise

13. Available-to-Promise
Available-to-Promise is
the uncommitted portion of a company’s inventory and planned production, maintained in the master schedule to support customer order promising. The ATP quantity is the uncommitted inventory balance in the first period and is normally calculated for each period in which an MPS receipt is scheduled
APICS Dictionary, 8th edition

14. Available-to-Promise
The ATP calculation assumes that the entire ATP will be sold before the next scheduled receipt. When calculating ATP, consider all orders until the next scheduled receipt.
ATP for period 1 = on hand - customer orders due before next MPS scheduled receipt
ATP for periods 2, 4, and 6 = MPS scheduled receipt - customer orders due before next MPS scheduled receipt

15. Available-to-Promise
On hand = 200 units

16. Available-to-Promise
On hand = 200 units

17. Available-to-Promise
On hand = 200 units

18. Available-to-Promise
On hand = 200 units

19. Planning Horizon The planning horizon is defined as
the amount of time the master schedule extends into the future. This is normally set to cover a minimum of cumulative lead time plus time for lot sizing low-level components and for capacity changes of primary work centers or of key suppliers.
APICS Dictionary, 8th edition

20. Planning Horizon B A C D E What is the minimum planning
Lead Time
= 6 weeks
= 2 weeks
= 5 weeks
= 8 weeks
= 16 weeks
What is the minimum planning
horizon in this example?

21. (Changes constrained by production plan
Time Fences and Zones
Actual Orders
(Emergency
Changes Only)
Frozen
Slushy
Liquid
Actual and Forecast
(Trade-offs)
Forecast Only
(Changes constrained by production plan
Due
Date
Demand
Time
Fence
Planning
2 weeks
26 weeks

22. Master Production Scheduling (MPS)

23. Objectives of MPS
Determine the quantity and timing of completion of end items over a short-range planning horizon.
Schedule end items (finished goods and parts shipped as end items) to be completed promptly and when promised to the customer.
Avoid overloading or underloading the production facility so that production capacity is efficiently utilized and low production costs result.

24. Time Fences The rules for scheduling 6+ weeks 4-6 weeks 2-4 weeks 1-2
+/- 20%
Change
1-2
weeks
+/- 10%
Change
+/- 5%
Change
No Change
Frozen
Firm
Full
Open

25. Time Fences The rules for scheduling:
Do not change orders in the frozen zone
Do not exceed the agreed on percentage changes when modifying orders in the other zones
Try to level load as much as possible
Do not exceed the capacity of the system when promising orders.
If an order must be pulled into level load, pull it into the earliest possible week without missing the promise.

26. Developing an MPS Using input information
Customer orders (end items quantity, due dates)
Forecasts (end items quantity, due dates)
Inventory status (balances, planned receipts)
Production capacity (output rates, planned downtime)
Schedulers place orders in the earliest available open slot of the MPS
. . . more

27. Developing an MPS Schedulers must:
estimate the total demand for products from all sources
assign orders to production slots
make delivery promises to customers, and
make the detailed calculations for the MPS

28. Example: Master Production Scheduling
Arizona Instruments produces bar code scanners for consumers and other manufacturers on a produce-to-stock basis. The production planner is developing an MPS for scanners for the next 6 weeks.
The minimum lot size is 1,500 scanners, and the safety stock level is 400 scanners. There are currently 1,120 scanners in inventory. The estimates of demand for scanners in the next 6 weeks are shown on the next slide.

29. Example: Master Production Scheduling
Demand Estimates
CUSTOMERS
BRANCH WAREHOUSES
MARKET RESEARCH
PRODUCTION RESEARCH
500
200 10 1 50
300
1000
400 2 3 4
700 6 5
WEEK

30. Example: Master Production Scheduling
WEEK
Computations 1 2 3 4 5 6
CUSTOMERS
500
1000
500
200
700
1000
BRANCH WAREHOUSES
200
300
400
500
300
200
MARKET RESEARCH 50 10
PRODUCTION RESEARCH 10
TOTAL DEMAND
710
1350
900
700
1010
1200
BEGINNING INVENTORY
1120
410
560
1160
460
950
REQUIRED PRODUCTION
1500
1500
1500
1500
ENDING INVENTORY
410
560
1160
460
950
1250

31. Example: Master Production Scheduling
MPS for Bar Code Scanners 1 2 3 4 6 5
WEEK
SCANNER PRODUCTION
1500

32. Rough-Cut Capacity Planning
As orders are slotted in the MPS, the effects on the production work centers are checked
Rough cut capacity planning identifies underloading or overloading of capacity

33. Example: Rough-Cut Capacity Planning
Texprint Company makes a line of computer printers on a produce-to-stock basis for other computer manufacturers. Each printer requires an average of 24 labor-hours. The plant uses a backlog of orders to allow a level-capacity aggregate plan. This plan provides a weekly capacity of 5,000 labor-hours.
Texprint’s rough-draft of an MPS for its printers is shown on the next slide. Does enough capacity exist to execute the MPS? If not, what changes do you recommend?

34. Example: Rough-Cut Capacity Planning
Rough-Cut Capacity Analysis
WEEK 1 2 3 4 5
TOTAL
PRODUCTION
100
200
200
250
280
1030
LOAD
2400
4800
4800
6000
6720
24720
CAPACITY
5000
5000
5000
5000
5000
25000
UNDER or OVER LOAD
2600
200
200
1000
1720
280

35. Example: Rough-Cut Capacity Planning
Rough-Cut Capacity Analysis
The plant is underloaded in the first 3 weeks (primarily week 1) and it is overloaded in the last 2 weeks of the schedule.
Some of the production scheduled for week 4 and 5 should be moved to week 1.

36. Demand Management
Review customer orders and promise shipment of orders as close to request date as possible
Update MPS at least weekly.... work with Marketing to understand shifts in demand patterns
Produce to order..... focus on incoming customer orders
Produce to stock focus on maintaining finished goods levels
Planning horizon must be as long as the longest lead time item

37. Types of Production-Planning and Control Systems

38. Types of Production-Planning and Control Systems
Pond-Draining Systems
Push Systems
Pull Systems
Focusing on Bottlenecks

39. Pond-Draining Systems
Emphasis on holding inventories (reservoirs) of materials to support production
Little information passes through the system
As the level of inventory is drawn down, orders are placed with the supplying operation to replenish inventory
May lead to excessive inventories and is rather inflexible in its ability to respond to customer needs

40. Push Systems
Use information about customers, suppliers, and production to manage material flows
Flows of materials are planned and controlled by a series of production schedules that state when batches of each particular item should come out of each stage of production
Can result in great reductions of raw-materials inventories and in greater worker and process utilization than pond-draining systems

41. Pull Systems
Look only at the next stage of production and determine what is needed there, and produce only that
Raw materials and parts are pulled from the back of the system toward the front where they become finished goods
Raw-material and in-process inventories approach zero
Successful implementation requires much preparation

42. Focusing on Bottlenecks
Bottleneck Operations
Impede production because they have less capacity than upstream or downstream stages
Work arrives faster than it can be completed
Binding capacity constraints that control the capacity of the system
Optimized Production Technology (OPT)
Synchronous Manufacturing

43. Synchronous Manufacturing
Operations performance measured by
throughput (the rate cash is generated by sales)
inventory (money invested in inventory), and
operating expenses (money spent in converting inventory into throughput)
. . . more

44. Synchronous Manufacturing
System of control based on:
drum (bottleneck establishes beat or pace for other operations)
buffer (inventory kept before a bottleneck so it is never idle), and
rope (information sent upstream of the bottleneck to prevent inventory buildup and to synchronize activities)

45. Wrap-Up: World-Class Practice
Push systems dominate and can be applied to almost any type of production
Pull systems are growing in use. Most often applied in repetitive manufacturing
Few companies focusing on bottlenecks to plan and control production.

46. Role of the MPS Aggregate plan: Master production schedule:
Specifies the resources available (e.g.: regular workforce, overtime, subcontracting, allowable inventory levels & shortages)
Master production schedule:
Specifies the number & when to produce each end item (the anticipated build schedule)
Disaggregates the aggregate plan

47. Business Planning Hierarchy

48. Planning Links to MPS

49. Objectives of MPS Maintain the desired customer service level
Utilize resources efficiently
Maintain desired inventory levels

50. Developing an MPS: Assume: Make-to-stock environment
Production is in fixed quantities of 125 (MPS)
110 units in beginning inventory (BI)

51. Sample Problem We start with 110 units in Beginning Inventory
Period 1 2 3 4 5 6 7 8 9 10 11 12
Forecast 50 75
Projected
Available
MPS
We start with 110 units in Beginning Inventory
Projected Available: How many units are available at the end of each time period?
MPS: Replenishment Shipments that need to arrive at the beginning of the time period
Projected Available =BI + MPS - Forecast

52. Step 1 Find first negative “projected available”
We start with 110 units in Beginning Inventory
Projected Available: How many units are available at the end of each time period? (safety stock criteria could be in place > 5)
MPS: Replenishment Shipments that need to arrive at the beginning of the time period

53. Schedule Production

54. Repeat

55. Continue, Until Complete

56. Evaluating the MPS Customer service issues:
Does “available-to-promise” inventory satisfy customer orders?
What new orders can we take from customers and when?

57. Available to Promise
When a customer places an order, they do not expect immediate delivery (negotiable).
The product will delivered by some later date.
ATP = how many uncommitted units the company has available at a given time

58. New Calculation for Projected Available
Period 1 2 3 4 5 6 7 8 9 10 11 12
Forecast 50 75
Customer Orders 35 25 20 15
Projected
Available
Available to Promise
MPS
Projected Available =
BI + MPS – Max (Customer Orders ; Forecast)

59. Available-to-Promise “Action Bucket”
Period 1 2 3 4 5 6 7 8 9 10 11 12
Forecast 50 75
Customer Orders 35 25 20 15
Projected
Available 60 85
110
Available to Promise
MPS
125
“Action Bucket” = the current period
Only calculate ATP during in Action Bucket and when MPS occurs
ATP action bucket = BI +MPS-customer orders before next replenishment
– (35+25) = 50

60. Available-to-Promise “Replenishment periods”1 2 3 4 5 6 7 8 9 10 11 12
Forecast 50 75
Customer Orders 35 25 20 15
Projected
Available 60 85
110
Available to Promise 80
125
115
MPS
ATP for replenishment periods
ATP = MPS - customer orders between current MPS and next scheduled replenishment
ATP period 3 = 125 – ( )= 80
ATP period 5 = 125 – (0 + 15)= 110

61. New Order
Suppose we get an order for 200, can we accept this for delivery in period 5?

62. Worksheet for New Order for 200
Period 1 2 3 4 5 6 7 8 9 10 11 12
Forecast 50 75
Customer Orders 35 25 20
200 15
Projected
Available 60 85
Available to Promise 80
MPS
125
Fit in the order for 200 (can’t change MPS)

63. New Order for 200
Period 1 2 3 4 5 6 7 8 9 10 11 12
Forecast 50 75
Customer Orders 35 25 20
200 15
Projected
Available 60 85
-40
-115
-65
-15
-90
Available to Promise 80
125
115
MPS
Negative number in Projected Available = might be a problem in the future
Negative number in Available to Promise= always a problem
Solution?

64. Split up New Order for 200 Check to see if this is OK Period 1 2 3 4 56 7 8 9 10 11 12
Forecast 50 75
Customer Orders 45 25
105 20
110 15
Projected
Available
Available to Promise
MPS
125
Check to see if this is OK

65. Can you now take 2 more orders?
Period 1 2 3 4 5 6 7 8 9 10 11 12
Forecast 50 75
Customer Orders 45 25
105 20
110 15 40
Projected
Available 60 30
-20 -5
-80
-30
Available to Promise
MPS
125
50 units to be delivered in Period 8
30 units to be delivered in Period 12

66. Time Fences

67. Time Fences
Frozen: no changes are possible with a certain period of time (i.e. 8 weeks)
Time Fence (length of period schedule is frozen, liquid, etc.)
Demand Fence: MPS numbers do not change and focus is on orders not forecast
Planning Fence: Master Production Scheduler is planning more MPS.

68. Rough-cut capacity planning
An estimate of the plans’ feasibility
Given the demonstrated capacity of critical resources (e.g.: direct labor & machine time), have we overloaded the system?

69. Rough-Cut Capacity Planning
Determine required resources & proposed workload:
Hours/unit

70. Calculate Required Labor Hours
Compare with hours available

71. Calculate Required Machine Hours
Compare with hours available

72. Summary MPS Major Functions
To form the link between production planning and what manufacturing builds.
To plan capacity requirements. The MPS determines the capacity required.
To plan material requirements. The MPS drives the material requirements plan.
To keep priorities valid. The MPS is a priority plan for manufacturing.
MGMT 3750

73. Summary MPS Links Between Sales and Production
To aid in making order promises. The MPS is a plan for what is to be produced and when. As such, it tells sales and manufacturing when goods will be available for delivery.
To be a contract between marketing and manufacturing. It is an agreed-upon plan.
MGMT 3750

74. Summary
The MPS must be realistic and based on what production can and will do. If not, the following may be the results
Overload or underload of plant resources.
Unreliable schedules resulting in poor delivery performance.
High levels of work-in-process (WIP) inventory.
Poor customer service.
Loss of credibility in the planning system.
MGMT 3750

75. End of Lecture 8