Introduction Products into product groups. They combine Which alltogether Aggregate Production Demand into reflect Top Management & Capacity Plans monthly totals. Decisions. Personnel Requirements across departments Eventually, the time comes when individual “end item” products and services must be scheduled at specific work centers. This is accomplished by master schedulingWhich means, producing a SUPPLY PLAN (a time table including quantities) to produce specificitems or provide specific services within a given time period.
Master Schedule & the Master Production Schedule (MPS)The master schedule (MS) is a Example : A simple MS for an MPS item (endpresentation of the demand, including product)the forecast and the backlog (customerorders received), the master productionschedule (the supply plan), theprojected on hand (POH) inventory, andthe available-to-promise (ATP) quantity.The master production schedule (MPS)is the primary output of the masterscheduling process.It is the “plan” forproviding the supply to meet thedemand. Table 1
Relationship of Master Scheduling to other MPC activities Is the “key” in Creates demand Creates demand developing the requirements requirements master scheduleThe master schedule (MS) is a keylink in the manufacturing planningand control chain.The MS interfaces withmarketing, distributionplanning, production planning, andcapacity planning.The MS drives the materialrequirements planning (MRP) system.Master scheduling calculates thequantity required to meet demand Is the “key”requirements from all sources (see link Calculates net requirementsthe example case on next page). Input-Output Control & Operation Scheduling Figure 1
Example : A case in which the distribution requirements are the gross requirements for the MS Here, the MS; enables marketing to make legitimate delivery commitments to field warehouses and final customers. enables production to evaluate capacity requirements in a more detailed manner. provides to management the opportunity to ascertain whether the business plan and its strategic objectives will be achieved. Table 2 Distribution Net Requirements are requirements (gross calculated by MRP logic.requirements for MS)
Understanding THE ENVIRONMENT in which master scheduling takes place.Before describing the activities involved in creating and managing the MS,we need to examine the different organizational environments inwhich master scheduling takes place. THESE ENVIRONMENTS ARE DETERMINED BY the company’s STRATEGIC RESPONSES to; the INTERESTS of CUSTOMERS and the ACTIONS of COMPETITORS Thus, a COMPETETIVE STRATEGY evolves...
The Role and Structure of Master SchedulingMaster Scheduling is a business process designed to balancedemand and supply at the detailed, mix level. Master Schedulingis primarily a decision-making process, performed by anindividual called the Master Scheduler. As such, it is people-centered; the computer’s role is to support the people intheir decision-making activities.The output from this process is the Master ProductionSchedule, which is the anticipated build schedule for specificproducts (or parts of products) and customer orders. The MasterSchedule is:• time-phased,• extends for a number of weeks into the future, and• is typically expressed in weekly time increments or smaller.
Inputs & outputs of master scheduling: Capacity Company Product Economic Consts. Policies Charact. Considerations Placed Orders Master ProductionForecasted Demand Schedule: MPS When & How MuchCurrent and Planned to produce for eachAvailability, eg., product•Initial Inventory,•Initiated Production,•Subcontractedquantities Planning Time Horizon unit Capacity Planning
Rough-Cut Capacity Planning• RCCP checks whether critical resources are available to support the preliminary master production schedules. Critical resources include bottleneck operations, labor, and critical materials.
MASTER PRODUCTION SCHEDULING PROCESSFigure 1 shows the master production scheduling process. Operations must firstcreate a prospective MPS to test whether it meets the schedule with theresources(e.g., machine capacities, labor, overtime, and subcontractors) providedfor in the aggregate production plan. Operations revises the MPS until it obtains aschedule that satisfies all resource limitations or determines that no feasibleschedule can bedeveloped. In the latter event, the production plan must berevised to adjust production requirements or increase authorized resources.Once a feasible prospective MPShas been accepted by plantmanagement, operations uses the authorized MPS as input to materialrequirements planning. Operations can then determine specific schedules forcomponent production and assembly. Actual performance data such as inventorylevels and shortages are inputs to the next prospective MPS, and the masterproduction scheduling process is repeated.
DEVELOPING A MASTER PRODUCTION SCHEDULEThe process of developing a master production schedule includes (1) calculating the projected on-hand inventory (2) determining the timing and size of the production quantities of specific productsStep 1. Calculate Projected On-Hand Inventories. The first step is to calculate theprojected on-hand inventory, which is an estimate of the amount of inventoryavailable each week after demand has been satisfied:
In some weeks, there may be no MPS quantity for a product becausesufficient inventory already exists. For the projected requirements forthis week, the scheduler uses whichever is larger—the forecast or thecustomer orders booked—recognizing that the forecast is subject toerror. If actual booked orders exceed the forecast, the projection will bemore accurate if the scheduler uses the booked orders because bookedorders are a known quantity. Conversely, if the forecast exceeds bookedorders for a week, the forecast will provide a better estimate ofrequirements for that week because some orders are yet to come in.
ExampleThe manufacturer of the ladder-back chair produces the chair to stock and needsto develop an MPS for it. Marketing has forecasted a demand of 30 chairs for thefirst week of April, but actual customer orders booked are for 38 chairs. Thecurrent on-hand inventory is 55 chairs. No MPS quantity is due in week 1. Figure2 shows an MPS record with these quantities listed. As actual orders for week 1are greater than the forecast, the scheduler uses that figure for actual orders incalculating the projected inventory balance at the end of week 1:
In week 2, theforecastedquantity exceedsactual ordersbooked, so theprojectedon-hand inventoryfor the end ofweek 2 is 17 + 0 -30= -13. Theshortage signalsthe need for morechairs in week 2.
Step 2. Determine the Timing and Size of MPS Quantities. The goal ofdetermining the timing and size of MPS quantities is to maintain anonnegative projected on-hand inventory balance.As shortages in inventory are detected, MPS quantities should bescheduled to cover them, The first MPS quantity should be scheduledfor the week when the projected on-hand inventory reflects ashortage, such as week 2 in Figure 2 The scheduler adds the MPSquantity to the projected on-hand inventory and searches for the nextperiod when a shortage occurs. This shortage signals a need for asecond MPS quantity, and so on.Figure 3 shows a master production schedule for the ladder-back chair forthe next eight weeks. The order policy requires production lot sizes of 150units. A shortage of 13 chairs in week 2 will occur unless the schedulerprovides for an MPS quantity for that period.
Once the MPS quantity is scheduled, the updated projected inventory balancefor week 2 is The scheduler proceeds column by column through the MPS record until reaching the end, filling in the MPS quantities as needed to avoid shortages. The 137 units will satisfy forecasted demands until week 7, when the inventory shortage in the absence of an MPS quantity is 7 + 0 -35 =-28. This shortage signals the need for another MPS quantity of 150 units. The updated inventory balance is 7 + 150 - 35 = 122 chairs for week 7. The last row in Figure 3 indicates the periods in which production of the MPS quantities must begin so that they will be available when indicated in the MPS quantity row.
a lead time of one week is indicated for the ladder-back chair; that is, one week isneeded to assemble 150 ladder-back chairs, assuming that items B, C, D, and E areavailable. For each MPS quantity, the scheduler works backward through the leadtime to determine when the assembly department must start producing chairs.Consequently, a lot of 150 units must be started in week 1 and another in week 6.
AVAILABLE-TO-PROMISE QUANTITIESIn addition to providing manufacturing with the timing and size ofproduction quantities ,the MPS provides marketing with informationthat is useful in negotiating delivery dates with customers. Thequantity of end items that marketing can promise to deliver onspecified dates is called available-to-promise (ATP) inventory. It isthe difference between the customer orders already booked and thequantity that operations is planning to produce. As new customerorders are accepted, the ATP inventory is reduced to reflectcommitment of the firm to ship those quantities, but the actualinventory stays unchanged until the order is removed from inventoryand shipped to the customer. An available-to-promise inventory isassociated with each MPS quantity because the MPS quantityspecifies the timing and size of new stock that can be earmarked tomeet future bookings.
Figure 4 shows an MPS record with an additional row for the available-to promisequantities. The ATP in week 2 is the MPS quantity minus booked customerorders until the next MPS quantity, or 150 - (27 + 24 + 8 + 0 + 0) = 91 units. TheATP indicates to marketing that, of the 150 units scheduled for completion inweek 2, 91 units are uncommitted, and total new orders up to that quantity canbe promised for delivery as early as week 2. In week 7, the ATP is 150 unitsbecause there are no booked orders in week 7 and beyond.The procedure for calculating available-to-promise information is slightly differentfor the first (current) week of the schedule than for other weeks because itaccounts for the inventory currently in stock. The ATP inventory for the first weekequals current on-hand inventory plus the MPS quantity for the first week, minusthe cumulative total of booked orders up to (but not including) the week in whichthe next MPS quantity arrives. So, in Figure 4, the ATP for the first week is 55 + 0 -38 = 17.
This information indicates to the sales department that it can promise asmany as 17 units this week, 91 more units sometime in weeks 2 through6, and 150 more units in week 7 or 8. If customer order requests exceedATP quantities in those time periods, the MPS must be changed before thecustomer orders can be booked or the customers must be given a laterdelivery date—when the next MPS quantity arrives. See the solvedproblem at the end of this supplement for an example of decision makingusing the ATP quantities.FREEZING THE MPSmany firms, particularly those with a make-to-stock strategy and a focuson low-cost operations, freeze, or disallow changes to, a portion of theMPS. Freezing can be accomplished by specifying a demand timefence, which is the number of periods (beginning with the currentperiod) during which few, if any, changescan be made to the MPS(i.e., the MPS is firm). Companies select the demand time fence afterconsidering the costs of making changes to the MPS:
Other time fences that allow varying amounts of change can be specified.For example, the planning time fence typically covers a longer period thanthe demand time fence.
Example :The number of time fences can vary. Black & Decker uses three time fences:8, 13, and 26 weeks. The 8-week fence is essentially a demand time fence. From 8to 13 weeks, the MPS is quite rigid, but minor changes to model series may bemade if components are available. From 13 to 26 weeks, substitution of one enditem for another is permitted as long as the production plan is not violated andcomponents are available. Beyond 26 weeks, marketing can make changes as longas they are compatible with the production plan.
SOLVED PROBLEMThe order policy is to produce end item A in lots of 50 units. Using the datashown in Figure 6 and the FOQ lot-sizing rule, complete the projected on-handinventory and MPS quantity rows. Then complete the MPS start row byoffsetting the MPS quantities for the final assembly lead time. Finally, computethe available-to-promise inventory for item A. If in week 1, a customer requestsa new order for 30 units of item A, when is the earliest date the entire ordercould be shipped?The projected on-hand inventory for the second week is
where requirements are the larger of the forecast or actual customer ordersbooked for shipment during this period. No MPS quantity is required.Without an MPS quantity in the third period, there will be a shortage of item A:5 + 0 - 40 =- 35.Therefore, an MPS quantity equal to the lot size of 50 must be scheduled forcompletion in the third period. Then the projected on-hand inventory for thethird week will be 5 + 50 - 40 = 15.Figure K.7 shows the projected on-hand inventories and MPS quantities fromOM Explorer that would result from completing the MPS calculations. The MPSstart row is completed by simply shifting a copy of the MPS quantity row to theleft by one column to account for the one-week final assembly lead time. Alsoshown are the available-to-promise quantities. In week 1, the ATP is
The ATP for the MPS quantity in week 3 is The other ATPs equal their respective MPS quantities because there are no booked orders for those weeks. As for the new order for 30 units, the earliest it can be shipped is week 3 because the ATP for week 1 is insufficient. If the customer accepts the delivery date of week 3, the ATP for week 1 will stay at 5 units and the ATP for week 3 will be reduced to 5 units. This acceptance allows the firm the flexibility to immediately satisfy an order for 5 units or less, if one comes in. The customer orders booked for week 3 would be increased to 35 to reflect the new order’s shipping date.