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3. Master Scheduling

Chapter 3  Master Scheduling Introduction ·          Master production schedule (MPS) is the next step in the manufacturing planning and co... thumbnail 1 summary
Chapter 3 
Master Scheduling

·         Master production schedule (MPS) is the next step in the manufacturing planning and control process and forms the basis for communication between sales and manufacturing.  It makes possible valid order promises and becomes a contract between marketing and manufacturing.  It is not meant to be rigid.  It is the basis to make changes that are consistent with the demands of the marketplace and the capacity of manufacturing.  It forms the link between production planning and what manufacturing will actually build.  It forms the basis for calculating the capacity and resources needed.  The MPS drives the material requirements plan and sets the priority plan for manufacturing.  It breaks down the production plan into the requirements for individual end items, in each family, by date and quantity.  The production limits the MPS, so the total of the items in the MPS should equal the total shown on the production plan.  Within this limit, its objective is to balance the demand (priorities) set by the marketplace with the availability of materials, labor, and equipment (capacity) of manufacturing.
·         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, and capacity restraints.
Relationship to Production Plan

·         The objectives in developing an MPS are: 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, and to maintain inventory investment at the required levels.  To reach these objectives, the plan must satisfy customer demand, be within the capacity of manufacturing, and be within the guidelines of the production plan.
·         The three steps in preparing an MPS are to develop a preliminary MPS, to check the preliminary MPS against available capacity, and to resolve differences between the preliminary MPS and capacity availability (rough-cut capacity planning).
·         Rough-cut capacity planning checks whether critical resources (bottleneck operations, labor, and critical materials) are available to support the preliminary master production schedules.  The process is similar to resource requirements planning used in the production planning process, except we now work with a product and not a family or products. The resource bill is for a single product (figure 3.2).
·         If available capacity is greater than the required capacity, the MPS is workable.  If not, methods of increasing capacity have to be investigated (overtime, additional workers, routing through alternate work centers, or subcontracting).  If not, revise the MPS.
·         MPS is judged by three criteria: resource use, customer service, and cost.  Does it make the best use of resources?  Will due dates be met and will delivery performance be acceptable?  Is the plan economical, or will excess costs be incurred for overtime, subcontracting, expediting, or transportation?
·         The MPS should represent as efficiently as possible what manufacturing will make.  If too many items are included, it will lead to difficulties in forecasting and managing the MPS.  In each of the manufacturing environments --- make to stock, make to order, and assemble to order --- master scheduling should take place where the smallest number of product options exists (see figure 3.3).
·         The last step, assembly to customer order, is generally planned using a final assembly schedule.  It is used when there are many options and difficult to forecast which combination the customers will want.
·         The planning horizon is the time span which covers a period at least equal to the time required to accomplish the plan (see figure 3.5).  The planning horizon is usually longer because 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.
Production Planning, Master Scheduling, and Sales
·         The production plan reconciles total forecast demand with available resources.
·         The MPS is built from forecasts and actual demands for individual end items.  It reconciles demand with the production plan and with available resources to produce a plan that manufacturing can fulfill.  The MPS is a plan for what production can and will do.
·         In a make-to-stock environment, customer orders are satisfied from inventory.  However, in make-to-order or assemble-to-order environments, demand is satisfied from productive capacity.  Sales and distribution need to know what is available to satisfy customer demand.  As orders are received, they “consume” the available inventory or capacity.  Any part of the plan that is not consumed by actual customer orders is available to promise to customers.
·         Available to promise (ATP) is that portion of a firm’s inventory and planned production that is not already committed and is available to the customer (see examples on 57, 58 & 59).  The ATP is calculated by adding scheduled receipts to the beginning inventory and 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.  If customer orders are greater than the scheduled receipts, then the previous ATP is reduced by the amount needed.
·         Projected available balance (PAB) is calculated based on the larger of actual customer orders and the forecast.  The PAB is calculated in one of two ways, depending on whether the period is before or after the demand time fence.  For periods before the demand time fence:
PAB = prior period PAB or on-hand balance + MPS – customer orders
For periods after the demand time fence, forecast will influence the PAB so it is calculated using the greater of the forecast or customer orders.
                        PAB = prior period PAB + MPS – greater of customer orders or forecast
The demand time fence is the number of periods, beginning with period 1, in which changes are not excepted due to excessive cost caused by schedule disruption.
·         The planning horizon must be at least as long as the cumulative lead-time for the product structure.  The cost of making a change increases and the company’s flexibility decreases as production gets closer to the delivery time.  Far off changes can be made with minimal cost or disruption to manufacturing, but the nearer to delivery date, the more disruptive and costly changes will be. 
·         Changes to the MPS will occur due to customer order cancellation or change, changing capacity, supplier problems, and excessive process scrap.
·         Changes to production schedules can result in cost increases due to rerouting, rescheduling, extra setups, expediting, and buildup of WIP inventory; decreased customer service; and loss of credibility for the MPS and the planning process.  Changes to the MPS must be managed and decisions made with full knowledge of the costs involved.
·         Frozen zone – capacity and materials are committed to specific orders, changes result in excessive costs, and so senior management approval is required to make changes.  The extent of the frozen zone is defined by the demand time fence.
·         Slushy zone – capacity and materials are committed to less extent.  Sales and manufacturing negotiate changes.  The extent of the slushy zone is defined by the planning time fence.
·         Liquid zone – Any change can be made to the MPS as long as it is within the limits set by the production plan.