Lecture 5 Master Product Scheduling 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.

Objectives Master product scheduling Round cut capacity planning Planning horizons

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.

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.

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

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

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

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?

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?

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?

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.

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

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

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

Available-to-Promise On hand = 200 units

Available-to-Promise

Available-to-Promise

Available-to-Promise

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

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

21 Time Fences and Zones 0 Actual Orders (Emergency Changes Only) FrozenSlushyLiquid Actual and Forecast (Trade-offs) Forecast Only (Changes constrained by production plan Due Date Demand Time Fence Planning Time Fence 2 weeks26 weeks

Master Production Scheduling (MPS)

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.

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

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

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

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.

Example: Master Production Scheduling Demand Estimates CUSTOMERS BRANCH WAREHOUSES MARKET RESEARCH PRODUCTION RESEARCH WEEK

Example: Master Production Scheduling Computations CUSTOMERS BRANCH WAREHOUSES MARKET RESEARCH PRODUCTION RESEARCH WEEK TOTAL DEMAND BEGINNING INVENTORY REQUIRED PRODUCTION ENDING INVENTORY

Example: Master Production Scheduling MPS for Bar Code Scanners SCANNER PRODUCTION WEEK

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

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?

Example: Rough-Cut Capacity Planning Rough-Cut Capacity Analysis PRODUCTION WEEK TOTAL 1030 LOAD CAPACITY UNDER or OVER LOAD

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.

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

End of Lecture 5