Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Manufacturing Planning and Control MPC 6 th Edition Chapter 5

5-2 Master Production Scheduling An effective Master Production Schedule (MPS) provides the basis for making good use of manufacturing resources, making customer delivery promises, resolving trade-offs between sales and manufacturing, and attaining the firm’s strategic objectives, as reflected in the Sales and Operations Plan.

5-3 Agenda What is Master Production Scheduling?MPS and the Business EnvironmentMPS TechniquesAvailable-To-PromiseMPS in Assemble-To-Order EnvironmentsMPS StabilityManaging the MPS

5-4 Master Production Scheduling and the Manufacturing Planning and Control System The MPS is a statement of the specific products that make up manufacturing output The MPS is a translation of the sales and operations plan into producible products with their timing and quantities determined The MPS shows when products will be available in the future

5-5 Attributes of the Master Production Schedule The MPS is a statement of production, not of demand The MPS is not a forecast The MPS considers factors such as capacity constraints, costs of production, resource limitations, and the sales and operations plan The MPS is stated in terms of product specifications–usually part numbers which have specific bills of materials (BOM) In assemble-to-order environments, the MPS may be stated in terms of an “average” final product

5-6 MPS and the Business Environment In a make-to-stock company, the MPS is a statement of how much of each end item to be produced and when it will be available In a make-to-order (or engineer-to-order) firm, the MPS is usually defined as the specific end item(s) that make up an actual customer order In an assemble-to-order firm, the large number of possible product combinations is represented with a planning bill of materials

5-7 MPS in the MPC System Resource planning Sales and operations planning Demand management Master production scheduling Detailed material planning Enterprise Resource Planning (ERP) System Front End Engine Rough-cut capacity planning

5-8 Master Production Scheduling Linkages The MPS is the driver of all detailed manufacturing activities need to meet output objectives The MPS is the basis for key inter-functional trade-offs Production and sales Financial budgets should be integrated with MPS activities

5-9 Master Production Scheduling Process and Techniques Determine supply and demand relationships over time (time- phased record) Prepare production schedule according to strategy (chase, level, mixed) Calculate projected available balance (for available-to- promise activities) Revise plans as time passes (rolling through time)

5-10 Time-Phased Record A means of gathering and displaying critical scheduling information (Forecast, available stock, production schedule) On hand Period Forecast Projected available balance Master production schedule10

5-11 MPS Process–with Lot Sizing Period 1 – 5 planPeriod On hand12345 Forecast Projected available balance Master production schedule30 Lot size = 30 Safety stock = 5 Period 2 – 6 planPeriod On hand23456 Forecast Projected available balance Master production schedule30 Lot size = 30 Safety stock = 5 Order size driven by lot sizing constraint, order timing/quantity driven by safety stock constraint As time progresses, new information becomes available On hand stock = On hand – actual demand + production = ( – 10) Updated forecast for periods 2 – 6 changes projected available balancing, prompting rescheduling

5-12 Revising the MPS Period 2 – 6 planPeriod On hand23456 Forecast Projected available balance Master production schedule30 Lot size = 30 Safety stock = 5 Additional production orders in periods 2 and 5 to meet safety stock requirements

5-13 Available-to-Promise When immediate delivery is not expected (or is not possible due to stockouts), a promised delivery date must be established The order promising task is to determine when the shipment can be made Available-to-promise (ATP) procedures coordinate order promising with production schedules

5-14 Available-to-Promise Logic– Discrete Discrete ATP treats each period independently Period On hand12345 Forecast Orders53200 Projected available balance Available-to-promise1228 Master production schedule30 Lot size = 30 Safety stock = 5 Period 1: Total customer demand before next production = 8 units Period 1: ATP = available balance – customer orders = Period 1: Projected available = Previous available + MPS – MAX(Forecast, Orders) Period 3: ATP = MPS – customer orders = Period 3: Total customer demand before next production = 2 units

5-15 Available-to-Promise Logic– Cumulative Cumulative ATP carries ATP units forward Period On hand12345 Forecast Orders53200 Projected available balance Available-to-promise1240 Master production schedule30 Lot size = 30 Safety stock = 5 Period 1: Total customer demand before next production = 8 units Period 1: ATP 1 = available balance – customer orders = Period 1: Projected available = Previous available + MPS – MAX(Forecast, Orders) Period 3: ATP 3 = ATP 1 + MPS – customer orders = Period 3: Total customer demand before next production = 2 units

5-16 ATP–Consuming the Forecast In the ATP calculation, demand is considered to be the maximum of forecast and actual customer orders This is a conservative approach Assumes that we will eventually sell at least the forecast quantity Adjusts for periods where demand exceeds the forecast

5-17 MPS in Assemble-to-Order Environments In an assemble-to-order (ATO) environment, the possible combinations of end items can be huge Specific end item bills of materials (BOM) are replaced with a planning bill of materials, which represents the potential product combinations One type of planning BOM is the super bill, which describes the usage of options and components that make up the average product

5-18 Super Bill of Materials Parts used in all configurations are listed with usage probability of 1.0 Mutually exclusive option sets are listed together, with a usage probability for each option Safety stock absorbs variations in actual mix

5-19 Available-to-Promise Logic with Planning BOM Common Parts Available? Gear Available? Taylor Available? Book order Try 1 period later No Yes Are the common parts on the BOM available? Is the requested gear option available? Is the requested Taylor option available?

5-20 Two-Level Master Production Schedules When a planning BOM is used, a final assembly schedule (FAS) is often used States the set of end products to be built over a time period Two-level MPS coordinates component production and the FAS Component production is controlled by aggregate production plan in the FAS Final assembly is controlled by the FAS Either discrete or cumulative ATP logic can apply

5-21 Discrete ATP with a Two-Level Master Production Schedule 4-Horsepower Tillers (Aggregate)Period On hand12345 Production Plan100 Orders Projected available balance Available-to-promise Master production schedule100 Safety stock = 0 Taylor Brand 4-HP Tillers (FAS)Period On hand12345 Forecast for model (40% of total)40 Orders Projected available balance Available-to-promise Master production schedule80 Lot size = 80 Safety stock = 10 Normal ATP logic applies to FAS items For planning BOM items projected available balance is always zero because the item doesn’t actually exist Planning BOM orders are the sum of FAS orders

5-22 Master Production Schedule Stability A stable MPS translates to stable component schedules Stability allows improved plant performance Excessive MPS changes can lead to reduced productivity Failure to change the MPS can lead to reduced customer service and increased inventory (failure to react)

5-23 Freezing the Master Production Schedule Inside the frozen horizon no order changes are allowed Demand Time Fence Planning Time Fence Only occasional changes Minor changes Most changes

5-24 Managing the Master Production Schedule To be controlled, the MPS must be realistic People should only be held accountable for attainable performance levels Stability and buffering are important The MPS must not be overstated Sum of the MPS should equal the production plan

5-25 Principles The MPS unit should reflect the business environment and the company’s chosen approach. If a common ERP database is implemented, the MPS function should use that data. Regardless of the firm’s environment, effective scheduling is facilitated by common systems, time-phased processing, and MPS techniques. Customer order processing should be closely linked to MPS.

5-26 Principles ATP information should be derived from the MPS and provided to the sales department. An FAS should be used to convert the anticipated build schedule into the final build schedule. The master production scheduler should ensure that the sum of the parts (the MPS) is equal to the whole (the operations plan).

5-27 Quiz – Chapter 5 The Master Production Schedule (MPS) shows when products will physically be available to ship? (True or False) In which environment is a planning bill-of-material (BOM) most likely to be used? Available-to-promise (ATP) is likely to be least useful in which environment? A Super Bill represents average usage of components in an assemble-to-order environment? (True or False) When the master production schedule (MPS) is frozen for some period, changes to the plan within that period are typically prohibited?