MANGT 660 (A): Supply Chain Planning and Control Chapter 4 Master Production Scheduling (1/2)

Master Production Schedule (MPS) A key link in the manufacturing supply chain P&C process An anticipated schedule of demand – Tool for controlling product availability Driven by the aggregate plan (Ch3) – Disaggregation (i.e. break down) of the aggregate plan – More detail than aggregate plan – Focusing on distinct end items rather than composite or average units of product – Finer time intervals (e.g. weeks rather than months) 2

MPS (cont’d) MPS S&OP Aggregate Plan Demand Management Marketing Planning Financial Planning Business Planning Material requirements planning (MRP) Production planning Supply chain planning Capacity Planning 3 MPS interfaces: Ch9 Ch3 Ch6 Ch2

MPS (cont’d) Inputs – Beginning inventory – Customer orders – Finished goods warehouse requirements – Service part requirements – Sales forecast for a particular end item – Safety stock – Orders for safety stock (stabilization inventory in anticipation of future needs) – Inter-plant orders (component parts rather than products Outputs – Production per period needs to meet anticipated customer demand Trade-off between costs and product availability 4

MPS example 1 Schedule of planned production Q. Disaggregation? – Two models (Model A & Model B) – Demand composition of Models (Model A = 40%; Model B = 60%) – Demand typically occurs uniformly throughout a month – Project the week-by-week production needs for the two models (4 Weeks per Month) 5

MPS example 1 (cont’d) 6 =100=400 6 Disaggregation of production plan

Different organizational environments in which MPS takes place Firms can have different strategies for different product lines and, thus, use different MPS approaches. 1)Make to Stock 2)Make to Order 3)Assemble to Order 7 MPS environment

MPS environment (cont’d) 1)Make to Stock – Emphasizes immediate delivery of reasonably priced off-the-shelf standard items – MPS is the anticipated build schedule of the items required to maintain the finished goods inventory at the desired service level. – Mass-production (continuous, repetitive, or intermittently) line or in batch production – Uses Bill of Material (BOM) 8

MPS environment (cont’d) Bill of materials (BOM) – A detailed description of an “end item (i.e., finished product)” and list of all of its raw materials, parts, and sub- assemblies. Three types of BOM 1)Indented list 2)Parts list 3)Product structure tree 9

MPS environment (cont’d) BOM example 1: BBQ grill gift set 10 Tote Bag Fork Spatula Tongs Metal Spatula + Handle A + Rivets (2) + Leather Tie = Metal Tongs + Handle B + Rivets (8) = Rivets Handle A Metal Tongs Leather Tie Handle B Metal Fork Metal Spatula Metal Fork + Handle A + Rivets (2) + Leather Tie = Steel Sheet (1 per each) Wood Block (1 per Handle A; 2 per Handle B) Purchased as a finished item =

MPS environment (cont’d) Indented list and parts list 11 “Parent” “Children”

MPS environment (cont’d) Product structure tree 12

MPS environment (cont’d) BOM example 2: Using the BOM shown below, how many of part E will be needed if 20 units of end item A are needed? 1) Start with the Bs. 2) 20 As x 2 Bs for each A = 40 Bs; 40 Bs x 4 Es for each B = 160 Es. 3)Then determine the Es needed for the Ds (20As x 2Ds for each A = 40 Ds; 40 Ds x 2 Es for each D = 80 Es). 4)The total number of Es = =

MPS environment (cont’d) 2)Make to Order ― MPS for the raw material and the standard items that are purchased, fabricated, or built to stock and another MPS for items that are custom engineered, fabricated, and assembled 3)Assemble to Order ― Can supply a large variety of final product configurations from standard components and subassemblies within a relatively short lead time. 14

MPS environment (cont’d) 3)Assemble to Order (cont’d) ― Example: Boeing’s 787 Dreamliner supply chainBoeing’s 787 Dreamliner supply chain Costs of delays and penalties: $4 billion+ Major suppliers share the risks as well as the profits. Major pre-assembled sections of the aircraft are to be flown in to Boeing’s Everett Washington final assembly plant from Japan, Italy, South Carolina and Kansas. Component suppliers stretch to China and India and beyond. Customer order decoupling point could be in either raw materials at the manufacturing site or the supplier inventory. Depending on how similar the products are it might not even be possible to pre-order parts. 15

MPS (cont’d) BOM Time bucket: Individual time period for planning Cumulative lead time: The longest lead-time path in the BOM Available to Promise (ATP): Part of planned production that is not committed to a customer (to be covered in Ch4(2) slides) 16

MPS (cont’d) Planning horizon: – Entire time period covered by the MPS (must be always bigger than cumulative lead time to provide enough time for the production) – Includes: Production time Procurement time Engineering time for custom environments Delivery-to-customer response times 17

MPS example 2 18 Time bucket: 1 week Planning horizon: 8 weeks Cumulative lead-time: 6 weeks (See the “product structure tree” at slide p.12) MPS for the BBQ grill gift set

MPS example 3 GFR, Inc. schedules production of its best selling dog food, Rex-2, in batches of 130 units whenever the projected ending inventory balance in a quarter falls below 20 units. It takes one quarter to make a batch of 130 units. GFR currently has 80 units on hand. The sales forecast for the next four quarters is: 19

MPS example 3 (cont’d) a.Prepare a time-phased MPS record showing the sales forecast and MPS for Rex-2. b.What is the inventory balances at the end of each quarter? 20

MPS example 3 (cont’d) c.During the first quarter, no units were sold. The revised forecast for the rest of the year is (Assume no safety stock is needed, and a batch is already ordered in the first quarter): How does the MPS change? 21