5 Master Production Scheduling Homework problems 3 4

5. Master Production Scheduling Homework problems: 3, 4, 5, 6, 7, 9. 1

1. The MPS Activity l What is an MPS? Ø Ø Ø It is the output of the master scheduling process, which encompasses the variety of activities involved in the preparation and maintenance of the master schedule. It is an anticipated build schedule, Not a forecast It is a statement of Production, NOT a statement of Demand It translates the SOP into a plan for producing specific products in the future. Figure 5. 1 SOP is an aggregate statement of the manufacturing output required, but MPS is a statement of the specific products that make up that output. As the statement of output, the MPS forms the basic communication link between the market and manufacturing. 2

1. The MPS Activity l MPS and the Business Environment Ø Ø Ø The MPS is stated in terms of product specifications–usually part numbers which have specific bills of materials (BOM) 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 assemble-to-order environments, the MPS may be stated in terms of an “average” final product. In an assemble-to-order firm, the large number of possible product combinations is represented with a planning bill of materials. 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. 3

1. The MPS Activity An MPS is a detailed plan (a statement of planned future output) that states how many end item/products (or product options or group of models) will be produced within specified periods of time. Ø End items are either finished products or the highest level assemblies from which shippable products are built. Ø An MPS must be stated in terms used to determine component -part needs (e. g. , BOM) and other requirements, but NOT in dollars. Ø Time periods are usually measured in weeks, although they may be measured in hours, days, or even months. 4

Constraints of MPS a. Sum of the MPS quantities must equal those of PRODUCTION PLAN b. Total requirements for a product must be allocated over time in an efficient manner. Considerations involved are: * Costs of production (and setups) * Inventory carrying costs c. CAPACITY LIMITATION must be recognized. v Production may be delayed or take place before market demand in order to improve utilization, reduce cost, etc. 5

An MPS Example April 1 Ladder-back chair 2 May 3 Aggregate production plan for chair family 5 150 6 7 8 150 Kitchen chair Desk chair 4 120 200 550 120 200 790 6

The MPS Process Authorized production plan Prospective master production schedule Are resources available? No Yes Material requirements planning Authorized master production schedule 7

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

Fig. 5. 1 MPS in the MPC System Rough-cut capacity planning Sales and operations planning Master production scheduling Detailed material planning Demand management Front End Engine Enterprise Resource Planning (ERP) System Resource planning 9

2. MPS Techniques Determine supply and demand relationships over time (timephased 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) 10

2. MPS Techniques The time-phased record (Fig. 5. 2) Leveling strategy (Fig. 5. 2) Chase strategy (additional example) Lot sizing strategy (Fig. 5. 3) Rolling through time (Figs. 5. 3, 5. 4, 5. 5) Order promising and ATP (Figs. 5. 6, 5. 7) Consuming the forecast (Figs. 5. 8, 5. 9, 5. 10) Demand time fence and planning time fence (handouts) 11

2. MPS Techniques The time-phased record with level MPS strategy (Fig. 5. 2) • A means of gathering and displaying critical scheduling information (Forecast, available stock, production schedule) Period On hand Forecast Projected available balance Master production schedule 20 1 2 3 4 5 5 5 8 10 15 25 30 32 32 27 10 10 10 12

2. MPS Techniques Chase MPS strategy example • Production (MPS) reflects the forecasted demand • Constant projected available balance inventory Period On hand Forecast Projected available balance Master production schedule 20 1 2 3 4 5 5 5 8 10 15 20 20 20 5 5 8 10 15 13

Lot Sizing strategy (Fig. 5. 3) Period 1 – 5 plan Period On hand Forecast Projected available balance Master production schedule Lot size = 30 Safety stock = 5 20 1 2 3 4 5 5 5 8 10 15 15 10 32 22 7 30

Rolling through time (Fig. 5. 3 5. 4) Period 1 – 5 plan Period On hand Forecast Projected available balance 20 1 2 3 4 5 5 5 8 10 15 15 10 32 22 7 Master production schedule 30 Lot size = 30 Safety stock = 5 Period 2 – 6 plan Period On hand Forecast Projected available balance 10 Master production schedule Lot size = 30 Safety stock = 5 2 3 4 5 6 20 20 20 15 20 -10 0 -20 -35 -55 30

Rolling through time (Fig. 5. 3 5. 4) Period 2 – 6 plan Period On hand Forecast Projected available balance 10 Master production schedule Lot size = 30 Safety stock = 5 2 3 4 5 6 20 20 20 15 20 -10 0 -20 -35 -55 30

Rescheduled MPS (Fig. 5. 5) Period 2 – 6 plan Period On hand Forecast Projected available balance Master production schedule Lot size = 30 Safety stock = 5 10 2 3 4 5 6 20 20 20 15 20 20 30 10 25 5 30 30 30

Available-to-Promise (ATP) • 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

Available-to-Promise (ATP) Calculation • ATP 1 = beginning on-hand + MPS – sum of the orders before the next MPS receipt • For subsequent weeks (when MPS occurs): – Discrete logic: • ATPsubsequent weeks = MPS – sum of the orders before the next MPS receipt – Cumulative logic: • ATPsubsequent weeks = Previous ATP + MPS – sum of the orders before the next MPS receipt

¢ Discrete logic ATP treats each period independently (Fig. 5. 6) Period On hand 1 2 3 4 5 Forecast 5 5 8 10 15 Orders 5 3 2 0 0 15 10 32 22 7 Projected available balance Available-to-promise Master production schedule 20 12 28 30 Lot size = 30 Safety stock = 5 5 -20

¢ Cumulative logic ATP carries ATP units forward (Fig. 5. 7) Period On hand 1 2 3 4 5 Forecast 5 5 8 10 15 Orders 5 3 2 0 0 15 10 32 22 7 Projected available balance Available-to-promise Master production schedule 20 12 40 30 Lot size = 30 Safety stock = 5 5 -21

Consuming the Forecast ¢ In the ATP calculation, demand is considered to be the maximum of forecast and actual customer orders l This is a conservative approach l Hope that we will eventually sell at least the forecast quantity l Adjusts for periods where demand exceeds the forecast 22

Consuming the Forecast ¢ Assuming the following orders come in during period 2: ¢ Order # 1 2 3 Amount 5 15 35 10 Desired week 2 3 6 5 4 Can we accept all these orders? To accept all these orders, we need to schedule MPS in 5 and 6. 23

¢ Discrete logic ATP (Fig. 5. 8) Period On hand 2 3 4 5 6 Forecast 5 8 10 15 20 Orders 3+5(new) 2+15 0 10 35 7 20 10 -5 -40 7 -32 Projected available balance Available-to-promise Master production schedule 15 30 Lot size = 30 Safety stock = 5 5 -24

¢ Discrete logic ATP after update (Fig. 5. 9) Period On hand 2 3 4 5 6 Forecast 5 8 10 15 20 Orders 3+5(new) 2+15 0 10 35 7 20 10 25 20 7 13 20 -5 30 30 30 Projected available balance Available-to-promise Master production schedule 15 Lot size = 30 Safety stock = 5 5 -25

¢ Revising ATP due to negative ATP in subsequent week Period On hand 3 4 5 6 7 Forecast 10 10 15 Orders 20 2 Projected available balance Available-to-promise Master production schedule 30 35 10 20 3 0 -15 -30 30 Lot size = 30 Safety stock = 5 5 -26

ATP ¢ Compared to the discrete logic, cumulative ATP logic may look easier to use for order acceptance decisions, it might overstate the real availability. ¢ The use of PAB and ATP is the key to effective master scheduling. Negative PAB => potential problem ¢ Negative ATP => real problem ¢ 27

5. 3 MPS in Assemble-to-Order Environments ¢ ¢ ¢ In an assemble-to-order (ATO) environment, the possible combinations of end items (and thus MPS needed) can be huge (Fig. 5. 11 and DELL’s PCs) 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 28

Fig. 5. 11 The MPS Hourglass End items Establish MPS at the subassembly level Components 29

BOM Structuring for the MPS • Planning Bill (of Material): an artificial grouping of items or events in bill-of-material format used to facilitate master scheduling and material planning. • Super Bill (of Material): a type of planning bill, located at the top in the structure, that ties together various modular bills (and possibly a common parts bill) to define an entire product or product family. That is, it states the related modules/options that make up the average end item. The quantity per relationship of the super bill to its modules represents the forecasted percentage of demand of each module. The super bill is very useful for planning and (master) scheduling purposes. Figure 5. 12 30

Super Bill (of Materials) Fig. 5. 12 5 -31

¢ What are the pros and cons of super bill? Reduce the large number of MPS needed. ¢ But when orders are received, ATP must be applied to EACH option. That is, each of the affected modules must be checked (See Fig. 5. 13) ¢ 32

Using Available-to-Promise Logic with Planning BOM (Fig. 5. 13) Common Parts Available? No Yes Gear Available? No Try 1 period later Yes Taylor Available? No Yes Book order 5 -33

5. 4 Two-Level Master Production Schedules ¢ ¢ ¢ When a planning BOM is used, a final assembly schedule (FAS) is often used l 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 34

Two-Level Master Production Schedule with discrete ATP logic Taylor Brand 4 -HP Tillers (FAS) Period On hand 1 2 3 4 5 Forecast for model (40% of total) 40 40 40 Orders 42 37 23 0 0 48 88 48 Available-to-promise 48 20 80 Master production schedule 80 80 80 Projected available balance 10 Lot size = 80 Safety stock = 10 4 -Horsepower Tillers (Aggregate) Period On hand 1 2 3 4 5 Production Plan 100 100 100 Orders 100 72 54 0 0 0 0 Available-to-promise 0 28 46 100 Master production schedule 100 100 100 Projected available balance 0 Safety stock = 0 5 -35

5. 5 Master Production Schedule Stability ¢ ¢ ¢ A stable MPS translates to stable component schedules l Stability allows improved plant performance Failure to change the MPS can lead to reduced customer service and increased inventory (failure to react) Excessive MPS changes can lead to reduced productivity 36

Freezing the Master Production Schedule Inside the frozen horizon no order changes are allowed Only occasional changes Minor changes Most changes 5 -37

Demand & Planning Time Fence l Demand time fence: – The number of periods, beginning with period one, during which changes to the MPS are typically not accepted due to excessive cost caused by schedule disruption. Inside the demand time fence, the forecast is ignored in calculating the PAB, because customer orders, not the forecast, matter in the near term. l Planning time fence: – The number of periods, beginning with period one, during which the computer will not reschedule MPS orders. Usually the MPS is stated in terms of firm planned orders inside the planning time fence. – The planning time fence is typically at or outside the cumulative lead time for the master scheduled item. Example. 38

PAB with time fence • The projected available balance (PAB) is calculated in two ways, depending on whether the period is before or after the demand time fence. – Before: PAB = [prior period PAB] + [MPS] – [Customer Order] – After: PAB = [prior period PAB] + [MPS] – Max (Customer Order or Forecast) 39

MPS example with demand planning time fence 40

H. W. MPS with demand planning time fence Update PAB, schedule MPS, and calculate ATP. Onhand=40; Lost size=50 Demand time fence=4 Planning time fence=10 Period 1 2 3 4 5 6 7 8 9 10 Forecast 18 21 17 17 12 14 23 28 30 25 Orders 19 20 15 20 6 20 4 6 12 0 Projected available balance Available-to-promise Master production schedule 41

5. 6 Managing the Master Production Schedule ¢ ¢ To be controlled, the MPS must be realistic The MPS must not be overstated against the manufacturing budget and capacity constraints, and sum of the MPS should equal the production plan. ¢ Performance Measures: ¢ Against the schedule ¢ Customer service (meeting due dates; lead time performance) 42

Scheduling production using priority index Product A B C D Beginning inventory 20 50 -30 25 Weekly forecast 5 40 35 10 Lot size 50 250 100 Hours per lot size 20 80 60 30 Based on the above data, calculate priority index for each product and schedule production, where Priority index = weeks of supply = (beginning inventory) / (weekly forecast) Priorities: Product A B C D P 1 P 2 P 3 P 4 P 5 P 6 P 7 P 8

Scheduling production using priority index Product P 1 P 2 P 3 P 4 P 5 P 6 P 7 P 8 A 4 3 0 -2 4. 5 B 1. 25 0. 25 3. 5 1. 5 0. 5 C -0. 86 0. 64 -0. 57 0. 29 0. 71 D 2. 5 1. 5 -1. 5 6. 5 5. 5 35 Hours 30 25 20 15 10 5 0 1 2 3 4 Week 5 6 7 Capacity= 35 hours a week 8

Concluding 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. 45

Concluding 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). 46