04 Master Production Scheduling 2011Spring

Master SchedulingMaster Scheduling&&

The Master ScheduleThe Master Schedule

22

Introduction

They combine

Eventually, tEventually, the time comes when individual he time comes when individual “end item”“end item” products and services products and services must be scheduled at specific work centers.must be scheduled at specific work centers.

This is accomplished by master schedulingThis is accomplished by master scheduling

Which means, producing a SUPPLY PLAN (a time table including quantities) to produce specific items or provide specific services within a given time period.

Aggregate Production & Capacity Plans

Products into product groups.

Demand into monthly totals.

Personnel Requirements

across departments

Which alltogetherreflect Top ManagementDecisions.

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Master Scheduling & the Master Production Schedule (MPS)

The master schedule (MS) is a presentation of the demand, including the forecast and the backlog (customer orders received), the master production schedule (the supply plan), the projected on hand (POH) inventory, and the available-to-promise (ATP) quantity.

The master production schedule (MPS) is the primary output of the master scheduling process.It is the “plan” for providing the supply to meet the demand. Table 1

Example : A simple MS for an MPS item (end product)

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Relationship of Master Scheduling to other MPC activities

Figure 1

Is the “key” link

Is the “key” in developing the

master schedule

Creates demand requirements

Creates demand requirements

Calculates net requirements

The master schedule (MS) is a key link in the manufacturing planning and control chain.

The MS interfaces with marketing, distribution planning, production planning, and capacity planning.

The MS drives the material requirements planning (MRP) system.

Master scheduling calculates the quantity required to meet demand requirements from all sources (seethe example case on next page).

Input-Output Control & Operation Scheduling

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Example : A case in which the distribution requirements are the gross requirements for the MS

Here, the MS;enables marketing to make legitimate delivery commitments to field warehouses and final customers. enables production to evaluate capacity requirements in a more detailed manner. provides to management the opportunity to ascertain whether the business plan and its strategic objectives will be achieved.

Net Requirements are calculated by MRP logic.

Table 2Distribution requirements (gross requirements for

MS)

Distribution requirements (gross requirements for

MS)

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Understanding THE ENVIRONMENT in which master scheduling takes place.

Before describing the activities involved in creating and managing the MS, we need to examine the different organizational environments in which master scheduling takes place.

THESE ENVIRONMENTS ARE DETERMINED BY the company’s STRATEGIC RESPONSES to;

and

Thus, a COMPETETIVESTRATEGY evolves...

the INTERESTS ofCUSTOMERS

the ACTIONS ofCOMPETITORS

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FOR A SPECIFIC PRODUCT (end item),THIS COMPETETIVE STRATEGY MAY BE

ONE OF THE FOLLOWING

Make finished itemsto stock

(sell from finished goods inventory)

Assemble final products to orderand make/buy subassemblies andlower level detail parts to stock.

Custom design and make toorder.

It is not unusual for an organization to have different strategies for different product lines and, thus, use different MS approaches.

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Make-to-stock StrategyMake-to-stock Strategy

This strategy emphasizes immediate delivery of reasonably priced off-the-shelf standard items.

In this environment the MPS is the anticipated build schedule of the items required to maintain the finished goods at the desired level.

Quantities on the schedule are based on manufacturing economics, the forecasted demand and desired safety stock levels.

In this environment, an end item bill of material (BOM) is used. Items may be produced either on a mass production (continuous or repetitive) line or in batch production.

Basic characteristics of this strategy/environment:

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Assemble-to-order StrategyAssemble-to-order Strategy

In this environment, subassemblies and lower level detail parts/components are either produced or purchased to stock.

The competitive strategy is to be able to supply a large variety of final product configurations from standard components and subassemblies within a relatively short lead time. This environment requires a forecast of options as well as the total demand of the end item. Thus, there is an MPS for the options, accessories, and common components as well as final assembly schedule (FAS). Here, examples of options can be given as; “an automobile may be ordered with or without air conditioning” or “a fast-food restaurant may deliver your hamburger with or without lettuce”. The advantage of this approach is that many different final products can be produced from relatively few subassemblies and components. This reduces inventory substantially (see example on following page).

Basic characteristics of this strategy/environment:

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Example : Advantages of Assemble-to-order Strategy

The number of alternative final product configurations = 4x2x4x3x5 = 480The number of different items to stock = 4+2+4+3+5 = 18

Figure 2There are 4 different Variations for A1

There are 2 different Variations for A2



There are 5 different Variations for C1

(Each final product contains four major sub-assemblies and a detail part)

Competetive strategy of large variety of final product.

Relatively small number of

component items to stock.

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Custom Design & Make-to-Order Strategy Strategy

In many situations the final design of an item is part of what is purchased. The final product is usually a combination of standard items and items custom designed to meet the special needs of the customer.

Combined material handling and manufacturing processing systems, special trucks for off-the-road work on utility lines and facilities are examples of such final products.

Thus, there is one MPS for the raw material and the standard items that are purchased, fabricated, or built to stock and another MPS for the custom engineering, fabrication, and final assembly.

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Relationships between competetive strategies

Figure 3

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Understanding the Bill of Material & its uses

An inclusive definition of a final product includes; a list of the items, ingredients, or materials needed to assemble, mix, or produce that end product. This list is called a bill of material (BOM) and created as part of the design process .

A single level BOM is sufficient when final product is assembled or manufactured from a set of purchased parts and raw materials.

Table 3

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A multilevel (indented) BOM is required when final product has “make subassemblies” in its structure.

Table 4

Figure 4

End Item: Lamp LA01

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If the “finished shaft” and “wiring assembly” shown in Table 4 were “make subassemblies”, then their components would be listed in the multilevel (indented) BOM of Lamp LA01.

Table 5

As one can easily see, the multilevel product structure is really made up of building blocks of single level product trees.

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COMPLEXITIES IN REAL LIFE : What happens if we manufacture alternate lamps by using;

three different shades, two alternate base plates, and two types of sockets

Then we have (3x2x2=) 12 different models having some common components.

To make the planning task more understandable, we can prepare the “common parts bill”.

Table 6

Some parts are common to all

models

Some parts are not common to all

models

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Inorder to ease up the planning task, we can reduce the number of items in BOM by grouping part 1100 (finished shaft) and part 1700 (wiring assembly) which are common parts to all products, and assign a new part number (such as 3000) to this group.

18 items 19 items

Since part no 3000 will never be stocked, it will be a pantom number.

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From Table 6, a simplified product structure diagram can be created for the family of lamps which consists of modular pseudo subassemblies :

Figure 5

In this kind of diagram, instead of the quantity for each unit assembled, the percentage split for each type of component is stated.

If we plan for a total of 10,000 lamps for each month, this planning bill can be used to derive the number of each type of component to build.

Furthermore, if we decide to change from 15” cream shade to, say, a 16” green shade, we need to alter only this single BOM (modular bill).

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Understanding the Planning Horizon

A plan must cover a period at least equal to the time required to accomplish it.

A Principle of Planning:

That is, the MS planning horizon must be at least as long as the lead time required to fabricate the MS items. This includes production and procurement time as well as engineering time in a custom design environment.

Figure 6

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Minimum Planning Horizon:

According to the principle of planning, Minimum Planning Horizon is, “the time period in which the MPS can not be changed”. This period is also called as “frozen zone”.

Prod

uctio

n H

ours

1 2 63 4 5 7 8 9 10 11 12 13 14 15 16 17 18

Weeks

Committed Backlog(IN PRODUCTION)

(frozen schedule/zone)

CommittedBacklog(NOT inPROD)

CommittedBacklog(NOT inPROD)

ForecastedBacklog

Minimum planning horizon(frozen zone)

19 20 21 22 23 24

Planning horizon which is under the authority of master schedular

Figure 7

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A Sample Time Fencing for MS Planning Horizon

Only top management can change the MPS.PERIOD A :PERIOD B : Any additions to the schedule must be counterbalanced by comparable

deletions or increases in capacity. Changes are usually negotiated between marketing and manufacturing with the master scheduler determining their feasibility before the final decision. The product mix may change but not the production rate.

PERIOD C : The MPS is consistent with the production plan. Preparation of the MS is straightforward in this time frame.

Table 7

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DESIGNING, CREATING & MANAGING THE MASTER SCHEDULE

Master Scheduling activities are carried out in three main steps:

Designing the master schedule (MS)STEP 1 :

STEP 2 : Creating the master schedule (MS)

Controlling the master schedule (MS)STEP 3 :

1. Select the items; that is, select the levels in the BOM structure to be represented by the items scheduled (both components and final assemblies may be included).2. Organize the MS by product groups.3. Determine the planning horizon, the time fences, and the related operational guides.4. Select the method for calculating and presenting the available-to-promise (ATP) information.

1. Obtain the necessary informational inputs, including the forecast, the backlog (customer commitments), and the inventory on hand.2. Prepare the initial draft of the master production schedule (MPS).3. Develop the rough cut capacity requirements plan (RCCR').4. If required, increase capacity or revise the initial draft of the MPS to obtain a feasible schedule.

1. Track actual production and compare it to planned production to determine if the planned MPS quantities and delivery promises are being met.2. Calculate the available-to-promise to determine if an incoming order can be promised in a specific period.3. Calculate the projected on hand to determine if planned production is sufficient to fill expected future orders.4. Use the results of the preceding activities to determine if the MPS or capacity should be revised.

SUBSTEPS :

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Designing The Master Schedule

Suppose that we are going to create a MS in a make-to-stock environment with no safety stock.

Our planning horizon will be 4 weeks (weeks 32, 33, 34 & 35).Calculation method for ATP (available-to-promise) quantitieswill be “discrete”.

Figure 8

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Creating The Master Schedule

Table 8

When we examine the availableinformation for PG1, we see that;

For MPS Item1, the POH quantity ofweek 31 does not meet the forecasted requirement of week 32. So, we need to schedule this item for week 32.



Some companies may use a safety stock level. Item is rescheduled when POH drops Some companies may use a safety stock level. Item is rescheduled when POH drops down to the safety stock level.down to the safety stock level.

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Based on a weighted average capacity of 180 units per week, we create our initial (first) plan :

Table 9

The POH for the first week equals the beginning inventory plus the MPS quantity minus the forecast requirements.

For each week we expect to complete a total of 180 units of PG1 products.

Now the question is, “whether do we have sufficient capacity to carry out this plan?”Now the question is, “whether do we have sufficient capacity to carry out this plan?”

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Brief summary of Capacity management

Figure 9 shows an overview of the entire Manufacturing Planning & Control (MPC)process under MRP.

In this approach, capacity management techniques usually are separated into four categories:

1. resource requirements planning (RRP), 2. rough cut capacity planning (RCCP), 3. capacity requirements planning (CRP), and4. input / output control.

Figure 9

Remember: MRP is insensitive to capacity.

A problem commonly encountered in operating MRP systems is the existence of an overstated MPS.

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Table 10

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An overstated master production schedule is the one which orders more than the production can complete. It causes;

• raw materials and WIP inventories to increase because more materials are purchased and released to the shop than are completed and shipped.

• a buildup of queues on the shop floor resulting an increase in actual lead times which yields to ship dates to be missed.

Figure 10

Overstated MPS causes a chain reaction which flows down to the lowest level components.

Overstated MPS causes a chain reaction which flows down to the lowest level components.

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Revising the MPS

Let’s go back to the initial MPS developed for product group PG1 which coversproducts MPS Item1, MPS Item2, and MPS Item3 according to the productionplan dictated by management.

Capacity required by this initial MPS is shown in following page.

Table 11

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The comparison of capacity requirements to available capacity gives the master scheduler the following options:

1. Increase capacity in Weeks 32 and 33.2. Reduce production quantities in Weeks 32 and 33 and increase production quantities in Weeks 34 and 35.3. Some combination of Options 1 and 2,

Table 12

(0.342 standard hrs/lamp)

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In this case the choice is Option 2: The revised MPS quantities were obtained by scheduling the maximum possible quantity of MPS Item1 in Weeks 32 and 33 and completing those requirements in Week 34. The remaining requirements for MPS Item2 and MPS Item3 were roughly balanced between Weeks 34 and 35, producing MPS Item2 first.

Table 13Copy of Table 11

(0.342 standard hrs/lamp)

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Table 14

Remember that; the “Production Plan” and the “MPS” were based on the “Forecasts” and “customer commitments /backlog”. For this reason, it may be necessary to revise the MPS again if actual orders are substantially different from the forecast.

Once the initial revised feasible MPS is developed, creating the master schedule is completed.

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POH values reveal that sufficient units will be available to cover forecast demand for PG1

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Controlling the MPS

The MASTER SCHEDULE (MS) itself serves as a control device

in three distinct ways

Actual production is compared to the MPS to

determine if the plan is being met.

The available-to-promise (ATP)is calculated to determine

if an incoming order can be promised for delivery in

a specific period.

The projected on hand (POH) is calculated to determine if the supply is sufficient to fill

expected future orders.

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The Available to Promise Quantity (ATP)The Available to Promise Quantity (ATP)

Definition of ATP as given by APICS Dictionary is as follows;

"The uncommitted portion of a company's inventory or planned production. This figure is normally calculated from the master production schedule and is maintained as a tool for customer order promising."

However, when we say that;

there are 25 units available-to-promise in Week 7 and there are20 units available-to-promise in Week 8,

the meanings are not clear until the method of calculation for ATP values is known.

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There are three methods of computing the ATP

DISCRETE (ATP:D)

CUMULATIVE

With look ahead(ATP:WL)

Without look ahead(ATP:WOL)

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A. Calculation of Discrete ATP (ATP:D)

Computation method is as follows:

1. For the first period If there is a scheduled MPS quantity; ATP:D = Beginning inventory + Scheduled MPS qty for the first period – Backlog for the period (committed qty). If there is NO scheduled MPS quantity; ATP:D = 0

Table 15

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WHY ATP:D=0 for the second case?

Because in this case, the beginning inventory is supposedto compensate the backlogs of the first period and the consecutive periods (if there are any)which does not have scheduled MPS quantities.

For this reason, the beginning inventory has no significance for the first period. Thus, the formula yields toa “negative” or “zero” value for ATP:D. Since there can not be a “negative” available to promise quantity, ATP:D value becomes “0”.

Example - ATP:D quantities for week 32

MPS Item1 ATP:D = 10+169-110 = 69 MPS Item2 ATP:D = 0+0-35 = -35 = 0 MPS Item3 ATP:D = 0+0-13 = -13 = 0 Table 15

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2. For the second period and on If there is a scheduled MPS quantity; ATP:D = Scheduled MPS qty for the period – Backlog for the period (committed qty). If there is NO scheduled MPS quantity; ATP:D = 0

Table 15

Example - ATP:D quantities for MPS Item1 for weeks 33, 34 and 35

For week 33 ATP:D = 169-80 = 89 For week 34 ATP:D = 22-5 = 17

For week 35 ATP:D = 0-15 = -15 0


For week 33 ATP:D = 0-20 = -20 0Remember that, since there is no scheduled MPS for this period, respective backlog should be associated with an MPS quantity prior to week 32.

For week 34 ATP:D = 160-45 = 115

For week 35 ATP:D = 56-24 = 32

What happens to ATP:D values of MPS Item1 if we receive an additional order of 30 units for week 32?

The ATP:D of week 32 changes from 69 to 39. ATP:D quantities for other weeks remain same as before.


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Note that in computing the ATP: D, it is not necessary to have the forecast and the projected on hand inventory in the master schedule. This is because at this time the master scheduler is not creating a master schedule, but, instead, is managing an existing schedule.

WHY we DO NOT have “Forecast” and “POH” values in Master Schedule when computing ATP:D?

The master scheduler is promising the delivery of units to customers which will be available either from units already on hand when construction of the master schedule began, or from units scheduled to be built in accordance with the master production schedule. Therefore, the forecast and POH are not included in the tables that follow.

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B. Calculation of Cumulative ATP without lookahead (ATP:WOL)


1. For the first period ATP:WOL = Beginning inv + Scheduled MPS qty – Backlog

2. For the following periods ATP:WOL = ATP:WOL of preceeding period + Scheduled MPS qty –

BacklogExample - ATP:WOL quantities for MPS Item1 for weeks 32, 33, 34 and 35

For week 32 ATP:WOL = 10+169-110 = 69 For week 33 ATP:WOL = 69+169-80 = 158 For week 34 ATP:WOL = 158+22-5 = 175For week 35 ATP:WOL = 175+0-15 = 160

Table 16

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Difference between ATP:WOL & ATP:D methods

The most obvious difference between ATP:WOL and the ATP:D methods is that, the ATP in any period is likely to include units also included in the ATP of other periods.

For example, For MPS Item1, the 158 unit ATP:WOL of Week 33 includes the 69 units in the ATP of Week 32, which are also included in the ATP of all other weeks.

Furthermore, in ATP:WOL procedure, the ATP for a week may include units committed to fill requirements for a later week.

For example, 15 of the units in the ATP of Week 34 are committed to customer orders promised in Week 35.

The data becomes misleading

Table 16

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B. Calculation of Cumulative ATP with lookahead (ATP:WL)The look-ahead approach resolves the “misleading data” problem of ATP:WOL method of calculation.

Table 17


The ATP:WL of a period = (the ATP:WL of the preceding period) + (the MPS of the period) – (the backlog of the period) – (the sum of the differences between the production [MPS qty] and backlog of all future periods until, but not including, the period at which point production exceeds the backlog).

Example - ATP:WL quantities for MPS Item1 for week 34

For week 34 ATP:WL = 158+22-5-15 = 160

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Detailed Calculation:

MPS Item1 :ATP:WL for week 32;

ATP:WL which is prior to week 32 is 10 units.MPS for week 32 is 169 units.Backlog for week 32 is 110 units.In the following week (week 33), production(MPS qty of 133 units) exceeds the backlog(of 80 units). Therefore we will not consider week 33. Accordingly; ATP:WL quantity of week 32 =10+169-110 = 69 units.

Is calculated exactly in the same way since, in the following week (week 34), production (MPS qty of 22 units) exceeds the backlog (of 5 units). Accordingly; ATP:WL quantity of week 33 = 69+169-80 = 158 units.

ATP:WL for week 33;

ATP:WL for week 34;In the following week (week 35), production (MPS qty of 0 units) does not exceed the backlog (of 15 units). So, we have to look ahead and say that, this difference of 15 units between production and backlog of week 35will be covered by the ATP of week 34.Accordingly; ATP:WL quantity of week 34 = 158+22-5-(15) = 160 units.

ATP:WL for week 35; remains as 160 units since we had already excluded 15 units of difference qty.

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Resolution of the “misleading data” problem :

The ATP quantity of 175 for week 34 includes comitted quantity of 15 units for the following week (week 35).

The ATP quantity of 160 for week 34 does not include the comitted quantity of 15 units for the following week (week 35).

Week in which wedo not have enoughproduction to meet the existing backlog.

Week in which wedo not have enoughproduction to meet the existing backlog.

Also read the following supplementary handouts for Rough Cut Capacity Planning from the IE434 web page:

“Reading 03-ROUGH CUT CAPACiTY PLANNiNG_supplement for MPS_2010.doc”

04 Master Production Scheduling 2011Spring

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