Chapter - 3

Master Scheduling

1
Introduction
After production planning, the next step in the manufacturing planning and
control process is to prepare a master production schedule (MPS).
It is an extremely important planning tool and forms the basis for
communication between sales and manufacturing.
The MPS is a vital link in the production planning system:
• It forms the link between production planning and what manufacturing will actually
build.
• It forms the basis for calculating the capacity and resources needed.
• The MPS drives the material requirements plan. As a schedule of items to be built,
the MPS and bills of material determine what components are needed from
manufacturing and purchasing.
• It keeps priorities valid. The MPS is a priority plan for manufacturing.

2
Introduction
Whereas the production plan deals in families of products, the MPS works with
end items.
It breaks down the production plan into the requirements for individual end
items, in each family, by date and quantity.
The production plan limits the MPS.
Therefore the total of the items in the MPS should not be different from the total
shown on the production plan.
The MPS forms a vital link between sales and production as follows:
• It makes possible valid order promises. The MPS is a plan of what is to be produced and
when. As such, it tells sales and manufacturing when goods will be available for delivery.
• It is a contract between marketing and manufacturing. It is an agreed-upon plan.

3
Introduction
The information needed to develop an MPS is
provided by:
• The production plan.
• Forecasts for individual end items.
• Actual orders received from customers and for
stock replenishment.
• Inventory levels for individual end items.
• Capacity limitations.
4
RELATIONSHIP TO PRODUCTION PLAN

5
6
7
8
• This schedule is satisfactory for the following
reasons:
– It tells the plant when to start and stop production of
individual items.
– Capacity is consistent with the production plan.
• It is unsatisfactory for the following reasons:
– It has a poor inventory balance compared to total
inventory.
– It results in a stockout for product C in periods 2 and 3.

9
 RELATIONSHIP TO PRODUCTION PLAN
 EXAMPLE PROBLEM
The Hotshot Lightning Rod Company makes a family of two
lightning rods, Models H and I. It bases its production planning
on weeks. For the present month, production is leveled at 1000
units. Opening inventory is 500 units, and the plan is to reduce
that to 300 units by the end of the month. The MPS is made using
weekly periods. There are 4 weeks in this month, and production
is to be leveled at 250 units per week. The forecast and projected
available for the two lightning rods follows. Calculate an MPS
for each item.
10
DEVELOPING A MASTER PRODUCTION SCHEDULE
The objectives in developing an MPS are as follows:
• To maintain the desired level of customer service by maintaining
finished-goods inventory levels or by scheduling to meet customer
delivery requirements.
• To make the best use of material, labor, and equipment.
• To maintain inventory investment at the required levels.

To reach these objectives, the plan must satisfy customer demand,
be within the capacity of manufacturing, and be within the guidelines
of the production plan.

11
 There are three steps in preparing an MPS:
1. Develop a preliminary MPS.
2. Check the preliminary MPS against available capacity.
3. Resolve differences between the preliminary MPS and capacity availability.

 Preliminary Master Production Schedule

• To show the process of developing an MPS, an example is used
that assumes
• the product is made to stock,
• an inventory is kept, and
• the product is made in lots.
1. A particular item is made in lots of 100, and the expected
opening inventory is 80 units.
2. Figure 3.1 shows the forecast of demand, the projected
available on hand, and the preliminary MPS.

12
• Period 1 begins with an inventory of 80 units.
• After the forecast demand for 60 units is
satisfied, the projected available is 20 units.
• A further forecast demand of 60 in period 2 is not
satisfied, and it is necessary to schedule an MPS
receipt of 100 for week 2.
• This produces a projected available of 60 units at
the end of period 2. In period 3, the forecast
demand for 60 is satisfied by the projected 60 on
hand, leaving a projected available of 0.

13
• In period 4, a further 100 must be received, and when the
forecast demand of 60 units is satisfied, 40 units remain in
inventory.
• This process of building an MPS occurs for each item in the
family.
• If the total planned production of all the items in the family
and the total ending inventory do not agree with the
production plan, some adjustment to the individual plans
must be made so the total production is the same.
• Once the preliminary master production schedules are
made, they must be checked against the available capacity.
This process is called rough-cut capacity planning.

14
15
 EXAMPLE PROBLEM
• Amalgamated Nut Crackers, Inc., makes a family of nut
crackers. The most popular model is the walnut, and the sales
department has prepared a 6-week forecast. The opening
inventory is 50 dozen (dozen is the unit used for planning).
As master planner, you must prepare an MPS. The
nutcrackers are made in lots of 100 dozen.

16
 Rough-Cut Capacity Planning
Rough-cut capacity planning checks whether critical resources are
available to support the preliminary master production schedules.
Critical resources include bottleneck operations, labor, and
critical materials (perhaps material that is scarce or has a long
lead time).
 EXAMPLE PROBLEM
The Acme Tweezers Company makes tweezers in two models,
medium and fine. The bottleneck operation is in work center 20.
Following is the resource bill (in hours per dozen) for work
center 20.
17
 Hours per Dozen
Work Center Medium
Fine
20 0.5
1.2
The master production schedule for the next 4
weeks is:
Week 1 2 3
4 Total
Medium 40 25 40
15 120
Fine 20 10 30
18
20 80
 Resolution of Differences
 The next step is to compare the total time required to the available capacity of
the work center.
 If available capacity is greater than the required capacity, the MPS is
workable. If not, methods of increasing capacity have to be investigated.
 Is it possible to adjust the available capacity with overtime, extra workers,
routing through other work centers, or subcontracting? If not, it will be
necessary to revise the master production schedule.
 Finally, the master production schedule must be judged by three criteria:
1. Resource use. Is the MPS within capacity restraints in each period of the plan? Does it
make the best use of resources?
2. Customer service. Will due dates be met and will delivery performance be acceptable?
3. Cost. Is the plan economical, or will excess costs be incurred for overtime, subcontracting,
expediting, or transportation?
19
 Master Schedule Decisions
 The MPS should represent as efficiently as possible what manufacturing will
make. If too many items are included, it will lead to difficulties in forecasting
and managing the MPS.
 In each of the manufacturing environments – make to stock, make to order,
and assemble to order – master scheduling should take place where the
smallest number of product options exists.
 Make-to-stock products: In this environment, a limited number of standard
items are assembled from many components. Televisions and other consumer
products are examples. The MPS is usually a schedule of finished-goods
items.
 Make-to-order products: In this environment, many different end items are
made from a small number of components. Custom-tailored clothes are an
example. The MPS is usually a schedule of the actual customer orders. 20
 Assemble-to-order products: In this environment, many end items can be
made from combinations of basic components and subassemblies.
 Final assembly schedule (FAS): This last step, assembly to customer
order, is generally planned using a final assembly schedule. This is a
schedule of what will be assembled. It is used when there are many options
and it is difficult to forecast which combination the customers will want.
 The FAS schedules customer orders as they are received and is based on the
components planned in the MPS. It is responsible for scheduling from the
MPS through final assembly and shipment to the customer.
 Engineer to order: This is a form of make-to-order (MTO) products. In
this environment, the product is designed before manufacturing based on
the customer’s very special needs. A bridge is an example.

21
22
23
 Planning Horizon
• The planning horizon is the time span for which plans are
made.
• It must cover a period at least equal to the time required to
accomplish the plan.
• For master production scheduling, the minimum planning
horizon is the longest cumulative or end-to-end lead time
(LT).
• For example, in Figure 3.5, the longest cumulative lead
time path is A to D to F to G.
• The cumulative lead time is the minimum planning horizon
must be 12 weeks; otherwise, raw material G is not
ordered in time to meet delivery.

24
25
• The planning horizon is usually longer for several reasons.
• The longer the horizon, the greater the “visibility” and the
better management’s ability to avoid future problems or to
take advantage of special circumstances.
• For example, firms might take advantage of economical
purchase plans, avoid future capacity problems, or
manufacture in more economical lot sizes.
• As a minimum, the planning horizon for a final assembly
schedule must include time to assemble a customer’s
order.
• It does not need to include the time necessary to
manufacture the components. That time will be included in
the planning horizon of the MPS.

26
 PRODUCTION PLANNING, MASTER
SCHEDULING, AND SALES
• The production plan reconciles total forecast
demand with available resources.
• It takes information from the strategic business
plan and market forecasts to produce an overall
plan of what production intends to make to meet
forecast.
• It is dependent on the forecast and, within
capacity limits, must plan to satisfy the forecast
demand.
• It is not concerned with the detail of what will
actually be made. It is intended to provide a
framework in which detailed plans can be made
in the MPS. 27
• The MPS is built from forecasts and actual demands for individual
end items.
• It reconciles demand with the production plan and with available
resources to produce a plan that manufacturing can fulfill.
• The MPS is concerned with what items will actually be built, in
what quantities, and when, to meet expected demand.
• The production plan and the MPS uncouple the sales forecast from
manufacturing by establishing a manufacturing plan.
• Together, they attempt to balance available resources of plant,
equipment, labor, and material with forecast demand.
• However, they are not a sales forecast, nor are they necessarily
what is desired. The
• MPS is a plan for what production can and will do.

28
• Figure 3.6 shows the relationship between the
sales forecast, production plan, and MPS.
• The MPS must be realistic about what
manufacturing can and will do.
• If it is not, it will result in overloaded capacity
plans, past-due schedules, unreliable delivery
promises, surges in shipments, and lack of
accountability.

29
30
 The MPS and Delivery Promises
 Using the MPS, sales and distribution can determine the available to promise
(ATP). Available to promise is that portion of a firm’s inventory and planned
production that is not already committed and is available to the customer.
 This allows delivery promises to be made and customer orders and deliveries to be
scheduled accurately.

 The ATP is calculated as follows:

ATP for period 1 = on hand - customer orders due before next MPS
= 100 – 80
= 20 units
ATP for period 2 = MPS scheduled receipt - customer orders due before next MPS
= 100 – (10 + 10)
= 80 units
ATP for period 4 = 100 - 30 = 70 units

This method assumes that the ATP will be sold before the next scheduled receipt
arrives. It is there to be sold, and the assumption is that it will be sold. If it is not
31
sold, whatever is left forms an on-hand balance available for the next period.
 Inventory on hand: 100 units
Period 1 2 3 4 5
Customer 80 10 10 30
Order
MPS 100 100
ATP 20 80 70
Available-to-promise calculation
EXAMPLE PROBLEM
Calculate the available to promise for the following example. Can an order for 30
more be accepted for delivery in week 5? What will be the ATP if the order is
accepted?
Week 1 2 3 4
5
Customer 50 20 30 30 15
Order
MPS 100 100
ATP 30 25 32
 Projected Available Balance
 The projected available balance (PAB) is calculated in one of two ways,
depending on whether the period is before or after the demand time
fence.
 The demand time fence is the number of periods, beginning with period
1, in which changes are not excepted due to excessive cost caused by
schedule disruption.
 For periods before the demand time fence it is calculated as:
PAB = Prior period PAB or on-hand balance + MPS - customer orders
 For periods after the demand time fence, forecast will influence the PAB
so it is calculated using the greater of the forecast or customer orders. Thus
the PAB becomes:
PAB = prior period PAB + MPS - greater of customer orders or forecast 33
 EXAMPLE PROBLEM
Given the following data, calculate the projected available balance. The
demand time fence is the end of week 3, the order quantity is 100, 40 are
available at the beginning of the period.
Week 1 2 3 4
5
Forecast 40 40 40 40
40
Customer 39 42 39 33
23
Order

34
RECAP:
Master production scheduling’s major functions are as follows:
• To form the link between production planning and what manufacturing builds.
• To plan capacity requirements. The master production schedule determines the
capacity required.
• To plan material requirements. The MPS drives the material requirements plan.
• To keep priorities valid. The MPS is a priority plan for manufacturing.
• To aid in making order promises. The MPS is a plan for what is to be produced
and when. As such, it tells sales and manufacturing when goods will be
available for delivery.
• To be a contract between marketing and manufacturing. It is an agreed-upon
plan.

35
 The MPS must be realistic and based on what production can
and will do. If it is not, the results will be as follows:
• Overload or underload of plant resources.
• Unreliable schedules resulting in poor delivery performance.
• High levels of work-in-process (WIP) inventory.
• Poor customer service.
• Loss of credibility in the planning system.

36
Mathematical
Arena 37
The End
38