Master Scheduling & The Master Schedule

1. Master Scheduling&The Master Schedule

2. Introduction Products into product groups. They combine Aggregate Production & Capacity Plans Demand into monthly totals. Which alltogether reflect Top Management Decisions. Personnel Requirements across departments Eventually, the time comes when individual “end item” products and services must be scheduled at specific work centers. This is accomplished by master scheduling Which means, producing a SUPPLYPLAN(a time table including quantities) to produce specific itemsor provide specific services withinagiven time period.

3. 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. Example : Asimple MS for an MPS item (end product) 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

4. Relationship of Master Scheduling to other MPC activities Is the “key” in developing the master schedule Creates demand requirements Creates demand 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 MSdrives the material requirements planning (MRP) system. Master scheduling calculates the quantity required to meet demand requirements from all sources (see the example case on next page). Is the “key” link Calculates net requirements Input-Output Control & Operation Scheduling Figure 1

5. Distribution requirements (gross requirements for MS) Distribution requirements (gross requirements for MS) Example : A case in which the distribution requirements are the gross requirements for the MS Here, the MS; enables marketing to makelegitimate delivery commitments to field warehouses and final customers. enables production to evaluatecapacity requirements in a more detailed manner. provides to management the opportunity to ascertain whether the business plan and its strategic objectives will be achieved. Table 2 Net Requirements are calculated by MRP logic.

6. 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; the INTERESTS of CUSTOMERS the ACTIONS of COMPETITORS and Thus, a COMPETETIVE STRATEGY evolves...

7. FOR A SPECIFIC PRODUCT (end item), THIS COMPETETIVE STRATEGY MAY BE ONE OF THE FOLLOWING Make finished items to stock (sell from finished goods inventory) Assemble final products to order and make/buy subassemblies and lower level detail parts to stock. It is not unusualfor an organization to have different strategiesfor different product lines and,thus, use different MS approaches. Custom design and make to order.

8. Make-to-stock Strategy Basic characteristics of this strategy/environment: 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 demandanddesired safety stock levels. In this environment,an end item bill of material (BOM) is used. Items may be produced either on amass production (continuous or repetitive) line or in batch production.

9. Assemble-to-order Strategy Basic characteristics of this strategy/environment: In this environment, subassemblies and lower level detail parts/components are either produced or purchased to stock. The competitive strategy isto be able to supply a large variety of final product configurations from standard components and subassemblies within a relatively short lead time. This environment requiresa 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).

10. (Each final product contains four major sub- assemblies and a detail part) There are 2 different Variations for A2 There are 3 different Variations for A4 There are 5 different Variations for C1 There are 4 different Variations for A1 There are 4 different Variations for A3 Figure 2 Example : Advantages of Assemble-to-order Strategy The number of alternative final product configurations = 4x2x4x3x5 = 480 The number of different items to stock = 4+2+4+3+5 = 18 Competetive strategy of large variety of final product. Relatively small number of component items to stock.

11. Custom Design & Make-to-Order 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.

12. Relationships between competetive strategies Figure 3

13. Understanding the Bill of Material & its uses An inclusive definition of a final product includes; a list of the items, ingredients,or materialsneeded 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 productis assembled or manufactured from a set of purchased parts andraw materials. Table 3

14. Amultilevel (indented) BOM is required when final product has “make subassemblies” in its structure. Figure 4 End Item: Lamp LA01 Table 4

15. 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. As one can easily see, the multilevelproduct structure is really made up of building blocks of single level product trees. Table 5

16. 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”. Some parts are common to all models Some parts are not common to all models Table 6

17. 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. Since part no 3000 will never be stocked, it will be a pantom number. 18 items 19 items

18. From Table 6,a simplified product structure diagram can be created for the family of lampswhich consists of modularpseudo 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. 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). 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.

19. Understanding the Planning Horizon A Principle of Planning: A plan must cover a period at least equal to the time required to accomplish it. That is, the MS planning horizon must be at least as long asthe lead time required to fabricate the MS items. This includes production and procurementtime as well as engineering time in a custom design environment. Figure 6

20. 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”. Committed Backlog (IN PRODUCTION) (frozen schedule/zone) Production Hours Forecasted Backlog Committed Backlog (NOT in PROD) Committed Backlog (NOT in PROD) 19 20 21 22 23 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Figure 7 Minimum planning horizon (frozen zone) Planning horizon which is under the authority of master schedular Weeks

21. A Sample Time Fencing for MS Planning Horizon Table 7 PERIOD A : Only top management can change the MPS. 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.

22. DESIGNING, CREATING & MANAGING THE MASTER SCHEDULE Master Scheduling activities are carried out in three main steps: SUBSTEPS : Designing the master schedule (MS) 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. STEP 1 : 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. Creating the master schedule (MS) STEP 2 : 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. Controlling the master schedule (MS) STEP 3 :

23. Designing The Master Schedule Suppose that we are going tocreatea MS in a make-to-stock environment with no safety stock. Figure 8 Our planning horizon will be 4 weeks (weeks 32, 33, 34 & 35). Calculation method for ATP (available-to-promise) quantities will be “discrete”.

24. Creating The Master Schedule When we examine the available information for PG1, we see that; For MPS Item1, the POH quantity of week 31 does not meet the forecasted requirement of week 32. So, we need to schedule this item for week 32. For MPS Item2, the POH quantity of week 33 does not meet the forecasted requirement of week 34. So, we need to schedule this item for week 34. For MPS Item3, the POH quantity of week 34 does not meet the forecasted requirement of week 35. So, we need to schedule this item for week 35. Table 8 Some companies may use a safety stock level. Item is rescheduled when POH drops down to the safety stock level.

25. Based on a weighted average capacity of 180 units per week, we create our initial (first) plan : 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. Table 9 Now the question is, “whether do we have sufficient capacity to carry out this plan?”

26. 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: • resource requirements planning (RRP), • rough cut capacity planning (RCCP), • capacity requirements planning (CRP),and • input / output control. Remember: MRP is insensitive to capacity. A problem commonly encountered in operating MRP systems is the existence of an overstated MPS. Figure 9

27. Table 10

28. An overstated master production schedule is the one which orders morethan 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. 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. Figure 10

29. Revising the MPS Let’s go back to the initial MPS developed for product group PG1 which covers products MPS Item1, MPS Item2, and MPS Item3according to the production plan dictated by management. Capacity required by this initial MPS is shown in following page. Table 11

30. (0.342 standard hrs/lamp) Table 12 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,

31. In this case the choice is Option 2: The revised MPS quantities were obtained by scheduling the maximum possible quantity ofMPS 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. (0.342 standard hrs/lamp) Copy of Table 11 Table 13

32. 104 POH values reveal that sufficient units will be available to cover forecast demand for PG1 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. Table 14 Once the initial revised feasible MPS is developed, creating the master schedule is completed.

33. 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 projected on hand (POH) is calculated to determine if the supply is sufficient to fill expected future orders. The available-to-promise (ATP)iscalculated to determine ifan incoming order can be promised for delivery in a specific period.

34. 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.

35. There are three methods of computing the ATP DISCRETE (ATP:D) CUMULATIVE With look ahead (ATP:WL) Without look ahead (ATP:WOL)

36. A. Calculation of Discrete ATP (ATP:D) Table 15 Computation method is as follows: • 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

37. WHY ATP:D=0 for the second case? Because in this case, the beginning inventory is supposed to 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 to a “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 Table 15 MPS Item3 ATP:D = 0+0-13 = -13  = 0

38. 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 What happens to ATP:D values of MPS Item1 if we receive an additional order of 30 units for week 32? Example - ATP:D quantities for MPS Item1 for weeks 33, 34 and 35 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 Example - ATP:D quantities for MPS Item2 for weeks 33, 34 and 35 For week 33  ATP:D = 0-20 = -20  0 Remember 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 Table 15 The ATP:D of week 32 changes from 69 to 39. ATP:D quantities for other weeks remain same as before. For week 35  ATP:D = 56-24 = 32

39. WHY we DO NOT have “Forecast” and “POH” values in Master Schedule when computing ATP:D? 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 creatinga master schedule, but, instead, is managing an existing schedule. 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.

40. B. Calculation of Cumulative ATP without lookahead (ATP:WOL) Computation method is as follows: • For the first period • ATP:WOL = Beginning inv + Scheduled • MPS qty – Backlog • For the following periods • ATP:WOL = ATP:WOL of preceeding • period + Scheduled MPS qty – • Backlog Example - 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 = 175 For week 35  ATP:WOL = 175+0-15 = 160 Table 16

41. 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, inATP: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. Table 16 The data becomes misleading

42. B. Calculation of Cumulative ATP with lookahead (ATP:WL) The look-ahead approach resolves the“misleading data” problem of ATP:WOL method of calculation. Computation method is as follows: 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 Table 17

43. 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. ATP:WL for week 33; 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 34; In the following week (week 35), production (MPS qty of 0 units) does notexceed 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 35 will 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.

44. 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 we do not have enough production to meet the existing backlog. Week in which we do not have enough production 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”