Master Production Schedule

This resource helps to understand how the Master Production Schedule is created, what is the content of such schedule, what calculations takes place in the MPS creation and how to ensure the realistic MPS.

Master Production Schedule (MPS)
The Master Production Schedule is a detailed Plan of Production. It drives the MRP system by referencing inventory, requirements and bill of materials. For the purpose of Materials Requirements Planning, the time periods must be identical with those used in MRP system.

Master Production Schedule represents the plan for manufacturing products. It consists quantities, dates and configurations. Typical MPS is a table containing the following information: The MPS Planning Analysis Table for an individual product is shown below. It's done for every product and the table may look like this. SS (Safety Stock) = 20 in this example (this is minimum number of items to be kept in stock)
 * Demand forecast
 * Allocated, Reserved and Unplanned slots
 * Planned Order - planned and firm
 * Projected Available Balance (PAB)
 * Available to promise (ATP)

Inputs to MPS

 * High-level Production Plan
 * Market Requirements
 * Available resources - Bill of Labour

Information in the MPS Planning Analysis Table

 * Forecast - represents the demand forecast for the items to be produced. When companies produce in the make-to-stock environment, forecast is the most critical factor. The demand must cover the product requirements, but also replacement parts (testing, service). When on the other side companies produce in make-to-order environment, production is not started until the customer order arrives. Nevertheless, raw materials and parts have to be in stock at the time of order. In assemble-to-order similarly to make-to-order, all the components are required when order arrives, therefore earlier planning is required.
 * Customer Orders - Sum of all customer orders (allocated, reserved, unplanned)
 * Slots allocated - each of the accepted customer orders takes one slot.
 * Slots reserved - These slots are used by the management. Whenever they're not sure whether order will become firm or not, they use this.
 * Unplanned slots - These (as the name suggests) are slots used by unplanned (unexpected) orders which were not included in the forecast calculations.
 * Net demand - It's based on forecasts. When within time fence - it's based on the orders.
 * Firm Planned Order - Firm orders are orders which has already been released. They cannot be changed by the system - each change to firm order requires manual intervention. Firm orders may already be in production.
 * Planned Order - Manufacturing order automatically calculated by the system or manually entered.
 * Projected Available Balance (PAB) - Projected number of available items.
 * Available To Promise (ATP) - Number of MPS items that can be promised to new customer orders.

Calculations
Planned Order is calculated using the following formula: PlannedOrder[i] = SS + Net_Demand[i] - PAB[i-1] - FirmPlannedOrder[i] PAB: PAB[i] = SS = PAB[i-1] + PlannedOrder[i] + FirmPlannedOrder[i] - Net_Demand[i] ATP: ATP[1] = PAB[0] + PlannedOrder[1] - MIN(Customer_Orders[1], Net_Demand[1]) ATP[i] = PlannedOrder[i] - MIN(Customer_Orders[i], Net_Demand[i])

Time Fences
The first week or two can be frozen - no changes are allowed during this time - this is called time fence. There are different time fences:
 * Forecast time fence - it's a period where only orders are used when calculating Net demand.
 * Reservation time fence - only firm customer orders can be accepted for allocation during this period
 * MPS time fence - within this time, MPS stay firm.
 * Available to Promise time fence - no additional orders may be accepted in this period.

Calculating examples
The table above shows the MPS for some Product A. We can clearly see that there is no demand forecasts for week 1 and 2. This is the case because these two weeks are inside the time fence where only customer orders are used to calculate Net demand (see above). Whether the orders are allocated, reserved or unplanned - all of them are added together and the resulting output is Net demand. To calculate Net demand outside of time fence, we simply take the maximum of these two: Whichever is greater - it's used in the Net demand. Examples:
 * Demand forecast
 * Sum of all customer orders (allocated, reserved, unplanned)
 * Net demand in week 2 = Allocated + Reserved + Unplanned = 25 + 0 + 5 = 30
 * Net demand in week 4 = MAX((Allocated + Reserved + Unplanned), Demand_Forecast) = MAX(25, 35) = 35
 * Planned Order for week 1 = Safety_Stock + Net_Demand - PAB from previous week - Firm_Orders = 20 + 35 - 55 - 10 = 0 -- Negative result is put as zero.
 * Planned Order for week 3 = Safety_Stock + Net_Demand - PAB from previous week - Firm_Orders = 20 + 40 - 20 - 0 = 40
 * Projected Available Balance for week 4 = PAB from previous week + Planned_Order + Firm_Planned_Order - Net_Demand = 20 + 35 - 35 = 20
 * ATP for week 3 = Planner_Orders - MIN(Customer_Orders, Net_Demand) = 40 - MIN((15 + 5), 20) = 20

Planning Horizon
The Planning Horizon is the time from the current date to some date in the future. It should be long enough to avoid problems with scheduling. Typically Planning Horizon should be longer than the cumulative lead time for the item.

Typical MPS Table
The MPS is a statement of what the company intends to manufacture. By Netting the information from the MPS Planning Analysis Table we can create a realistic MPS. The accuracy of the MPS decreases the more you deviate from the planning horizon. This is because a short term MPS has actual orders in its Netting whereas further out in the planning horizon the MPS relies almost solely on forecasts.

Below is an example of what a fragment of the MPS table looks like.

Ensuring the realistic MPS
Before the MPS can be provided to the manufacturing system it must have some kind of feasibility test. Rough Cut Capacity Planning (RCCP) is one technique which verifies that the MPS is realistic. What this means is that RCCP confirms that the forecasts made in the MPS conform to the capacity of the manufacturing facility or more specifically the Work Centers which are carrying out the particular job.

RCCP uses a Bill of Labour for each MPS item and calculates the capacity required, called the Load, for each work center in each period of the MPS. Data which may be included in the RCCP:
 * Overall Plant Capacity
 * Labor Hours
 * Assembly Hours
 * Machine Capacity

Using RCCP allows visibility of bottlenecks and helps to reduce them. The effects bottlenecks could have are:
 * Slow down execution of the MPS plan
 * Lead to distortion of priorities
 * Invalidate the priority plan

Identifying the bottlenecks allows us to re-calculate the MPS if it has been overstated. An overstated MPS causes:
 * Build ups of queues
 * Increased Lead Times
 * Increase in materials on the floor

When the RCCP output indicates that proposed MPS is not feasible, either additional resources are introduced (overtimes, new machinery, outsourcing) or the MPS is revised. By completing RCCP verification we can prevent ship dates being missed.

Verifying MPS
To make the final verification, Capacity Requirements Planning (CRP) is used. It generates more detailed report than RCCP and is used as a verification tool after the MRP run. Its output is a load profile for each work centre. It lists the available capacity (surplus or deficit) that will be needed for each WC.

Types of Forecasting
As mentioned, the further from the planning horizon we get the more the MPS relies on forecasting. It's based on the historical trends analysis, current economical situation and other factors that may affect the accuracy of the forecast. The following are the three basic techniques used to forecast in MPS:


 * Qualitative
 * Quantitative
 * Causal

Qualitative Forecasting

This method forecasts using expert opinion and a rating scale instead of using just hard cold facts. One of the disadvantages of this method is that in a group of experts a dominant leader can sway the opinion of the group. In this sense only one person is agreeing on the forecast with other simply falling in line.

Quantitative Forecasting

In contrast, this method uses historical data. So in an MPS the historical data is previous sales figures.

Causal Forecasting

This method uses the cause-and-effect relationship between the forecasted items. This method is also strong enough to take special events into account.

So by using an MPS Planning Analysis Table, verifying the MPS using RCCP and using the aforementioned forecasting methods we can ensure a realistic MPS.