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Chapter – 3: Master Scheduling

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.
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.
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 restraints.

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.
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.
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

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.

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.
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 20 80
Using the resource bill and the master production schedule, calculate the number of hours required in work
center 20 for each of the 4 weeks. Use the following table to record the required capacity on the work center.
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?

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.
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.
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).
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.

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.
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. Following figure shows the relationship between the sales forecast,
production plan, and MPS.

SALES PRODUCTION
FORECAST PLAN

MASTER
PRODUCTION
SCHEDULE

MATERIAL
REQUIREMENTS
PLAN
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 by adding scheduled receipts to the beginning inventory and then subtracting actual
orders scheduled before the next scheduled receipt. A scheduled receipt is an order that has been issued
either to manufacturing or to a supplier.
Inventory on hand: 100 units
Period 1 2 3 4 5
Customer Orders 80 10 10 30
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 Orders 50 20 30 30 15
MPS 100 100
ATP 30 25

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
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 Orders 39 42 39 33 23

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.

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.