Sales and operations planning (S&OP) is concerned with sales, pro- duction, inventories, backlog, and shipments. A sales and operational plan is designed to execute the strategic objectives represented in the
2 Here we rely heavily on the very fi ne description of the MRPII loop provided by Thomas F. Wallace in pages 131– 135 of Customer- Driven Strategy (New York: John Wiley
& Sons, 1993) and the author’s interpretation of Enterprise Resource Planning (ERP).
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37
Why Master Scheduling?
business plan. It’s generally expressed in fi nancial as well as nonmone- tary terms: units, tons, hours, and similar quantitative measures. Sales and operations planning is conducted within the broad framework of product families, rates, volumes, and monthly/quarterly periods.
Sales and operations planning is an important link between the top and middle levels of management. The process is typically con- ducted by means of several formal meetings that bring together the company’s various functions in order to create a single game plan.
In these forums, the participants thrash out confl icting expectations about demand and manufacturing’s capability and capacity to meet that demand.
Master Scheduling
Master scheduling in the closed- loop system has already been dis- cussed. The master scheduler must develop a plan that makes it possible, given the resources available to the company, to meet the requirements articulated by sales and operations planning. This plan takes the form of items, quantities, and specifi c dates. But here the level of planning is not within the broad context of product families but takes place among individual product family members; and here the dates are not expressed in months but in days and weeks. Further- more, master scheduling must meet those requirements with a plan (schedule) that makes optimal use of the company’s valued productive resources and time. This is the balancing act described earlier.
In developing that schedule, three other disciplines are brought to bear:
Rough Cut Capacity Planning (RCCP) addresses the question
“Do we or will we have enough equipment, enough people, enough materials, and enough time to meet the sales and operations plans as currently written?” It is a sanity check on the quantities and dates developed by the S&OP process. If the answer is no to any of those questions, some rethinking is required. Rough cut capacity planning is also used to sanity check and validate the quantities and dates in the master schedule before it is released by the master scheduler.
Demand Management is the function of recognizing and managing all demands for products to ensure that the master scheduler is aware of them. It encompasses the activities of forecasting, order entry, or- der promising, branch warehouse requirements, interplant orders, and service parts requirements. Many companies do not pay suffi cient attention to this important part of the process. That’s a mistake! Manu- facturing Resource Planning and Enterprise Resource Planning are demand- driven processes, and therefore the demand aspect of these processes needs full attention.
Supply Management is the function of pulling together the compa- ny’s overall supply planning efforts as well as the successful execution of the aggregate plans. Replenishment quantities are created in re- sponse to anticipated and fi rm demands for product. It encompasses supply planning in pre- S&OP, rationing out the production plan to the manufacturing facility or facilities, coordinating fi nished goods in- ventory levels, managing production to satisfy customer demand, estab- lishing competitive lead times, and counseling with plant and mill master schedulers.
Many companies do not have the supply management function formalized as stated in regard to the demand management function.
Ignoring this critical function in a multiple- plant, multiple- business, or global- business supply chain could be an error. As Figures 2.6 and 2.7 suggest, Manufacturing Resource Planning, Enterprise Resource Planning, and Supply Chain Management (SCM) all require that sup- ply and demand be in balance at all levels within the global supply chain.
The remainder of the closed loop, detailed material/capacity plan- ning and scheduling, is very much a part of the MRPII, ERP, and SCM systems. Full discussion of these important interfaces with master scheduling is, however, beyond the scope of this book. Suffi ce it to say that once the master schedule is created by item, quantity, and time, its items are “exploded” using bills- of-material, recipes, and formulations to determine the gross requirements for all lower items. Combining master scheduling with detailed capacity planning, plant scheduling, supplier scheduling, and execution ensures that the materials and the
39
Why Master Scheduling?
capacity to build all of the items planned by the master scheduler are available at the right time and in the right quantities.
Not shown in Figure 2.6 or 2.7 are other important functions that make master scheduling, MRPII, ERP, and SCM possible. For ex- ample, inventory records with a high degree of accuracy (95% mini- mum; in some cases, as high as 99.5%) are required to support the master scheduler’s most basic decisions and bills- of-material that defi ne the contents of products in detail must be at least 98% accur- ate (in some cases, as high as 99.5%). The routings that identify the sequences of events that a product goes through must be at least 95%
accurate (in some cases, as high as 99.5%) in regard to structure, sequence, manufacturing centers, and times (within tolerance) for setup and run. Besides the routing data, a manufacturing center data- base identifying demonstrated and planned capacities must be avail- able to support the overall MRPII, ERP, and SCM processes for many environments.