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Contents
Linking the master schedule and the production plan 182 Master planning capabilities, activities, and events 184. Option overplanning in the Make-to-Stock environment 267 Master planning in Make-to-Order and Make-to-Stock.
Product-Driven Inventory Planning Split Inventory Planning 458 Product-Driven Backlog Planning 462 Product-Driven Backlog Planning 467 .
Acknowledgments
Walt Goddard, John Sari, and Al Stevens have also developed many major scheduling concepts over the years and were kind enough to share them with me. Darlene is truly my best friend and without her understanding and encouragement I would never have been in a position to write these acknowledgments for what I still believe is the first and only definitive book covering the subject of master scheduling.
Introduction
The Master of All Schedules
This development really marked the birth of Master Production Scheduling (MPS), or to use the term popular in this book, Master Scheduling. The acronym MPS will be used throughout the book when referring to master planning.). Master planning is a key point in a manufacturing business when market demand is balanced with the capabilities and capabilities of the company and its suppliers in real time.
Master Scheduling as Part of Enterprise Planning Systems
Failure to manage the master schedule results in poor deployment of the company's production and supplier resources. Well managed, the master schedule provides the basis for good customer order fulfillment and good resource utilization.
Who Should Understand Master Scheduling?
In addition, if the master schedule is improperly managed, many benefits from the sales and operations planning process will be lost. As one production manager put it, “Nobody ever got to Grade A without doing MPS well.”3 Therefore, anyone in authority in the company needs to understand what goes into the master schedule and what comes out of it.
How This Book Is Organized
Executive team members should familiarize themselves with the basic concepts of this book and understand the later chapters, which cover sales and operations planning, lean capacity planning, demand and supply management, and effective implementation. The master planner and people in special environments will benefit from the intermediate chapters, which cover specific environments and advanced techniques.
The chapters in the book conclude with Chapter 17 and Appendices - guidelines for implementing and managing a successful enterprise-wide and supply chain master planning process. No company ever gets to Class A without managing the master planning process well, and no one ever does master planning well without a solid understanding of the basic concepts and principles underlying the process.
Master Scheduling
Third Edition
Chaos in Manufacturing
In the corner by the coffee machine, a gray-haired foreman shakes his head and mutters, “So this is the production of the future that the company guys promised. It's an action-reaction cycle, and until companies break the cycle, they'll never get rid of the end-of-the-month crunch and nightmare.
Problems in Manufacturing
Symptoms of Master Scheduling Problems
Additionally, material may be queued up in the production floor due to material shortages, the capacity issues just described, or because plant priorities and workflows are driven by an overly optimistic sales forecast used to communicate the priorities of people in the production floor. Still other problems in the manufacturing space stem from inaccurate demand forecasts—forecasts that tell factories to build too much or too little.
THE INACCURATE FORECAST
Sales and marketing must understand the cost of excess inventory to business profitability and survival. This is known in the industry as placing the customer on assignment (such a nasty word).
And the Solutions
This is where Master Planning (MPS), Enterprise Resource Planning (ERP) and Supply Chain Management (SCM) play such a critical role in the business goal. Another type of shock absorber is flexibility in the supply chain, which allows the company to change the rate of activity on the factory floor in order to satisfy fluctuations in demand without severe disruptions.
THE CASE OF THE OVERLOADED MASTER SCHEDULE
Delayed MPS orders and overrun current work periods are the two main sources of congested master schedules that plague so many companies. Given all of these negatives, we have to ask: Why would anyone allow the master schedule to be overloaded.
Getting Out of the Overloaded Master Schedule
Not only must the company identify how it will book orders in the future (using available-to-promise and realistic lead times), it must also implement the changes necessary to ensure that this more realistic approach is followed become The next step in the process is to obtain approval for the new plan from sales, marketing, materials, manufacturing, engineering, finance and general management.
Why Master Scheduling?
The vision is expressed through strategic plans defined by the executive team, painted in broad lines and addressed to the fundamental goals of the company. These operational plans must be linked to each other and to the company's strategic plans.
Between Strategy and Execution
Nor is it generally in the company's best interest to keep production in line with incoming sales. In turn, it causes production fluctuations, sometimes 2, 3, even 10 times faster than the initial change in the sales forecast.
What Is the Master Schedule?
Other key points are specific configurations, quantities and dates, all of which are specified in the master schedule. Finally, the master schedule is not a sales forecast; rather, it considers the sales forecast, along with the production plan (again created in the sales and operational planning process), backlog position (orders booked but not shipped), and material and capacity availability.
Maximizing, Minimizing, and Optimizing
The master plan takes into account the forecast; the production plan; and other important considerations such as backlog, material availability, capacity availability, and management policies and objectives. The master plan is a supply statement that drives the detailed material and capacity processes, and this statement is based on expectations of demand – present and future – and of the company's own as well as external estimated resources.
The Challenge for the Master Scheduler
For the master planner, the challenge is to schedule production to approximate the stable master plan shown at the bottom of Figure 2.5. In short, the challenge facing the master planner to remove chaos from production is to balance the real world.
MPS, MRPII, ERP, and SCM
Master planning is an important element of these processes and the system or systems that support it. Within the closed loops of MRPII and ERP, master planning is a vital link to these and the rest of the process.
Business Planning
Here, master planning is one of the four (MRPII) or five (ERP) central boxes—along with sales and operations planning, demand management, rough capacity planning, and supply management—that together make up the basic content of this book.
Sales and Operations Planning
Furthermore, master scheduling must meet those requirements with a plan (schedule) that optimally utilizes the company's valued productive resources and time. Many companies do not pay enough attention to this important part of the process.
Enterprise Resource Planning
Oliver Wight ABCD Checklist for Operational Excellence, 5th Edition) or "Business Excellence" (The Oliver Wight Class A Checklist for Business Excellence, 6th Edition). From this point on, the terms Enterprise Resource Planning and Supply Chain Management will be used to refer to different processes that integrate the master planning process.
Supply Chain Management
To achieve Class A status in planning and control (as defined by the author), a company must demonstrate clear lines of communication and integration, use a shared database of the highest integrity, and measure performance results. Supply Chain Management deals with all business and management processes that involve planning and scheduling in the supply chain.
WHERE HAVE ALL THE ORDERS GONE?
So when do you expect things to pick up again?” asked the manufacturing vice president. The company that makes what it sells needs greater flexibility in production; for that, the model of lean production—the ability to produce at low cost in small quantities and to economically shift production to other items—.
The Four Cornerstones of Manufacturing Revisited
The business that sells what it makes needs flexibility in the ability to move finished goods. Master planning, the subject of this book, lies in the planning and control wedge in the figure.
So, Why Master Scheduling?
The details of how a company goes about master planning are covered in the following chapters. As time continues to pass, the diagnostic, simulation and actual planning capabilities of master planning software will necessarily increase.
The Mechanics of Master Scheduling
The Master Schedule Matrix
Time Segments
By convention, period 1 is the current period—the present—and remains so over time. The column just to the left of the current period is labeled Overdue (an explanation of this will come later).
Demand Section
This row in the MPS matrix reflects the total demand for the item over time. This type of demand is known as "abnormal demand" and will be discussed later in the book.
Supply Section
It is a placeholder that allows the master planner to establish a computer planned order in quantity and time. A CPO is an order created by the computer software rather than by the master planner.
Master Scheduling in Action
Possible shortage of Master Planning Mechanics, the master planner will receive recommendations from the computer system to issue new supply orders or to shift future supply orders to cover the anticipated shortfall. In Figure 3.3 on page 59 we see how this data finds its way into the master planning matrix.
Computing the Projected Available Balance
Therefore, our projected available balance at the end of period 1 will be 2 units, a surplus reflected as projected available balance. This is so because without the 20 units arriving as scheduled, the projected available balance will be negative (2 – 10).
Analysis
If the master scheduler decides to accept the computer recommendation in the future, the computer planned order will be converted to a firm planned order or released order and the projected negative available balance of 8 units will move to a positive 12 units (2 units available from period 7 added expected receipt of 20 units less total demand of 10). Therefore, the system will assume that the master scheduler will convert this computer planned order to a firm planned order when necessary (based on the product lead time).
How Master Scheduling Drives Material Planning
If the master planner expects to have 20 lamps as planned receipts in period 2, then it is better to have 20 head subassemblies, 20 lamp subassemblies, and 20 body subassemblies available in period 1. A computer planned order in period 8 also creates a gross requirement for 20 head, light and body subassemblies, this time in period 7.
Material Requirements Planning
The origin of this demand is the computer-planned order for 20 flashlights in period 8 of the master plan. Using the one-period planned lead time for the flashlight has resulted in this CPO generating an expected gross demand in period 7 of the MRP matrix.
The What, Why, and How of Safety Stock
Safety Stocks as a Hedge
What to Safety Stock
It would be unacceptable for a car service station to be out of service for a long time. However, these same customers would not expect the service station to have a replacement transmission for a 1998 Ford, and would be willing to wait for a special order for this part to come in.
The Mechanics of Using Safety Stocks
By the same logic, the master scheduler would receive an action message to move the 125 scheduled in period 5 to period 3 because the estimated available balance falls below the safety stock policy of 50. In this case, none of the periods has an estimated available balance below the safety stock level.
Alternative Safety Stock Display Format
Planning Time Fence
One of the really valuable features of master planning software is the planning time limit (PTF). A planning time limit limits the computer software system from automatically adding to the master plan within a specified zone.
Areas of Control
The planning time limit also satisfies the master planner's need to limit the master planning software so that only released orders and firm planned orders can be created within tight time periods. These are periods of time within which the master planner's attention must be focused, and within which the planner—not the computer—must make the decisions.
Maintaining Supply/Demand Balance Inside the Planning Time Fence
This excess supply is enough to meet next period's demand, but not enough to meet that of period 4. If it could talk (and it probably will one day), the computer software would tell screamed the master planner, "Wake up and fix that deficit in period 6!" Since it cannot do this, the computer software agrees to accumulate enough CPO in period 7 (the first period outside the planning time fence) to create a positive projected available balance and informs the master planner by means of an action (or exception ) message that there is a negative availability condition within the planning time fence.
Converting a CPO to an FPO
With this action or exception message, the decision about what to do falls squarely in the lap of the master scheduler.
Demand Time Fence
Total demand in period 4 is the sum of the 60 expected units and 10 units of actual demand equal to the total units. But before that discussion begins, we need to conclude this chapter with a discussion of some of the design criteria for the master planning process.
Master Schedule Design Criteria
There must be a policy that defines the setting of the DTF per MPS item, the maintenance of the demand close and its use in planning. Since this time fence affects the calculation of aggregate demand, it must be controlled by the demand side of the business, perhaps by the demand manager.
Time Criteria
Planning Horizon
Frequency of Review
This chapter covered the basic matrix of MPS and the calculations used in the master scheduling process. Some basic guidelines for designing the master scheduling process are also covered.
Managing with the Master Schedule
Drumlin have promised to expedite the order and deliver in just four weeks – not their usual five.” The sales director paused for a moment and prepared to drop his bombshell on Wilson. While the sales director was at a business lunch, the planner went to work on the problem.
The Master Scheduler’s Job
The master planner's activities are important to each of these company functions. The desire for financing to reduce inventory costs must be balanced against the demands of the competitive market and the production needs to keep the plant or mill operating reasonably.
MOVING A CUSTOMER ORDER TO AN EARLIER DATE
The following case illustrates how master planning is more than a mindless number tool, but one that requires finesse on the part of the planner. The company must have solid processes approaching grade A to make use of the software available today.
Action and Exception Messages
Here, the schedule time fence is somewhere after period 8; so all numbers in the master schedule row represent the firm planned orders (FPOs). Note that within the planning time fence, only the master planner can create and release orders and change firm planned order dates and quantities.
Six Key Questions to Answer
- Has Demand Really Changed?
- What Is the Impact on the Production Plan?
- Is Capacity Available?
- Is Material Available?
- What Are the Costs and the Associated Risks?
- What Is the Impact in the Marketplace?
One change to the master plan may need to be matched by an equal but opposite change for another item in the same product family. The desire to make a change to the master plan may be limited by available resources.
Answering the Six Questions
Time Zones as Aids to Decision Making
In zone C, the master planner, and often the computer software, is free to make changes as long as the schedule remains within the constraints of the production plan. Changes to this zone can generally be approved by the Chief Planner without further management analysis or discussion.
Guidelines for Establishing Zones
This period is by definition far enough into the future that the master planner can modify the master plan without affecting material procurement or the product-to-market process.
MOVING A MANUFACTURING ORDER TO AN EARLIER DATE
The capacity time fence (for example, see Figure 10.7, pp. 284–285) reminds the master planner that changing capacity within this boundary is difficult. The material time fence (for example, see Figures 10.8 and 10.9, pp. 294–295 and 302–303) reminds the master planner that changing material requirements within this boundary is difficult.
Planning Within Policy
The Hierarchy of Change Approvals
In fact, as the steps in the production process are completed, a company's flexibility to change the product also decreases. The exact location of the areas in the figure is hypothetical and strictly for illustration purposes.
The Placement of Approval Zones
No Past Dues
Managing with Planning Time Fences
As an experienced master planner, Judy Wilson knew she wouldn't change the master schedule just at the request of the vice president of sales. After a certain timeline, the company's planned supply must equal the planned demand (aggregated planning taking into account lot size).
Load- Leveling in Manufacturing
The master planner can't always make the factory or mill manager's dream come true, but he or she can smooth out some of the peaks and valleys of production. Of course, the lead planner must evaluate the impact of the MPS reduction between weeks 1–4 and 5–8 (what are we going to do with people and equipment?).
Lean Manufacturing and Continuous Improvement
Continuous improvement programs suggest that the way to reduce lot sizes is to reduce setup times. Continuous improvement programs suggest that one way to reduce inventory is to reduce safety stock, and one way to reduce safety stock is to reduce or eliminate supply/demand variations.
Mixed- Model Scheduling
Mixed model planning means building a small amount of each product each day or week. The upper part of the figure is the traditional approach and the lower part is the mixed model.
Planned Plant Shutdowns
The master scheduler may want to get rid of these correct, although unwanted, action messages. As the figure indicates, an artificial demand equal to the forecast demand for the closing period has been created and placed in the master scheduling matrix under the Reserve Quantity line.
THE PRODUCTION SHUTDOWN
As the demand forecast dropped rapidly, managers and production planners in the Xerox unit had to make new estimates of future demand and reflect them in drastic revisions to the production plan. With future demand slowing to a trickle and the future of the product clearly in doubt, management sees a shutdown of the production line as the best option.
Using the MPS Output in a Make- to-Stock Environment
The Master Schedule Screen
Item Information Section
Master Scheduler: Contains the initials or name of the individual scheduler responsible for this master schedule item. Cash on hand: The quantity of the master planned item in the warehouse on the day the MPS data was executed.
Planning Horizons Section
The information in this field is useful in determining the cost impact of changes to the master plan. This line is used to show the spare parts or service forecast for the planned main item.
Detail Data Section
Reference number: Is the specific customer name (which in a low-to-stock environment might just be "finished goods"). Order Number: Indicates the actual customer order number for the make-to-order environment and the production order or run number for the make-to-stock environment.
Working a Make- to-Stock Master Schedule
Lead Time: Refers to the time it takes to acquire or manufacture the individual item (hours, days, weeks). The cart assembly actually has the longest lead time of any of the intermediate products.
Time Phasing the Bill- of-Material
Since the final game assembly requires two periods to build once all the intermediates are in place, the cumulative lead time for the WA01 game is 18 periods.2. As long as other work can be done in parallel with this critical path, it defines the cumulative lead time to build the entire item.
Understanding the Action Messages
Assuming these are sold, the system subtracts 100 units from the 316 available units, leaving an estimated available balance of 216 units at the end of the first period. The same logic is used to calculate the expected available balance over the entire planning horizon.4.
The Refl ection of Supply and Demand in the Details Section
Further down in the master schedule detail is lot 016, a fixed scheduled order of 225, with a required date for period 9. The same logic applies to the order in period 17, where a different rescheduling recommendation appears in the master schedule detail (same situation: the expected available balance has fallen below the desired safety stock level of 100 units).
Bridging Data and Judgment
Thus, a total of 134 units will cover demand in periods 21 and 22, but the safety stock rules specify that 100 units must always be in stock, so the MPS system recommends issuing an order for an additional 100 units, for a total of 234. in this example we chose a dynamic lot size rule (period order quantity), the computer software will recommend that orders be placed outside the planning time fence equal to the requirements for two periods plus the safety stock.
Seeing the Big Picture
Here, a small supply deficit occurs in the early periods, but that deficit turns into a surplus in the intermediate periods, which then returns to a supply deficit in later periods. In the example, the master planner has borrowed some supplies in the early periods, but like any savvy borrower, he or she pays back what he or she owes.
SEASONALITY AND INVENTORY BUILDUP
Quality may cost less to produce, and short production runs are not necessarily synonymous with high costs.5 The either/or high capacity or high inventory dilemma for seasonal business may be just as outdated. Vendors are naturally concerned about filling their backlog if the company builds too few products.
The Six Key Questions Revisited
Scheduling in a World of Many Schedules
So, in scheduling the WA01, we must realize that other product family members may share the same manufacturing floor, the same material inventory area, and possibly the same production line. To the veteran scheduler, this would indicate that all three winches share an important critical resource: the same production line.
Working the WA04 Reschedule- In Action Message
By doing this, the master planner will use safety stock to satisfy expected demand. However, if this reduction in safety stock disturbs the master planner's comfort level, another approach should be taken.
Working the WA06 Reschedule-In Action Messages
Of course, this is not true when it comes to the master planner and his or her decisions. The master planner is responsible for creating and maintaining a realistic, valid and achievable master plan.
Working the WA06 Reschedule-Out Action Messages
Given the expected deep cut in safety stock, it would be worth the lead planner's time to review the product history. These simple examples again demonstrate the need for a knowledgeable master planner; left to their own devices, the computer software would initiate reprogramming actions, disrupting the production line and possibly frustrating many.
From Master Scheduling to Material Requirements Planning
Here, the cumulative lead time is two periods shorter than the finished winch, which makes sense because the final assembly of the winch from A100 and other required items requires two periods. Total Planned Benefits: Summary information calculated by combining data from the Planned Benefits Details section.
