the master schedule

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Chapter 4 - The Master Schedule 4.1 Background and links to the S&OP

4.2 Master schedule horizon 4.3 Time fences

4.4 Sources of demand

4.5 Basic methodology

4.6 Impact of product environment

4.7 General approach to master schedule development

4.8 Available-to-promise logic

4.9 Planning options in an ATO environment

4.10 The two-level master schedule

4.11 Some notes on the master scheduling responsibility

4.12 Demand management overview

4.13 Elements of demand management



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Introduction

Developing and managing the master schedule It is the next step in production planning

Assumes that S&OP has properly planned resources

Contains more detail than the S&OP

The time horizon is typically shorter than S&OP

S&OP plans in terms of families

Master schedule represents final, sellable items

– is a major interface between prod’n and customer Service firms may not have one

– master scheduled operating rooms???



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4.1 Background and Links to S&OP

S&OP lines up the proper resources S&OP aggregates forecast demand

– seldom includes actual input from customer orders

– planning is not done on the final product level

More planning is then needed to…



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Break down the aggregated plans – into buildable products

Serve as a plan to include forecast and actual

orders

Serve as a source of info to develop capacity

plans

Serve as a vehicle to translate customer orders

into effectively timed factory orders Serve as a tool to plan inventory levels

– especially finished goods



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This planning activity is the master schedule It starts with a detailed product forecast

Develops a set of rules for the consumption of

the forecast

Translates the requirements into actual orders

The master schedule has more detail than S&OP

The master schedule has a shorter time horizon

The master schedule quantities or values should

equal those developed in the S&OP



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Product Groups/Families

Represent how the product or service ispresented to the market

Logical groupings based on similar sales and

manufacturing requirements

Should be meaningful in terms of volume of

sales generated

Ideally should be no more than 6-12 product

groups per business unit

Source: Wallace, Tom F. Sales and Operations Planning, A How-To Guide, T.F. Wallace & Co. 1999.



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Master Planning of Resources Model

Demand Management

Sales and Operations Planning Resource Planning

Master Scheduling Rough-Cut Capacity Planning

Business Planning

Detailed Scheduling & Planning

Master Planning

of Resources



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Planning for Production

Sales

Planning

Production

Planning

Master

Scheduling

Detailed Planning

& Scheduling

C

AP

A

C

I

T

Y

P

L

A

N

NI

N

G

F

O

RE

C

A

S

T

I

N

G

&

D

E

M

A

N

D

Business

Planning

Source: Wallace, Tom F. Sales and Operations Planning, A How-To Guide, T.F. Wallace & Co. 1999.



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Master Scheduling

Sales and

Operations Plan

Master Schedule

Master Production

Schedule

Rough Cut

Capacity Planning

Input: The approved Sales and Operations Plan

Output: The approved Master Production Schedule



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The Master Scheduling Process

Develop preliminary

master schedule

Evaluate using RCCP

Revise master schedule

Re-evaluate using RCCP

1

2

3

4

5

Production plan

from S&OP

Publish master schedule



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4.2 Master Schedule Horizon

The master schedule must have a horizonthat is equal to or longer than the

cumulative lead time of the product or

service being planned. First examine the bill of material

– shows components required to assemble a product

– shows the relationship between products

– shows the quantity to build one product – contains lead times



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Cumulative lead time is the amount of time it takes to make a product from

start to finish

Figure 4.1



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Bill of Materials

SingleLevel

Multilevel

I n n e

B 1 2 1

O u t e

B 1 2 1

H a r d

K i t

B e a r

A 1 2 1

B a l l S e a g r e a

H a r dK i t

f o r g f a s t e

I n n eB 1 2 1

B 1 2 1O u t

B e a

A 1 2 1



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Traditional Single Level Bill of Material

Level

0

1

6-20

Packaged Product

Label Bottle CapBulk Solution



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Packaged Product

Label Bottle Cap

Active Filler

Bulk Solution

Base

Level

0

1

2

6-21

Multi-Level Bill of MaterialMulti-Level Bill of MaterialMulti-Level Bill of Material



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Typical Planning Bill for a Hotel

Hotel Room

Smoking Preference

Bed Preference

View Preference

Meal PreferenceSmoking

Non-Smoking

King

Two Doubles

One Double

Ocean

Lagoon

Breakfast

No Meals

All Meals

20%

80%

40%

40%

20%

60%

40%

35%

40%

25%

6-22



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Advantages of Planning Bills

More accurate forecasting Reduced number of end items

A more accurate scheduling and planning

process

Simplified order entry

Permits two-level scheduling

A more accurate method of product costing A more efficient and flexible data storage and

maintenance system

6-30



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We must plan beyond the cumulative leadtime

– promise of 1 product in week 14

– what about other components?



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4.3 Time Fences

One problem with using forecasts… – they are almost always wrong

The master schedule uses time fences

– they establish rules to manage the master schedule

Demand time fence

Planning time fence



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4.3 Time Fences

Within the demand time fence... The forecast data is ignored

Actual customer orders are used

Schedule is considered “frozen”

– no changes to the schedule

• impossible or impractical

• bake a loaf of bread and change the schedule during baking

The demand time fence is the closest to thepresent time in the schedule



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4.3 Time Fences

Within the planning time fence...

Is set equal to or longer than the cumulative lead time of

the product.

– Beyond this time there is adequate time to react to changes

• additions, deletions

• modifications to product

• modifications to schedule

Schedules are free or float with actual demand

Between demand and planning the schedule is “flexible”

or “slushy” – changes may be made but must be analyzed



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Time Fences

Demand Time Fence Sets the period of the

master schedule where

changes are seldom

permitted

Covers period of actual

customer demand

Usually set to cover the

production and assemblytime for a product or the

delivery time for a service

Planning Time Fence Sets the period within

which changes to the

master schedule must be

made by the master

scheduler

Combination of actual

demand plus forecasted

demand

Usually set to includematerial and components

acquisition time



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MPS Time Zones

DEMAND

TIME

Frozen Flexible Free

Customer Order

Backlog

Forecast

Impactof change



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Defining Time Fence Policies

DEMAND

Time

ZonesFrozen Flexible Free

D e m

a n d

P l a n

n i n g

Emergency

Changes

Only

Trade Off

Changes

Only

Virtually

Any Change

Allowed

Time Fences

C i Fi Pl d O d



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Released

Orders

Computer Generated

Planned

Orders

Creating Firm Planned Orders

DEMAND

TIME

Frozen Flexible Free

FirmPlanned

Orders

4 4 S f D d



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4.4 Sources of Demand

The master schedule is said to “disaggregate” the

S&OP...

Important that the numbers must agree with the

S&OP numbers

The forecasting methods are often different

– S&OP are long-range, often using causal

techniques

– Master schedule is shorter and typicallywould use quantitative methods

• actual customer orders

4 5 B i M th d l



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4.5 Basic Methodology

The master schedule uses demand (orders

and forecast) in its development It considers…

– inventory plans

– labor plans

– new product introductions

Now considers

– meeting the customers needs per the S&OP – balancing demand v. capacity

– establishing inventory levels per the S&OP

4 5 B i M th d l



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4.5 Basic Methodology

Figure 4.4 shows a simple master

schedule. The actual schedule that includes specific

quantities and models is the master

production schedule or MPS

review of schedule

– on hand = 70

– lot size = 80

– dates are completion dates

4 6 I t f P d t E i t



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4.6 Impact of Product Environment

The master schedule may need to be

developed and managed very

differently depending on the product

environment... Make-to-Stock (MTS)

Assemble-to-Order (ATO)

Make-to-Order (MTO)

S h d li D i i



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Scheduling Decisions

Assemble-to-Order

Engineer-to-Order

Design Supply Production Delivery


Make-to-Order


Make-to-Stock


6-18




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Make-to-Stock environment... Customer has no influence on final design

Master schedule serves as a final

assembly schedule (FAS) Relatively few final products

– significant raw materials or components

Order promising not done through MPS – orders filled directly from stock




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Assemble-to-Order environment... Customer has influence over final outcome

– automobiles, computers

Many raw materials and components

Final products not scheduled on the master

schedule

– too many options

Master schedule the options

– bicycles with different colors, seats, tires




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Make-to-Order environment... Customer has large influence over design

Companies may use standard components

– are assembled differently

Typically few number of raw materials but a

large number of final products

Typical of service organizations

This MPS reflects capacity and raw material

needs

4 7 G l A h t D l t



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4.7 General Approach to Development

Forecast and master schedule MTO bakery

– easier to develop forecast for raw materials

• plan to make 100 loaves of bread

• plan to make 100 cakes

Forecast and master schedule ATO – 12,960 forecasts and master scheduled bicycles

for one bicycle types

– develop schedule at option level

• forecast common assemblies – seats, wheels, frames

• order placed at FAS (final assy schedule)

4 7 G l A h t D l t



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4.7 General Approach to Development

Figure 4.5 master schedule development

The master schedule is usually designed to

operate at the level that has the fewest

items that need to be scheduled.

4 8 A ailable to Promise Logic



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4.8 Available-to-Promise Logic

Available-to-promise (ATP) allows a firm to

quickly and realistically promise delivery of product to customers

– typically not used in MTS environment

– not used as much in the MTO environment – very valuable in the ATO environment

For any MPS, the ATP is how many items arenot promised to specific customer orders

The Projected Available Balance



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The Projected Available Balance

The projected available balance (PAB) is the projected

inventory position in a particular time period.

It is similar to a projected bank balance on a projected

cash flow statement.

Prior to the Demand After the Demand

Time Fence : Time Fence:PAB = Prior period PAB PAB = Prior period PAB

+ MPS + MPS

- Customer orders - (> Forecast or Cust. orders)

Figure 4 6 ATP



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Figure 4.6 ATP

product: A demand time fence: 2 weeks

lead time: 2 weeks on hand: 56

Lot size: 60

Period 1 2 3 4 5 6 7 8 9 10 11 12Forecast 22 25 20 20 18 18 32 30 28 28 29 35

Customer orders 24 23 17 22 15 14 17 16 12 16 13 11

projected avail. Balance 32 9 49 27 9 51 19 49 21 53 24 59

ATP

MPS 60 60 60 60 60

Figure 4 6 ATP Solution



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Figure 4.6 ATP Solution

product: A demand time fence: 2 weeks

lead time: 2 weeks on hand: 56

Lot size: 60

Period 1 2 3 4 5 6 7 8 9 10 11 12Forecast 22 25 20 20 18 18 32 30 28 28 29 35

Customer orders 24 23 17 22 15 14 17 16 12 16 13 11

projected avail. Balance 32 9 49 27 9 51 19 49 21 53 24 59

ATP 9 6 29 32 20

MPS 60 60 60 60 60

4 8 Available to Promise (ATP)



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4.8 Available-to-Promise (ATP)

Available-to-promise (ATP) is the uncommitted portion of the

current inventory or future planned supply

ATP is similar to the uncommitted amount of your current bank

balance and future paychecks

ATP (period 1) = On-hand balance + MPS – Sum of customer

(1st period only) orders before next MPS

ATP = MPS – Sum of customer orders before next MPS

(all future periods that contain an MPS planned receipt)

6-16

Available to Promise



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Available-to-Promise

Forecasted sales 20 22 21 25 24 23 21 21 25

Customer orders 19 17 15 11 9 5 2 1 0

Projected avail. balance 50 31 14 49 24 0 27 6 35 10

Available-to-promise

Master production schedule

Item: 78100 Demand Time Fence: 3

Description: Commercial Generator Unit Planning Time Fence: 8

Lot Size: 50 On Hand: 50 Lead Time: 2 periods

Calculate the available-to-promise for periods 1–9

6-17

Period 1 2 3 4 5 6 7 8 9

Available to Promise (Solution)



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Forecasted Sales 20 22 21 25 24 23 21 21 25

Customer Orders 19 17 15 11 9 5 2 1 0

Projected Avail. Balance 50 31 14 49 24 0 27 6 35 10

Available-to-Promise 14 15 43 49

Master Production Schedule 50 50 50

Item: 78100 Demand Time Fence: 3

Description: Commercial Generator Unit Planning Time Fence: 8

Lot Size: 50 On Hand: 50 Lead Time: 2 periods

Available-to-Promise (Solution)

Period 1 2 3 4 5 6 7 8 9

6-17a

4 8 Available to Promise Logic



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4.8 Available-to-Promise Logic

Key points about ATP…

It is calculated from customer orders, not

from forecasts at any time

– the idea is it shows the availability to promise

a product to customers, not to forecasts ATP provides a valuable tool to

communicate immediately and honestly

with customers

4 9 Planning Options in ATO



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4.9 Planning Options in ATO

Forecasts are done for the end items

Master schedules are done for the

components

A special bill of material is used

– Planning bill

– super bill

Figure 4.8

– overplanning• mix hedge

• market hedge

4 10 The Two Level Master Schedule



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4.10 The Two-Level Master Schedule

Figure 4.9 sample two-level master

schedule

4 11 Master Scheduling Responsibility



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4.11 Master Scheduling Responsibility

Master Scheduler job is high visibility and very

important The master schedule is a major link to the

customer orders

It should reflect policy issues tied to the S&OPsuch as Chase, Level, or Combination

strategies

The MPS reflects the completion of an order

It must be realistic




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Lot sizes are established

– a tradeoff between carrying costs and customer service

– ordering just what is needed is lot-for-lot

Safety stocks can be planned as an absolute

number or a percentage of orders

– avoid system nervousness

firm planned orders

– orders that are firm planned and no changes to theorder are permitted

• the system may suggest a change

4 12 Demand Management Overview



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4.12 Demand Management Overview

Some demand is internal to the company

– service requirements

– new product prototypes

– quality assurance testing

–internal repairs

– distribution requirements

marketing and sales are flexible

changing capacity

changing human capacity

suppliers, inventory, phased out designs




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Valuable for what-if scenarios

– evaluate major changes to production volume

or mix change requests

MPS represents a major part of the

planning system for a company – generates production orders

– generates purchase orders

– recommended to be operated by computer control

Types of Supply Orders



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Planned Orders

Firm Planned Orders

Released Orders

Production Orders Purchase Orders

Types of Supply Orders

4 13 Elements of Demand Mgmt



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4.13 Elements of Demand Mgmt.

Four major elements of demand:

prediction

communication

influence prioritization and allocation




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Prediction... forecasting customer demand

– different methods may be used

– track the forecast

– lessen the impact of error • communication

• influence

• lead time reduction

• production flexibility• S&OP / Master Schedule policies

• safety stock




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Prediction... Set safety stock levels

– must be aligned with customer service levels

set by S&OP

– must be understood by all employees




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Prediction... Track and compare actual v. planned

– make adjustments and forecast more

accurately

Bill of Resources



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Bill of Resources

A bill of resources is a listing of the required amount

of constraining resources needed to manufacture

one unit of a selected item or family.

These could include:

– Labor – Materials or components

– Facilities

– Equipment

– Research and development assets – Finances

Master Scheduling Policy



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Master Scheduling Policy

Master scheduling policy

– Describes organizational responsibilities

– Defines approval cycle for the master schedule

– Establishes time fences and change management

procedures

Establishes methods of forecast review

– Establishes methods of forecast relief

– Defines forecast review guidelines

Defines master scheduling techniques – Order promising guidelines

– Make-to-stock, make-to-order strategies

What Is an Effective Schedule?



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What Is an Effective Schedule?

Production

System

Trade-OffsInventory

usage(costs)

Customer delivery

Manufacturing “efficiency”

(schedule)

The Goals of Master Scheduling



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The Goals of Master Scheduling

To balance supply and demand priorities

To develop practical solutions to supplyconstraints

To prioritize and allocate supply to customer

demands To establish a strategy to avoid overloaded

schedules and unbalanced conditions

To create a schedule with attainable completion

dates that satisfy customer needs

Master Scheduler Functions



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Master Scheduler Functions

Understand the forecasting approach and its limitations

Participate in the development of the sales and

operations plan

Manage the constraints of supply capacity

Maintain a realistic master schedule

Monitor consistency with the sales and operations plan

Execute master schedule policies, such as time fences,

safety stocks, subcontracting, and lot-sizing

Identify, negotiate, and resolve conflicts

Master Scheduler Job Qualifications



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Master Scheduler Job Qualifications Experienced with products and customers

A good communicator

Good with numbers

Cool under pressure

Disciplined—maintains data accuracy

Assertive—makes things happen A problem solver rather than a firefighter

Creative—finds innovative ways to balance supply and

demand

Genuinely interested in products and customer service

Who Brings What to the Table?



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Who Brings What to the Table?

MarketingProduct

Definition Product

Demand

Capital

Master

Schedule Business

Plan

Workforce

Availability

Source: Launchbury, Keith J. Principles of Planning Omeric, 1999.

Finance

MaterialsOperations

HumanResources

Engineering

Management

Capacity

Symptoms of Poor Master Schedules



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Symptoms of Poor Master Schedules

Unreliable delivery promises

Persistent past due orders

Excess inventory

Expediting selected orders

Excessive schedule changes Upper management scheduling

intervention

Excessive overtime or idle time

End of month shipping surge Lack of accountability

MPS Performance Measurements



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MPS Performance Measurements Customer service

Inventory turns

Schedule reliability

Respect for time fences

Excess and slow moving inventory

Level of backlog Lead time reduction

Cycle time reduction

Credibility of promise information

Keeping the MPS Realistic



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Keeping the MPS Realistic

Adapting the MPS to changing demand

conditions

Adapting the MPS to changing supply

conditions

Rescheduling

Bottom-up replanning and pegging

Testing for feasibility Regular review and revisions

Common Changes in Demand



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Common Changes in Demand

Customer schedule changes

Rush orders

Order cancellations

Changes to specifications

Common Changes in Supply



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Common Changes in Supply

Nonconformance to schedule

– Production downtime

– Capacity availability

– Over- or undersupply

Nonconformance to specifications

– Scrap

– Effect of quality

Engineering Changes



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g ee g C a ges

Mandatory or immediate

Phased-in or optional

Process

– Set up a review board

– Determine the procedure for instituting change – Set effective dates

– Ensure change process deals with multiple items

– Assess the cost and impact of the change

– Maintain the status for each revision

Managing Change



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g g g

Is the change

necessary?

Is the change

feasible?

Are resourcesavailable?

What are the costs

and the risks?

The S&OP and the Master Schedule



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Sales and

Operations Plan

Master

Schedule

Definition Supply Rateby Product Group

Anticipated Buildor Buy Schedule

Itemplanned

Product Group End Item or SpecificLevel in Bill of

Materials

PlanningHorizon

Longest Lead-timeResource

Cumulative Lead-timefor Components

Constraints ResourceCapacity

Material/Capacity/

Sales and OperationsPlan

TimePeriods

Monthly Weekly or Daily

Planning

Focus

Product Volume Product Mix

Uses of the Master Schedule



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The anticipated build or buy schedule

For independent demand items

Projects inventory/backlog position

Drives material and capacity plans Order promising

Assigning priorities

NOT a sales forecast!

The Inputs to the Master Schedule



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p

Production plan line from the sales and operations plan

Detailed sales forecast Inventory position and targets

Backlog position and targets

Time fence policies

Customer orders

Interplant orders

Service parts orders

Distribution requirements Planning bills of material

Production and supply position

The Outputs from the Master Schedule



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p

Master production schedule

Master purchasing schedule

Projected inventory position

Projected backlog position Product availability information

Valuable order promising information

Possible Solutions



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Overloading

Overtime Extra shifts

Transfer people Reroute work Subcontract Hire temporary help Install more equipment Add additional capacity

7-23

Possible Solutions



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Underloading

Increase sales demand Use time for training

Use time for maintenance Reduce shifts Transfer people Reroute work

Reduce subcontracting Lay off temporary help Reduce capacity

7-24

Chapter 4 Homework



p

Problem 5

the master schedule

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