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 prodn 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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4.1 Background and Links to S&OP

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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4.1 Background and Links to S&OP

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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S&OP Relationship to MPS

Product Group A Working Days/ Month Approved Production Plan from S&OP MPS Week Product A1 Product A2 Product A3 Product A4 Total July August 22 22,000 September 21 21,000 October 23 23,000 November 20 20,000 19 19,000

40 1,000 500 1,500 2,000 5,000

41 1,000 1,000 500 2,500 5,000

42 1,000 1,500 500 2,000 5,000

43 1,000 2,000 1,500 500 5,000

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Product Groups/Families
Represent how the product or service is presented 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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Definition of a Master Schedule

The anticipated build or buy schedule For specific products and services A set of planning numbers that drives detailed scheduling and planning MPS Master scheduling

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Master Planning of Resources Model

Business Planning

Demand Management

Master Planning of Resources

Resource Planning

Sales and Operations Planning

Master Scheduling

Rough-Cut Capacity Planning

Detailed Scheduling & Planning

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Planning for Production

F O R E C A S T I N G & D E M A N D

Business Planning Sales Planning Production Planning Master Scheduling Detailed Planning & Scheduling

C A P A C I T Y P L A N N I N G

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

Master Scheduling
Input: The approved Sales and Operations Plan
Sales and Operations Plan

Master Schedule

Rough Cut Capacity Planning

Master Production Schedule

Output: The approved Master Production Schedule

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The Master Scheduling Process

5 4 3 2
Production plan from S&OP

Publish master schedule Re-evaluate using RCCP Revise master schedule Evaluate using RCCP

Develop preliminary master schedule

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4.2 Master Schedule Horizon

The master schedule must have a horizon that 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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4.2 Master Schedule Horizon

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
Single Level
B A e a r in g 1 2 1 8 E 1

I n n e r O u t e rH B 1 2 1 8 B 112 1 8 W W

a r d w K2 i t

a r e

e 1 r e 2

Multilevel
H a K S e r d i t a w a B a l l s l g

r i n g 1 8 E

1 n e rB 1 2 1 8 W 2 1 8 O W u1 t e r s t e n e r s 2

I n B 1 a s fe o r g

r e

i n f ag

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Problem 4.1

Number of Gs needed? Which are purchased components?

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Traditional Single Level Bill of Material

Level 0
Packaged Product

Label

Bulk Solution

Bottle

Cap

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Multi-Level Bill of Material

Level 0
Packaged Product

Label

Bulk Solution

Bottle

Cap

Active

Filler

Base

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Typical Planning Bill for a Hotel

Hotel Room

Smoking Preference 20% 80% Smoking Non-Smoking 40% 40% 20% King Two Doubles One Double Bed Preference

View Preference 60% 40% Ocean Lagoon 35% 40% 25%

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Meal Preference Breakfast No Meals All Meals

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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

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4.2 Master Schedule Horizon

We must plan beyond the cumulative lead time

promise of 1 product in week 14 what about other components?

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4.2 Master Schedule Horizon

Without adequate inventory start product in week 12

2 week LT

start subassembly C in week 8

4 week lead time

start subassembly G in week 3

5 week lead time

buy component H in week minus 4 cumulative lead time is...

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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 the present 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

Planning 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 assembly time for a product or the delivery time for a service

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 include material and components acquisition time
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MPS Time Zones

DEMAND

Impact of change Frozen Flexible Free Forecast Customer Order Backlog

TIME
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Defining Time Fence Policies

DEMAND

Planning
Trade Off Changes Only

Demand

Time Fences

Emergency Changes Only

Virtually Any Change Allowed

Frozen

Flexible

Free
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Time Zones
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Creating Firm Planned Orders

DEMAND

Frozen

Flexible

Free

Released Orders

Firm Planned Orders

Computer Generated Planned Orders

TIME
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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 typically would use quantitative methods
actual customer orders
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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
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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

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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)

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Scheduling Decisions
Make-to-Stock Design Supply Production Assemble-to-Order Design Supply Production Delivery Delivery

Make-to-Order Design Engineer-to-Order Design Supply Production Delivery Supply Production Delivery

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4.6 Impact of Product Environment

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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4.6 Impact of Product Environment

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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4.6 Impact of Product Environment

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

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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)
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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.

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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 are not promised to specific customer orders

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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 Time Fence :
PAB = Prior period PAB

After the Demand Time Fence:

PAB = Prior period PAB

+ MPS - Customer orders

+ MPS - (> Forecast or Cust. orders)

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Figure 4.6 ATP

product: A lead time: 2 weeks Lot size: 60 Period Forecast Customer orders projected avail. Balance ATP MPS

demand time fence: 2 weeks on hand: 56

1 2 3 4 5 6 7 8 9 10 22 25 20 20 18 18 32 30 28 28 24 23 17 22 15 14 17 16 12 16 32 9 49 27 9 51 19 49 21 53 60 60 60 60

11 29 13 24

12 35 11 59 60

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Figure 4.6 ATP Solution

product: A lead time: 2 weeks Lot size: 60 Period Forecast Customer orders projected avail. Balance ATP MPS

demand time fence: 2 weeks on hand: 56

1 2 3 4 5 6 7 8 9 10 11 12 22 25 20 20 18 18 32 30 28 28 29 35 24 23 17 22 15 14 17 16 12 16 13 11 32 9 49 27 9 51 19 49 21 53 24 59 9 6 29 32 20 60 60 60 60 60

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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)

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Available-to-Promise
Item: 78100 Description: Commercial Generator Unit Lot Size: 50 On Hand: 50 Demand Time Fence: 3 Planning Time Fence: 8 Lead Time: 2 periods 1 20 19 2 22 17 3 21 15 49 4 25 11 24 5 24 9 0 6 23 5 27 7 21 2 6 8 21 1 9 25 0

Period Forecasted sales Customer orders Projected avail. balance 50 Available-to-promise Master production schedule

31 14

35 10

Calculate the available-to-promise for periods 19

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Available-to-Promise (Solution)
Item: 78100 Description: Commercial Generator Unit Lot Size: 50 On Hand: 50 Demand Time Fence: 3 Planning Time Fence: 8 Lead Time: 2 periods 1 20 19 2 22 17 3 21 15 49 15 50 4 25 11 24 5 24 9 0 6 23 5 27 43 7 21 2 8 9

Period Forecasted Sales Customer Orders Available-to-Promise Master Production Schedule

21 25 1 0

Projected Avail. Balance 50 31 14

14

6 35 10 49 50 50

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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

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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
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4.10 The Two-Level Master Schedule

Figure 4.9 sample two-level master schedule

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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&OP such as Chase, Level, or Combination strategies The MPS reflects the completion of an order It must be realistic

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4.11 Master Scheduling Responsibility

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 the order are permitted
the system may suggest a change
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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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4.11 Master Scheduling Responsibility

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
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Types of Supply Orders

Planned Orders

Firm Planned Orders Released Orders

Production Orders

Purchase Orders
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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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4.13 Elements of Demand Mgmt.

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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4.13 Elements of Demand Mgmt.

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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4.13 Elements of Demand Mgmt.

Prediction...

Track and compare actual v. planned

make adjustments and forecast more accurately

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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

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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
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What Is an Effective Schedule?

Manufacturing efficiency (schedule)

Inventory usage (costs)

Production System Trade-Offs Customer delivery

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The Goals of Master Scheduling

To balance supply and demand priorities To develop practical solutions to supply constraints 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

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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

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Master Scheduler Job Qualifications

Experienced with products and customers A good communicator Good with numbers Cool under pressure Disciplinedmaintains data accuracy Assertivemakes things happen A problem solver rather than a firefighter Creativefinds innovative ways to balance supply and demand Genuinely interested in products and customer service

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Who Brings What to the Table?

Engineering

Product Definition Workforce Availability

Product Demand Capital

Marketing

Human Resources

Master Capacity Schedule Business Plan

Finance

Operations Management

Materials

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

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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

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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

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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

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Common Changes in Demand

Customer schedule changes Rush orders Order cancellations Changes to specifications

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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

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Engineering Changes

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

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Managing Change

Is the change necessary? Is the change feasible? Are resources available? What are the costs and the risks?

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The S&OP and the Master Schedule

Definition Item planned Planning Horizon Constraints Master Schedule Anticipated Build or Buy Schedule Product Group End Item or Specific Level in Bill of Materials Longest Lead-time Cumulative Lead-time Resource for Components Resource Capacity Monthly Product Volume Material/Capacity/ Sales and Operations Plan Weekly or Daily Product Mix
Visual

Sales and Operations Plan Supply Rate by Product Group

Time Periods Planning Focus

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Uses of the Master Schedule

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!

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The Inputs to the Master Schedule

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
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The Outputs from the Master Schedule

Master production schedule Master purchasing schedule Projected inventory position Projected backlog position Product availability information Valuable order promising information

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Possible Solutions
Overloading

Overtime Extra shifts Transfer people Reroute work Subcontract Hire temporary help Install more equipment Add additional capacity
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Possible Solutions
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
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Chapter 4 Homework
Problem 5

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