MPS

Master Production
Schedule
 Definition and Overview

The Master Production Schedule (MPS)

is an anticipated build schedule for
manufacturing end products (or product
options) by quantity and time period.
It is a statement of production, not a
statement of market demand.
It is a disaggregation and
implementation of the production plan
a breakdown of the production plan
into specific end items.
 Functions of the MPS

It schedules production and purchase orders for

MPS items, in terms of items, quantities, and due
dates.
It is the principal input to the MRP system.
It is the basis for determining resource
requirements: (manpower, machine hours,
capacities, etc.)
It provides the basis for
Making customer delivery promises,
Utilizing the capacity of the plant effectively,
Attaining the strategic objectives of the firm as reflected in
the production plan, and
Resolving trade-offs between manufacturing and
marketing.
 MPS Business Environment

It encompasses
The production approach used,
The variety of products produced, and
The markets served by the company
Three classic types of MPS business
environments
MTS Make to stock (Final product)
MTO Make to order (Raw material/basic resources)
ATO Assemble to order (Basic components/Sub-
assemblies)
 Make To Stock

An MTS company produces in batches,

carrying finished goods inventories.
MPS is the production statement of how
much of and when each of those end
items is to be produced.
Consumer goods (products) as opposed
to industrial goods.
 Make to Order

An MTO company, in general, carries no finished

goods inventory and builds each customer order as
needed
This form of production is often necessary when
there is a very large number of possible product
configurations, and thus, a small probability of
anticipating the exact needs of a customer.
The MPS unit is typically defined as the particular end
item or set of items that comprises a customer order.
In this business environment, customers expect to
wait for a large portion of the entire design and
manufacturing lead time.
Examples include a tugboat manufacturer or a
refinery builder.
 Assemble To Order

An ATO firm is typified by an almost limitless number of possible

configurations, all of which are made from combinations of
basic components and subassemblies.
Customer delivery times are often shorter than total lead times,
so production must be started in anticipation of customer
orders.
The large number of end-item possibilities makes forecasting of
exact end-item definitions extremely difficult, and stocking of
end items very risky.
The MPS unit is stated in planning bills of material, such as an
average lift truck of some model series. The MPS unit (planning
bill) has as its components a set of common parts and options.
The option usages are based on percentage estimates, and their
planning in the MPS incorporates buffering or hedging
techniques to maximize response flexibility to actual customer
orders.
The automobile industries are good (General Motors, Chrysler,
Ford, etc.) examples of ATO firms.
 PLANNING BILLS

Involve grouping items, either

components, sub-assemblies, or
products, in ways that will simplify
demand forecasting, setting safety
stocks, and final assembly scheduling.
Examples of planning bills are
modular bills, and
super bills.
 Modular Bills
One in which sub-assemblies and parts are grouped in
accordance with whether they are unique to a product
option or common to all configurations of the product.
Each group is called a module.
A good example is an automobile that is sold with
different customer options as in the following illustration:
Body [2-door, 4-door, convertible]

Engine [V-6, V-8, Diesel]

Transmission [Manual, Automatic]

Suspension [Standard, Heavy duty]

Upholstery [Cloth, Vinyl]

How many combinations of options will result from

these?
 Super Bills for Options
A single-level BOM for which the part is a pseudo assembly.
The parent is a generic product and the components are all the option
modules.
Super bills are employed in what is known as a two-level MPS system.
Total demand for the product is input to the top level of the MPS.
The top level is then exploded using the super bill to obtain forecasts of
the demands for the option modules which are used in the second level of
the MPS.
Possible forecasting errors are corrected by providing safety stocks as
buffers in three different ways;
Set safety stocks for each module and the timing and quantities of orders
adjusted accordingly.
Inflate the forecast for the product which adds the same percentage
overplanning to all options.
Inflate the fractions in the quantities per parent so that they sum to more than
one for each set of mutually exclusive options
For example a manufacturer of hand tools might have such families
as hammers, screwdrivers, chisels, drills, wrenches, and sanders.
A super bill could be generated for each product family, for example,
screwdrivers showing all types of screwdrivers and their respective forecasted
percentage of sales.
 Selecting The MPS Items

An important decision which deserves careful study is the selection of

items to be scheduled using the MPS.
The basic criteria governing this decision include the following:
The number of items should be kept small. It becomes impractical for
management to make decisions relative to the MPS if the number of items
is very large.
It must be possible to forecast demand for the items (assuming the items
are not MTO). To accomplish this, the choice of items should be demand
oriented, that is, related to how the product is sold.
Each item must have a BOM so that the MPS can be exploded through the
BOM to determine the need for components and materials
Collectively, the items should account for most of the productive capacity
that will be required. Otherwise, rough-cut capacity planning will not be
reliable.
The MPS items should be chosen to facilitate translating customer orders
into shippable product configurations.
With simple standard products, catalog numbers or descriptions can be translated
directly into specific MPS items
With more complicated products, the customers choice of product options must
be translated into a number of MPS items which will be assemblied together
under the FAS (Final Assembly Schedule) to fill the order.
 Other Useful Terms

Time Buckets
The planning period in MPS and MRP systems is
called a time bucket
The MPS is a time-phased plan, that is, all the
data demand, orders, inventory, and so forth
are shown in a series of time buckets
Planning Horizon
The MPS has two planning horizons:
The first and shorter horizon is the one used to plan MPS
orders and to provide data which are input to MRP
system.
The second and longer horizon of the MPS is employed
when the MPS system is being used in simulation mode
for long-term, rough-cut capacity planning of personnel,
machines, warehouse space, and so forth.
 TIME FENCES

Short-term changes are restricted by lead times, material availabilities,

and production capacities.
In order to stabilize the schedule and make sure that if changes are
made, they are properly considered with these limitations in mind, the
future is divided into several zones with different procedures governing
schedule changes applied in each zone. The zones are separated by
time fences.
A number of different time fences are used in industry, but the two
most common are:
The demand time fence DTF
The planning time fence PTF
In zone 1 Frozen, it is assumed that no more customer orders
will be received and/or promised and, therefore, demand is the
customer backlog promised for shipment during this period.
The forecast is discarded and the projected inventory balance is based on
customer orders in hand.
In zone 2 Flexible, there may be changes in product mix
conditioned on material availabilities.
In zone 3 Free, changes in both rate and mix are possible
Planned Orders, Firm orders, and Orders

MPS involves three types of production orders

Planned Order: This is an order for future execution which
is calculated automatically, usually after the PTF time frame.
It is a decision to produce, but rather is regarded by the
master scheduler as a recommendation to take into
consideration in arriving at the final MPS
Firm Planned Order (FPO): This is an order authorized by
the master scheduler but not yet released to manufacturing.
FPOs are input to the MRP system to generate orders for
materials and components. Planned orders are not.
FPOs are orders scheduled for completion inside the PTF
Orders: are production orders that have been released to
manufacturing or purchase orders that have been sent to
vendors
 CONTENT OF THE MPS
The body of the MPS report contains the following information for each
time bucket through the planning horizon:
Forecast: the forecast of independent demand.
Production forecast: the calculated dependent demand if the item is a
component
Actual demand: promised customer orders
MPS: the scheduled receipts of orders and FPOs
Projected available balance: a projection of the on-hand inventory less any
allocations or back orders.
The projected available balance is calculated as the starting balance plus
cumulative MPS less cumulative demand.
Demand is calculated using forecast and actual demand.
In zone1, usually only actual demand is used.
In zone 2, the maximum of forecast or actual demand is used.
In zone 3, forecast demand is used
Available to promise (ATP): the quantity from the current balance and from
each MPS order that has not already been promised to customers and is,
therefore, available to promise
Planned orders: by period in which they are scheduled to be received.
 MPS Planning & Calculations
Example Problem
Current Period (t)
Inventory
Level = I0 = 30 0 1 2 3 4 5 6 7 8 9
Forecast - Ft 6 8 10 12 10 9 8 7 6
Customer Orders - 7 6 5 14 6 3 0 0 0
Ot
Projected Available
Balance (PAB) - It
MPSt

Available to
Promise ATPt
Planned Order - POt

Lot size (FOQ) = 12 DTF = 4 weeks

Safety stock = 0 PTF = 7 weeks
 Material-Balance Equations for MPS

Material-Balance Equations for evaluating time-phased MPS calculations

It = It-1 + Qt max{Ft , Ot} ---------------- Projected Available Balance (PAB), Qt > 0
It = max{0, It-1} max{Ft , Ot} ----------- Qt = 0

0 ........................................................................... if It 0
Qt
Outcome of stated production policies ........... otherwise

Typical production policies (lot sizing) include the following:

Batch production
Lot-for-lot production
Net-period requirements production, (a-kind-of periodic order quantity), etc.

MPSt defaults to the value of Qt (the outcome of stated production

policies) as in the equation above.
 Material-Balance Equations for MPS

ATPt depends on MPSt value

The difference between MPSt for a certain period (t) and the cumulative value of
customer orders between this period and the next period, for which MPSt > 0.
An important concept particularly when MPS is based on forecasts.

where n = the next period of planned production (next MPS) > t

Oj = actual customer orders for period j

Planned Order - POt It is simply defaulted MPSt value in zone 3 with no

firm commitment.
 Example Problem
(Problem 4.5 of reference text)
a) Given the following master schedule, fill in the Projected Available
Balance, Available to Promise and Planned Orders rows:
On-hand = 35; Demand Time Fence = 2; Planning Time Fence = 10; Lot Size = 200;
Safety Stock = 0
b) A customer wants an order of 100 in period 4. What can you tell the customer?
c) The customer from part (b) cancels his/her request, but then says he/she wants
120 in period 5; what can you tell the customer now?
d) Sales has requested that you add a MPS of 200 in period 9 to cover theirs needs
for a sales promotion. What can you tell them and why?
e) What action (if any) should be taken in period 11? Why is it okay to take the
action?
Period 1 2 3 4 5 6 7 8 9 10 11 12

Forecast 30 40 40 50 40 40 30 40 40 50 40 40

Customer Orders 31 35 29 21 17 14 33 11 5 2 0 1

Projected Available Bal 4 169 129 79 39 199 166 126 86 36 -4 -44

Available to Promise 4 98 135

MPS 200 200

Planned Orders 200

Answers to Questions (b) (e)

(b) We have only 98 available to promise. We can fill

the balance (100-98) = 2 in period 6
(c ) Just like part (b), we still have 98 available to
promise and to fill the balance of (120-98) in period 6
(d) The planning time fence is 10 weeks, so we do
not have enough time to complete all components in
week 9. Additional costs may be needed to expedite.
(e) An MPS value of 200 units should have been
added to meet demand; but defaulted to planned
order because it falls in the free zone.

20