Master Production Schedule (MPS)


MASTER PRODUCTION SCHEDULE
Master production schedule is a master level or top level schedule used to set the production plan in a manufacturing facility. It is usually a medium-term production plan indicating the start of manufacturing in quantities and lead times for each article according to demand and the company’s capacity. The MPS is used in particular to establish the Material Requirements Plan. 
 
If you recall the S&OP process flow diagram from Collaborative SupplyChain – II and AM PPG Inc’s coffee mug demand plan example from Sales Forecasting and Demand Planning, our demand plan, which is an output of S&OP process, depicts only aggregate demand of coffee mug (product group) instead of individual products (small, medium and large sizes). MPS disaggregates the S&OP demand plan data into a medium term production plan. MPS, therefore, is a statement of production not a statement of demand. It serves as contract between sales and production by firming the production dates and quantities and takes into account the capacity limitations.
In the following example, I have developed the Master Production Schedule (MPS) taking the demand plan of April, May and June months of year 2013 into account and assuming that our aggregate production plan has the same figures:
Demand Plan for April, May and June, 2013:
  

Master production Schedule (MPS) for April, May and June, 2013:
 


Since MPS is the basis for manufacturing budgets, the financial budgets should be integrated with production planning/MPS activities. When MPS is extended over a time horizon, it provides an effective ground for capital budgeting. One can forecast about the day-to-day cash flow based on the production output specified in the MPS. The MPS should be realistic and not overstated.
MPS development takes place in three phases:
  1. Development of the first version of MPS
  2. Rough cut capacity planning to ensure that target production quantities are achievable
  3. In case if capacity is overloaded and insufficient, S&OP team revises the plan to develop a more viable version of MPS
 MPS focus varies for different demand type/ production strategies.
 
MPS Inputs and Outputs:
 
Master Scheduling Grid (MSG):
In addition to aggregating data from the production plan, MPS also incorporates booked orders and inventory data in the form of master scheduling grid. Master scheduling grid is time phased and renders the information about:
  • Planning Horizon
  • Projected Available Balance (PAB)
  • Available-to-Promise (ATP)
Below is an example of Master Scheduling Grid (MSG) where the forecast figures have been taken from our coffee mug MPS:

 

As you can see in the above example:
  • MPS-MSG takes Forecast and Customer Orders into account.
  • It has a total 12 weeks of planning horizon
  • It also has Demand Time Fence (DTF) and Planning Time Fence (PTF)
Now let’s see what is planning horizon and what this time fence concept is all about.
Planning Horizon:
APICS defines planning horizon as “A cumulative period of time for which plan has been extended into the future”.
Planning horizon must be long enough to equal, at a minimum, the longest cumulative or end-to-end lead time of any item in the planning period. This includes engineering time (in custom design environment), procurement time and production time.

 
 Time Fence:
According to APICS definition “A time fence marks off a zone in which otherwise available product may not be promised-to-deliver without permission”.
There are three types of time fences-
Demand Time Fence (DTF): 
This is also known as Minimum Zone or Frozen zone. MPS can not be changed in this period as materials are committed to specific orders and these orders are frozen inside the fence. It provides stable targets for manufacturing to hit. DTF is comparatively shorter than PTF. In DTF, forecast is ignored in calculating the available. Any modification needs endorsement of top management as shown in the below diagram:

 
Planning Time Fence (PTF):
In this time period, capacity of resources and material are not as strongly committed to orders as in DTF. Planning fence indicates the time period in which the master production scheduler plans for more MPS quantities. In this zone, there is a room for negotiation in the form of management tradeoffs. PTF is also known as slushy zone.

 
Liquid Zone:
Master production scheduler can make changes outside the planning time fence. This zone is known as liquid zone. All changes are allowed in this zone as long as they do not violate the limits set in the production plan or by the policy in the S&OP plan.
Below diagram clearly explains the time fence concept:

 
 
Projected Available Balance (PAB):
PAB is a projected future inventory balance. PAB’s drop below the safety stock level or to a negative value alarms the MPS reevaluation. Here is how we calculate PAB:
PAB before DTF:
PAB = PAB from the last period + MPS – Customer Orders
PAB after DTF:
PAB = PAB from the last period + MPS – Greater of Customer Orders or Forecast
Below example is in continuation of our MSG and shows calculation of PAB:

 
Available-to-promise (ATP):
As the name suggests, ATP is uncommitted portion of the inventory and planned production maintained in MPS. Here is how we calculate ATP:
First period ATP = IOH* + MPS – Sum of customer orders before next MPS
(IOH* = Inventory on hand)
Following period ATP = MPS – Sum of customer orders before next MPS
Since following period does not include IOH, IOH is not taken in the calculation.
Below diagram is in continuation of PAB diagram and shows the calculation of ATP:


 I hope the above explanation is good enough to make MPS easily understandable. I tried my best but still should you need any help, please feel free to leave your questions in the comments.