Understanding Master Scheduling, Capacity Requirements Planning & Production Planning

The Long-Range Strategic Plan

Manufacturing resource planning (MRP II) and facility planning are elements of long-range strategic planning. Long-range strategic planning is the process of establishing corporate goals and objectives along with the plans to accomplish them. Medium-range tactical planning is the process of selecting the methods of achieving organizational goals and objectives. Long-range strategic decisions of relevance to production area comprise of which products to manufacture; which dimensions of the cost, quality and delivery to compete; where to locate manufacturing facilities; what production equipments to use; what inventory management and decision systems to use, and other choices concerning long-term supply sources of raw materials, energy and workforce skills.
 

The Medium-Range Tactical Plan

Tactical planning, with a planning horizon generally from 6 to 12 months into the future, take the basic physical production capacity constraints and projected demand pattern determined by the long-range plan, and allocate available resources to meet the projection of demand. Aggregate production planning, and aggregate capacity planning are examples of the medium-range tactical planning. Even though basic production capacity is essentially fixed in the long-range plan, production capacity can effectively be increased or decreased within threshold limits in the medium term. For example, a decision can be made to increase or reduce the workforce size, the amount of shifts and overtime scheduled, production rate, the level of inventory investment, the shipping modes used, and the amount of production subcontracting used.

Aggregate plans like the aggregate production and capacity plans, must be reviewed at least quarterly to determine that marketing, finance, manufacturing and production functions are operating in the same plan with the correct allocation of resources and capacity.

The Short-Range Operational Plan

Short-term operational activities provide the day-to-day flexibility needed to meet customer requirements within the guidelines established in the aggregate plans. Short-range operating schedules include receiving orders directly from customers, MRP explosion, release planned orders, approve purchase orders, revise production plan when actual output deviates from plan. In most cases, the detailed operational schedules are drawn up for one week, then one day, and finally one shift in advance. The schedules involve the assignment of products to machines, the sequencing and routing of orders through the production shop floor, recalculation of replenishment quantities for each SKU after offsetting against available supply from sales order, reorder point and planned safety stock level.
 

The Aggregate Production Plan

This has the medium-range scope and involves establishing production rates, work force sizes, and inventory levels within normally a planning horizon of 6 to 12 months, sometimes up to 24 months. Time block is generally one month. Aggregate Production Planning is done on an aggregate basis for families of products which are produced on the same equipment. This phase of planning is designed to properly utilize capacity especially in the continuous process industries, and it must take into account the planned equipment maintenance downtime. It is relatively easy to aggregate and subsequently disaggregate production planning in the job shop production line. In this context, "disaggregated" means the plan for goods to be produced in aggregate is broken down or de-kitting into its individual units.

Master Production Scheduling (MPS)

This is medium-range aggregate production planning. For a shorter planning horizon something like 6 months or so, master schedule is sometimes referred to as short-range plan. Figure 8.1 demonstrates the various functions in relation to master production scheduling. (read more...). Master schedule takes the aggregate production plan (with known constraints) and disaggregates it into a production schedule (usually in weeks or days) of specific products to be produced in a particular time periods at each manufacturing facility. Typically, the master schedule states which end items are to be produced, when these are needed, and in what quantities. The master schedule must be realistic, as besides driving material buying ahead, it is used to generate customer delivery dates (i.e. ATP) for any new orders.

Materials Requirement Planning (MRP)

MRP is a set of calculation techniques embedded in the computer-based information system, and it explodes the master production schedule into detailed production and procurement schedules, specifying timing and quantity of production for each end item. Closed-looped MRP performs capacity checks, which are used iteratively with MPS and the production plans, to generate feasible schedules. In assembly environments, it is crucial that can involves tens of thousands of SKU and components. In job shop production floor, it is relatively straightforward.

MRP uses bill of material data, inventory data (accurate records of stock items, work-in-progress (WIP) and on-order parts), lead time, routing, and the master production schedule to calculate net requirements for materials. It makes recommendations on when to release orders for material. Because it is time-phased, it makes recommendations to reschedule open orders when due dates and need dates are not in phase. Time-phased MRP begins with the product items listed on the MPS and determines : (1) the quantity of all components and materials required to fabricate those product items, and (2) the date that the components and material are required. Time-phased MRP is accomplished by exploding the bill of material, adjusting for the net requirements by the appropriate lead times, inventory quantities on-hand, open purchase orders, and sales orders.

MRP Functional Requirements

The following is a running list of the MRP 80 most common functional requirements.

The conceptual differences between MPS and MRP

Master Production Scheduling (MPS) is generally done for when the product groups exists. By doing MPS we basically disaggregate the product group requirements into individual product requirements. By doing MPS we can disaggregate the plan and we can only create planned order for finished products. Materials Requirement Planning (MRP) is done to drill down for individual product once the planned orders for finished products are created by MPS. However, we can use MRP for any individual material anytime.

Material Requirement planning is used for multi-level BOM planning. But MPS is used for critical level or single level BOM planning. In short, MPS operates within only one level of the BOM, While MRP can be utilized throughout all levels of a material’s BOM.

In MPS, the critical components are planned separately, but can be using interactive planning. In Material Master, the MRP Type is chosen accordingly, eg., MRP I, MRP II. In MRP time phased system planning, the bill-of-material is exploded, netting calculation is done, and component level quantities and time requirements are planned. Firstly, MPS is done, then MRP is run.

Planning Time Fence is must for MPS. Planning Time Fence dictates a series of time intervals for planning purposes, during which any changes to the firm orders are restricted. Subsequent MRP runs will not create planned orders within the time fence but will place them just outside it. (i.e. planning time fence specifies a period within which no automatic changes are made to the master plan. The master scheduler has full control over planned order release).

The Differences in the Inputs and Outputs of MPS and MRP

INPUT to MPS (i.e. sources of information needed for MPS logic):

■ Product Demand or Forecast
■ Spares Demand
■ Sister Plants' Demand
■ Production Costs
■ Inventory Costs
■ Customer Orders (Backlog)
■ Safety Stock requirements
■ Exhibition/Promotion/R&D requirements
■ Inventory Levels (beginning stock, etc)
■ Supply
■ Lot Size
■ Production Lead Time
■ Production Plan
■ Availability of Capacity
■ Key Capacity Constraints
■ Goals
■ Management/Inventory Policies

OUTPUT from MPS

■ Production plan volume, when to be produced, when to be completed
■ Number of productive hours needed and the staffing levels
■ Quantity Available to Promise
■ Projected Available Balance

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INPUT to MRP (plan optimal inventory levels, purchases, production schedules, etc):

■ Master Production Schedule
■ Bill of Materials
■ Process Routings and cycle times
■ Inventory Data (Unit Inventory, Quantity on Hand, WIP)
■ Material Lead Times
■ Sales Order Quantities / Due Dates
■ Scrap Rate
■ Purchase Order Quantities / Due Dates
■ Purchase Order Unit Conversion Factor
■ Lot Sizing policies for all parts (Lot-for-lot, Min/Max Ordering Qty, Fixed-Period Ordering Qty, EOQ)
■ Safety Stock Requirements
■ Re-Order Levels

OUTPUT from MRP:

■ Planned-Order Schedules (schedules that indicates the amount and timing of future orders)
■ Planned Order Releases (authorization for the execution of planned orders)
■ Changes (revisions of due dates or order quantities, or cancellations of orders)
■ Purchase Requisitions
■ Inventory Transaction
■ Action Exception Message Reports
■ Planning Reports
■ Performance Control Reports

Capacity Requirements Planning (CRP)

It is the process of determining short-range capacity requirements. Capacity Requirements Planning is a computerized technique for projecting resource requirements for critical work stations. The functions are:

● Tests MPS for feasibility
● Utilizes routings to determine labor/machine loads
● If master schedule is feasible, recommends freezing
● If master schedule overloads resources, identify processes that are over-scheduled

 Read more here on capacity planning

The Input comprises: -
―Planned Order Releases (after MRP run).
―Open Orders File.
―Other important sources - Rework, Excess scrap, Quality problems.

The Routing file contains: -
―Operation identification code
―Operation description
―Planned work center
―Standard setup time
―Standard run time per unit
―Tooling requirements

Lead Times are: -
―Staging time (time to pick up materials from store and send to shop floor work center)
―Queue time (time waiting before operation begins)
―Setup time (time getting ready for operation)
―Run time (time performing operation)
―Wait time (time waiting after operation ends)
―Move time (time physically moving between operations)

The Output comprises: -
Load Profile for each work center
Load Schedules that :
   ―Compares actual labor and machine hours against available hours
   ―Offsets schedules between successive stages of production by lead times
   ―Provides feasible MPS and economically loaded work centers
   ―Promotes system operating efficiency

I thought about sharing with you the sometimes confusing terms in production planning - MRP Planned Order and Production Order. In Discrete manufacturing environments, planned orders are created after the MRP run.  MRP - after adjusting for the net requirements by the appropriate lead times, inventory quantities on-hand, inbound in-transit inventory, open purchase orders, and sales orders - will create planned orders for the shortages of materials or sub-assemblies. MRP Planned Orders can be converted into Production Orders, released, and processed. Production order once created becomes a fixed plan, cannot be adjusted by MRP anymore. Once we firm the planned order, any material changes will not be reflected in the subsequent MRP (example, with BOM changes in quantity and addition/deletion of components). New components will not be recommended for firm planned order. Deleting planned orders is only temporary, because as soon as you run MRP they will be recreated. We can configure to automatically firming planned orders or release the orders earlier, but the drawback is that inventory cost will go up due to lesser control.

For Repetitive manufacturing, planned orders are created after you run the MRP against your demand. You can change and firm these manually or you can use time fence strategies, and you can have multiple operations running through multiple work centers. Repetitive planned orders type is normally run against shorter lead time build schedule, where we don't need a high level of control. Where we want a better level of control, we select Discrete planned orders.

With Discrete Planned Order type, we can link documents to the orders; we can change the routing and the BOM on the order; and we have better visibility of the individual orders while they are in manufacturing. After everything is complete, you still have a record against the production build. The planned order stays intact and its history of changes in process routing and the BOM is retained.

In its simplest form, we need to provide input to a plan before it becomes a demand schedule. This demand schedule stores the sales orders (partially or entirely firm), backlogs, and the forecasts, which are the demands for external purchase, internal procurement or in-house manufacturing. When you run MRP, you are launching the demand plan. The system planning process looks to the stock levels, and to the demand. If there is not enough stock to supply the demand, the planning process suggest Planned Orders.

Next Page >> Master Production Scheduling
 

This site was created in Feb.2007
by William Tan