Section F: Master Planning

Question 1

What are the two high level components of Master Planning?

Answer 1

Sales and operations planning and Master scheduling are the two components that comprises Master Planning.

Question 2

What are the sub-components of priority planning?

Answer 2

Priority Planning consists of:

• Sales and Operations Planning
• Master Scheduling
• Material Requirements Planning

Question 3

Define Priority Planning

Answer 3

Priority Planning

The function of determining what material is needed and when. Master production scheduling and material requirements planning are the elements used for the planning and re-planning process to maintain proper due dates on required materials.

Question 4

Due Date

Answer 4

due date

the date when purchased material or production material is due to be available for use.

It is also called an expected receipt date or arrival date or a scheduled receipt.

Available for use means that the item is ready to be used as an input to another operation or as a finished good to be shipped or added to inventory.

Thus priority planning can be simply stated as the setting and maintaining of these due dates over time.

Question 5

Sales and Operations Planning (S&OP)

Answer 5

A process to develop tactical plans that provide management the ability to strategically direct its businesses to achieve competitive advantage on a continuous basis by integrating customer-focused marketing plans for new and existing products with the management of the supply chain.

The process brings together all the plans for the business (sales, marketing, development, manufacturing, sourcing, and financial) into one integrated set of plans.

S&OP is performed at least once a month and is reviewed by management at an aggregate (product family) level.

Question 6

Backlog

Answer 6

All the customer orders received but not yet shipped. Sometimes referred to as open orders or the order board.

Question 7

The S&OP Process

Answer 7

Data gathering. Data on demand (sales, backorders, etc.), supply (backlogs, inventory levels, etc.), marketing, finance, and external events are gathered.

Demand planning. Forecasts are created, and input data or results are modified, as needed, based on evolving assumptions, price changes, new products, promotions, competitors, the economy, etc. How much demand can be generated through marketing efforts is determined.

Supply planning. Production planning compares demand requests against capacity in the long and medium terms to identify constraints.

Pre-S&OP meeting. Issues that do not require executive attention to balance supply and demand are resolved, and an agenda of exception items is created.

Executive meeting. Executives decide on exception items and ensure that the overall plan can still meet objectives and is consistent with strategy.

Question 8

The most important outcome of the S&OP process is that the organization’s aggregate inventory and/or backlog and production process will be in balance with planned aggregate demand as expressed in the sales plan.

What is the sales plan?

Answer 8

A time-phased statement of expected customer orders anticipated to be received (incoming sales, not outgoing shipments) for each major product family or item.

Represents sales and marketing management’s commitment to take all reasonable steps necessary to achieve this level of actual customer orders. Is a necessary input to the production planning process (or sales and operations planning process).

Expressed in units identical to those used for the production plan (as well as in sales dollars).

Question 9

Production Planning

Answer 9

A process to develop tactical plans based on setting the overall level of manufacturing output (production plan) and other activities to best satisfy the current planned levels of sales (sales plan or forecasts), while meeting general business objectives of profitability, productivity, competitive customer lead times, etc., as expressed in the overall business plan.

The sales and production capabilities are compared, and a business strategy that includes a sales plan, a production plan, budgets, pro forma financial statements, and supporting plans for materials and workforce requirements, and so on, is developed. A primary purpose is to establish production rates that will achieve management’s objective of satisfying customer demand by maintaining, raising, or lowering inventories or backlogs, while usually attempting to keep the workforce relatively stable.

Because this plan affects many company functions, it is normally prepared with information from marketing and coordinated with the functions of manufacturing, sales, engineering, finance, human resources, etc.

Question 10

A few important points from the definition of S&OP

Answer 10

Note a few important points from the definition:

It sets overall levels of manufacturing output at the product family level over a horizon of six to 18 months, in monthly or weekly time buckets. Details on individual products, options, and so on would not be accurate at this point.

The primary purpose is to set production rates.

It is coordinated with other functions and optimizes tradeoffs. (S&OP is one way this coordination can occur.)

Question 11

Product Faimilies

Answer 11

Product Families include all products that use the same routings between the same work centers as well as the same materials, setups and tooling, and cycle times. This allows to plan for capacity.

Question 12

Production planners have to assume somethings are fixed and others are variable.

What are variables?

Answer 12

Variables are things that can be changed in a system over the given planning horizon. These are the levers that production planners have at their disposal to alter capacity over the medium term.

Question 13

What are the 4 types of Production Strategies?

Answer 13

Production strategies include

• chase
• level
• subcontracting
• hybrid

Question 14

Chase Production Method

Answer 14

chase (Demand Matching) production method in part as a production planning method that maintains a stable inventory level while varying production to meet demand.

It attempts to match production to the level of demand to avoid the need for inventory, but at the cost of high production variability.

Question 15

What are the pros and cons of the chase production method?

Answer 15

CONS:
The costs of varying production levels might include the need to hire and lay off workers throughout the year, schedule overtime or short time, carry excess capacity at some times and idle capacity at others, and have a lot of changeovers.

PROS:
However, inventory costs will be very low, or there might not be any inventory.

Question 16

Level Production Method

Answer 16

level production method (Production leveling) as a production planning method that maintains a stable production rate while varying inventory levels to meet demand.

Question 17

A level strategy, also called production leveling, attempts to consistently produce at an amount equal to average demand and results in a level schedule. What is a level schedule?

Answer 17

Level Schedule

1) In traditional management, a production schedule or master production schedule that generates material and labor requirements that are as evenly spread over time as possible. Finished goods inventories buffer the production system against seasonal demand. 2) In JIT, a level schedule (usually constructed monthly) in which each day’s customer demand is scheduled to be built on the day it will be shipped. A level schedule is the output of the load-leveling process.

A level rate will actually be an average daily rate.

Question 18

Subcontracting (minimum level strategy with supplemental subcontracting)

Answer 18

A subcontracting strategy is a leveling strategy that sets production at the minimum level of annual demand and then subcontracts out all excess demand. While any of the strategies might use subcontracting (especially chase), this method will use subcontracting on a regular basis.

Question 19

Hybrid

Answer 19

Hybrid strategies combine the prior three strategies in different ways to arrive at custom solutions. Often a custom solution will be optimal in terms of minimizing costs and meeting other objectives such as labor relations.

Hybrid methods generally seek to match demand to some extent and to smooth out production to some extent.

Question 20

Production Plan

Answer 20

production plan :

The agreed-upon plan that comes from the production planning (sales and operations planning) process—

specifically, the overall level of manufacturing output planned to be produced, usually stated as a monthly rate for each product family (group of products, items, options, features, and so on).

Various units of measurement (e.g., units, tonnage, standard hours, number of workers) can be used to express the plan. Represents management’s authorization for the master scheduler to convert it into a more detailed plan—that is, the master production schedule.

Question 21

What are inputs to the Production Plan?

Answer 21

Forecast demand including backorders (orders late for delivery) broken down by planning bucket period

Opening inventory (or opening backlog) if leveling production

Targeted ending inventory (or projected backlog) if leveling production

Question 22

resource planning

Answer 22

Capacity planning conducted at the business plan level. The process of establishing, measuring, and adjusting limits or levels of long-range capacity.

Resource planning is normally based on the production plan but may be driven by higher-level plans beyond the time horizon of the production plan (e.g., the business plan).

It addresses those resources that take long periods of time to acquire. Resource planning decisions always require top management approval.

Question 23

bill of resources (also called a resource bill)

Answer 23

bill of resources (also called a resource bill)

A listing of the required capacity and key resources needed to manufacture one unit of a selected item or family.

Rough-cut capacity planning uses these bills to calculate the approximate capacity requirements of the master production schedule. Resource planning may use a form of this bill.

Question 24

Scheduling

Answer 24

Scheduling : The act of creating a schedule, such as a shipping schedule, master production schedule, maintenance schedule, or supplier schedule.

Question 25

Master scheduling :

Answer 25

Master scheduling : The process where the master schedule is generated and reviewed and adjustments are made to the master production schedule to ensure consistency with the production plan.

The master production schedule (the line on the grid) is the primary input to the material requirements plan. The sum of the master production schedules for the items within the product family must equal the production plan for that family.

Question 26

Master schedule :

Answer 26

Master schedule : A format that includes time periods (dates), the forecast, customer orders, projected available balance, available-to-promise, and the master production schedule.

It takes into account the forecast; the production plan; and other important considerations such as backlog, availability of material, availability of capacity, and management policies and goals.

Question 27

Master production schedule (MPS)

Answer 27

A line on the master schedule grid that reflects the anticipated build schedule for those items assigned to the master scheduler.

The master scheduler maintains this schedule, and in turn, it becomes a set of planning numbers that drives material requirements planning. It represents what the company plans to produce, expressed in specific configurations, quantities, and dates.

The MPS is not a sales item forecast that represents a statement of demand. It must take into account the forecast, the production plan, and other important considerations such as backlog, availability of material, availability of capacity, and management policies and goals.

Question 28

A master scheduler

Answer 28

A master scheduler is someone responsible for “managing, establishing, reviewing, and maintaining a master schedule for select items,”

Question 29

Objectives of Master Scheduling

Answer 29

• Produce what sales and production mutually agree should be produced in the priority in which it should be produced.
• Maintain customer service at the targeted level.
• Make the most efficient and effective use of resources (materials, labor, and equipment).
• Keep inventories and/or backlogs at the desired levels.
• Enable valid order promises.

Question 30

What are the inputs and outputs of Master Scheduling?

Answer 30

Inputs:
Demand Management (forecasts)
Distribution Requirements (orders)
Sales & Operations Planning
Rough-Cut Capacity Planning (capacity constraints, lot sizes, quantities, opening inventory, backlog)

Outputs:
Master Production Schedule
Material Requirements Planning (MRP)
Rough-Cut Capacity Planning

Question 31

Master Scheduling Steps

Answer 31

1. Disaggregate the production plan into preliminary master schedules per item.
2. Aggregate master schedules for all related end items.
3. Perform rough-cut capacity planning.
4. Resolve the differences and publish the MPS.

Question 32

A workable preliminary master schedule satisfies the following conditions:

Answer 32

Valid schedule. Workers should know when to begin and end production of individual units.

Valid capacity. Production per period and in total should stay within any production limits set in the production plan.

Valid inventory or backlog. There should be no negative inventory balances or strong imbalances among individual products. Backlogs per period should be managed within tolerances.

Valid changeovers. The number of changeovers should be cost-effective.

Valid batches and lots. Production batch and lot size policies (if any) should be honored.

Question 33

Batch

Answer 33

Batch : 1) A quantity scheduled to be produced or in production. 2) For discrete products, the batch is planned to be the standard batch quantity, but during production, the standard batch quantity may be broken into smaller lots. 3) In nondiscrete products, the batch is a quantity that is planned to be produced in a given time period based on a formula or recipe that often is developed to produce a given number of end items. 4) A type of manufacturing process used to produce items with similar designs; it also may cover a wide range of order volumes. Typically, items ordered are of a repeat nature, and production may be for a specific customer order or for stock replenishment.

Question 34

Lot

Answer 34

Lot : A quantity produced together and sharing the same production costs and specifications.

Question 35

Projected Available Balance (PAB)

Answer 35

An inventory balance projected into the future. It is the running sum of on-hand inventory minus requirements plus scheduled receipts and planned orders.

Question 36

rough-cut capacity planning (RCCP)

Answer 36

The process of converting the master production schedule into requirements for key resources often including labor, machinery, warehouse space, suppliers’ capabilities, and, in some cases, money. Comparison to available or demonstrated capacity is usually done for each key resource. This comparison assists the master scheduler in establishing a feasible master production schedule. Three approaches to performing RCCP are the bill of labor (resources, capacity) approach, the capacity planning using overall factors approach, and the resource profile approach.

Question 37

planning horizon

Answer 37

planning horizon as follows: The amount of time a plan extends into the future. For a master schedule, this is normally set to cover a minimum of cumulative lead time plus time for lot sizing low-level components and time for capacity changes of primary work centers or of key suppliers. For longer-term plans, the planning horizon must be long enough to permit any needed additions to capacity.

Question 38

cumulative lead time

Answer 38

cumulative lead time as follows: The longest planned length of time to accomplish the activity in question. It is found by reviewing the lead time for each bill of material path below the item; whichever path adds up to the greatest number defines cumulative lead time.

Question 39

System nervousness

Answer 39

System nervousness is a term commonly used to describe a production environment that has become inefficient due to too many last-minute changes to production.

Question 40

time fence

Answer 40

time fence as follows: A policy or guideline established to note where various restrictions or changes in operating procedures take place. For example, changes to the master production schedule can be accomplished easily beyond the cumulative lead time, while changes inside the cumulative lead time become increasingly more difficult to a point where changes should be resisted. Time fences can be used to define these points.

Question 41

Demand time fence and frozen zone.

Answer 41

The demand time fence creates a frozen zone, where all capacity and materials are committed to specific orders. Demand in the frozen zone is based on customer orders, not the forecast. Therefore, the PAB is calculated using the customer orders line and the forecast is not used. Changes at this point are disruptive and costly (e.g, rerouting, rescheduling, additional setups), so senior management approval is usually required to make changes. Where to locate the demand time fence in the time horizon is also a management decision.

Question 42

Planning time fence and slushy zone

Answer 42

The planning time fence creates a middle zone that is called slushy because the master scheduler has the authority to make changes. Some changes will be difficult, however, since capacity is established and materials are ordered. The master scheduler might instead alter priorities or make tradeoffs as needed to correct errors or accommodate sales or customer changes. The scheduling software will typically require MPS orders in this zone to be evaluated rather than automatically making them. The longest cumulative lead time of the product almost always defines where the planning fence is located. The PAB is calculated in this and the next zone using the higher of customer orders or the forecast.

Question 43

Liquid zone

Answer 43

In the liquid zone, the scheduling software might automatically make changes without requiring input from the master scheduler, and other manual changes can also be made. The only constraint will be the limits set in the production plan. This zone is usually the extra time added beyond the cumulative lead time of the product.

Question 44

pacemaker

Answer 44

pacemaker as follows: In lean, the resource that is scheduled based on the customer demand rate for that specific value stream; this resource performs an operation or process that governs the flow of materials along the value stream. Its purpose is to maintain a smooth flow through the manufacturing plant. A larger buffer is provided for the pacemaker than other resources so that it can maintain continuous operation.

A heijunka schedule is applied by distributing product volumes and mixes evenly over time so as to meet varying customer demand without building excess work-in-process inventories of units greater than currently in demand.

Question 45

Leveling the schedule is also called load leveling. When done for a plant, it is called uniform plant loading.

Define Load leveling & Uniform Plant Loading

Answer 45

Leveling the schedule is also called load leveling. When done for a plant, it is called uniform plant loading.

Load leveling : Spreading orders out in time or rescheduling operations so that the amount of work to be done in sequential time periods tends to be distributed evenly and is achievable. Although both material and labor are ideally level loaded, specific businesses and industries may load to one or the other exclusively (e.g., service industries).

Uniform plant loading : In lean, the distribution of work between work stations so that the time required for each station to complete all tasks is as close to equal as possible.

Question 46

How does Heijunka scheduling signal to shift between unit types?

Answer 46

Heijunka scheduling may use a type of kanban called a heijunka box to signal when to shift between unit types. It does this by breaking the “box” into time slots equal to takt time. The result is that lean often will have much smaller batch sizes, with an ideal being a batch size of one.

Question 47

Mixed-model scheduling

Answer 47

Mixed-model scheduling : The process of developing one or more schedules to enable mixed-model production. The goal is to achieve a day’s production each day.

Question 48

Mixed-model production

Answer 48

Mixed-model production : Making several different parts or products in varying lot sizes so that a factory produces close to the same mix of products that will be sold that day. The mixed-model schedule governs the making and the delivery of component parts, including those provided by outside suppliers. The goal is to build every model every day, according to daily demand.

Question 49

Order entry

Answer 49

Order entry : The process of accepting and translating what a customer wants into terms used by the manufacturer or distributor. The commitment should be based on the available-to-promise (ATP) line in the master schedule. This can be as simple as creating shipping documents for finished goods in a make-to-stock environment, or it might be a more complicated series of activities, including design efforts for make-to-order products.

Question 50

Order promising

Answer 50

Order promising : The process of making a delivery commitment (i.e., answering the question, “When can you ship?”). For make-to-order products, this usually involves a check of uncommitted material and availability of capacity, often as represented by the master schedule available-to-promise.

Question 51

Available inventory

Answer 51

Available inventory : The on-hand inventory balance minus allocations, reservations, backorders, and (usually) quantities held for quality problems. Often called beginning available balance.

Question 52

On-hand balance

Answer 52

On-hand balance : The quantity shown in the inventory records as being physically in stock.

Question 53

available-to-promise (ATP)

Answer 53

available-to-promise (ATP) in part as follows: In operations, the uncommitted portion of a company’s inventory and planned production maintained in the master schedule to support customer-order promising. The ATP quantity is the uncommitted inventory balance in the first period and is normally calculated for each period in which an MPS receipt is scheduled. In the first period, ATP includes on-hand inventory less customer orders that are due and overdue.

Question 54

ATP formula

Answer 54

ATP = PAB - Customer orders + amount in negative

Question 55

capable-to-promise (CTP)

Answer 55

capable-to-promise (CTP) as follows: The process of committing orders against available capacity as well as inventory. This process may involve multiple manufacturing or distribution sites. Used to determine when a new or unscheduled customer order can be delivered. Employs a finite-scheduling model of the manufacturing system to determine when an item can be delivered. Includes any constraints that might restrict the production, such as availability of resources, lead times for raw materials or purchased parts, and requirements for lower-level components or subassemblies. The resulting delivery date takes into consideration production capacity, the current manufacturing environment, and future order commitments. The objective is to reduce the time spent by production planners in expediting orders and adjusting plans because of inaccurate delivery-date promises.

Question 56

Calculate Total Production

Answer 56

Total Production = Forecast + Backorders + Ending inventory - Opening Inventory

Question 57

Calculate Ending Inventory

Answer 57

Ending Inventory = Prior period ending inventory + Production - Demand (Forecast)