In aggregate planning, we had established overall policies,
determined the resources needed, and made other necessary plans
to meet the forecasted demands for different product families. The
time frame was fairly long, in terms of months, if not years.
The next step is to develop a detailed planning for individual
products. The short planning horizon is in terms of weeks rather
than months. The purpose of these plans is to transfer each product
requirement into time-phased production and purchasing plans.
They also serve to develop capacity and resource requirement in
production and distribution. In some cases, planning information is
directly based on actual customer orders for immediate future and
not based on forecasted values, displaying real-time resource needs.
A master production schedule (MPS) specifies what is to be made
(e.g., the number of finished products or items) and when. Master
production schedule (MPS) determines how many units are to be
produced in a specific period. The MPS is the translation of the
sales and operations plan into producible products with their
quantities and timing determined. On a day-to-day basis, the MPS
provides the information by which sales and manufacturing are
coordinated.
The schedule must be in accordance with an aggregate plan. The
aggregate plan sets the overall level of output in broad terms (e.g.,
product families, standard hours, or dollar volume). The plan,
usually developed by the sales and operations planning team,
includes a variety of inputs, including financial data, customer
demand, engineering capabilities, labor availability, inventory
fluctuations, supplier performance, and other considerations.
Generally, the period is small, such as a week. Two major factors are
considered:
First, for which products we should develop the MPS, and
Second, what information we should take into account. This
information may include factors such as customer order or
replenishment needs.
Ideally, we like to develop detailed plans for each independent
product. However, the number of products can soon become
unmanageable. For example, should we consider automobile with
different colors or different options such as radios and air
conditioners as different product lines? If we do, then the
combinations and therefore the number of products could be very
large indeed. A simple solution is to consider a basic product as an
independent product and additional options as add-ons.
Production Environment Master Production
Schedule (MPS)
Make to stock (MTS) Final product
Assemble to order (ATO) Basic components
Make to order (MTO) Raw material and basic
resources
The development of MPS is a simple procedure and requires
sequential evaluations. However, some basic principles must be
followed. The sum of individual product quantities in MPS must add
to those with the production requirements for the parent product of
this family in aggregate planning. Each individual product must be
given appropriate resources such as storage space, labor, raw
materials, and machining capacities in each period to satisfy the
production needs.
The master production schedule is a statement of planned future
output. It specifies the products (or product options) that will be
completed, the time of completion, and the quantities to be
completed. It is the anticipated build schedule for the company. As
such, it is a statement of production, not a statement of demand.
The MPS specifies how product will be supplied to meet future
demand. We stress the fact that the MPS is not a forecast, since
manufacturing is held responsible for meeting the MPS
requirements.
Bills of Material
A bill of material (BOM) is a list of quantities of components,
ingredients, and materials required to make a product. Individual
drawings describe physical dimensions but also any special
processing as well as the raw material from which each part is
made. One way a bill of material defines a product is by providing a
product structure.
Developing a product structure and gross requirements
Speaker Kits, Inc., packages high-fidelity components for mail order.
Components for the top-of-the- line speaker kit, “Awesome” (A),
include 2 Bs and 3 Cs.
Each B consists of 2 Ds and 2 Es.
Each of the Cs has 2 Fs and 2 Es.
Each F includes 2 Ds and 1 G.
It is an awesome sound system. (Most purchasers require hearing
aids within 3 years, and at least one court case is pending because
of structural damage to a men’s dormitory.) As we can see, the
demand for B, C, D, E, F, and G is completely dependent on the
master production schedule for A—the awesome speaker kits.
This structure has four levels: 0, 1, 2, and 3. There are four parents:
A, B, C, and F. Each parent item has at least one level below it. Items
B, C, D, E, F, and G are components because each item has at least
one level above it. In this structure, B, C, and F are both parents and
components. The number in parentheses indicates how many units
of that particular item are needed to make the item immediately
above it. Thus, B(2) means that it takes two units of B for every unit
of A, and F(2) means that it takes two units of F for every unit of C.
