MPS

MPS record is a time-phased record to show

relationships between production output,
sales forecast, and expected
inventory balance
LEVEL STRATEGY
CHASE STRATEGY
For the same situation given above (for the level strategy), the MPS record, when chase strategy is followed, is given
in Fig. 8. In this strategy also the planner uses the on-hand inventory to buffer against demand and MPS uncertainty
LOT SIZING
Exercise Problem 1. Problem Neptune Manufacturing Company’s production
manager wants a master production schedule covering next year’s business. The
company produces a complete line of small fishing boats for both saltwater and
freshwater use and manufactures most of the components part used in
assembling the products. The firm uses MRP to coordinate production schedule of
the component part manufacturing and assembly operations. The production
manager has just received the following sales forecast for next year from the
marketing division:
The sales forecast is stated in terms of “standard boats”, reflecting total sales
volume for each of the firm’s three major product lines. Another item of information
supplied by marketing department is the target ending inventory position for each
product line. The marketing department would like the production manager to plan
on having the following number of standard boats on hand at the end of each
quarter of next year:
The inventory position for each product is:

The master production schedule specify the number of boats (in standard units) to be produced for each product line
in each quarter of next year on the firm’s single assembly line. The assembly line can produce up to 15,000 standard
boats per quarter (250 boats per day during the 60 days in a quarter).

Two additional factors are taken into account by the production manager in preparing the master production
schedule: the assembly line changeover cost and the inventory carrying cost for the finished goods inventory. Each
assembly line changeover costs $5,000 reflecting material handling costs of changing the stocking of component part
on the line, adjusting the layout, and so on. After some discussion with the company comptroller, the production
manager concluded that the firm’s inventory carrying cost is 10 percent of standard boats cost per year.
The item value for each of the product line standard units is:

The master production scheduler has calculated the production lot sizes as 5,000, 3,000 and 4,000 units, respectively.
a) Develop a master production schedule for next year, by quarter, for Neptune’s fishing boat line. Identify any
problems.

b) Verify the lot size calculations using the EOQ formula.

Solution for part (a) of the problem :

When the MPS is prepared here, the constraints to be satisfied are demand, capacity, end of the period inventory and
lot sizing. Prepare a tentative MPS satisfying demand and lot sizing constraints. If the planned production is more
than the lot size, the production batch is determined as the planned quantity for meeting the requirements.
MPS quantity in 2nd quarter is higher than the capacity.

Also, the required quarterly ending inventory is not

achieved using the tentative MPS.

Now, considering the excess capacity available in certain period, try to satisfy the capacity constraint. The capacity
and demand constraints should be satisfied, and the lot sizing and end of the period inventory constraints should be
satisfied to the maximum possible extend.

Modified MPS For StingRay series, modify the planned production as 11000 units in first period and for SunRay
series, modify the first period MPS quantity as 4000 units