MPS Process

Session 1
 Introduction
As operations & Supply Chain Management professionals, we deal with four primary modules
of the organisational processes.

Strategic Planning
Production & Supply
Demand Management
Management
All decisions need to
ultimately follow the
priorities of the
company. Strategic
Capacity Management planning provide
direction to all other
processes.

All resources are limited.

Planning always Production & Supply
That includes labor,
starts with the Management transforms
machines, raw materials,
customers. What customer demand to
money. Capacity Mgmt
they need. How business by making &
deals with these
much. When. supplying the products
constraints.
 Interlinkage Between Modules
The Four Primary Modules are interlinked, but Demand Management has a special place in the
chronological process.

Strategic Planning Strategic Planning

provides direction to all
three subsequent
processes.

Production & Supply

Demand Management Capacity Management
Management

But Demand Management The three processes are interlinked – they share inputs with
also informs Strategic one another.
Planning as well – Demand
Management is often the
first step of planning
activities.
 Planning at Various Levels
Planning & Scheduling happens at many levels, so we cannot have monolithic process modules when we
consider planning.

Strategic Planning

Production & Supply Capacity Management

Demand Management

Management
Sales & Operations Planning Resource Requirement Planning Long Term (12 – 18 months)

Master Production Schedule Rough Cut Capacity Planning Medium Term (Monthly to Quarterly)

Material Requirement Planning Capacity Requirement Planning Short Term (Weekly to Monthly)

Purchase Planning & Production Production & Control Very Short Term (Hourly to Daily)
Planning & Scheduling Stages
Processes at various timing horizons have specific names in the Planning & Scheduling Domain.

Strategic Planning
Demand Mgmt

Sales & Operations Planning (S&OP) Resource Requirement Planning

(Aggregate Level / Product Family / Volume) (Facilities, Capital, Equipment, Workers)

Master Production Schedule (MPS) Rough Cut Capacity Planning

(SKU Level – Finished Goods or Component Parts) (Aggregate Resource Level)

Material Requirement Planning (MRP) Capacity Requirement Planning

(Purchase Order Level) (Process Level)

Purchase Planning Production Production & Control

(Supplier Level) (Actual available capacity planning)
Training Agenda
A brief history of planning and scheduling paradigms

Demand management and Strategic Planning – a brief introduction

Sales & Operating Plan (Master Supply Planning), Inputs and Outputs

Master Production Schedule (Master Supply Schedule), Inputs & Outputs

Capacity Planning – long, medium and short term activities

Production & Control – managing shop-floor activities at very short term

 Evolution of Planning Paradigms
MODULES

Enterprise resource planning

&
General Accounting
ERP
sing essing

O
Integrated Modules • Integrated Planning
c
Pur er Pro

• Shared database U
SCM Integration
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• Real time management

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T
yste

MRP II
Master Scheduling
In-S

Manufacturing resource planning

Log
istic
Capacity Management C
• Resource Requirement

s P la
• Capacity Planning

nnin
Bill of M
a terials • M
t

Shop Floor Control

men

g
MRP
age

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Man

Material requirements planning

t

ing
Cos

nn

S
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Inventory Planning • Production Schedule

ply

• Purchasing Schedule
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Session 2
Topics to be Covered – A Recap
In this program, we’ll cover the modules highlighted below.

Strategic Planning
Demand Mgmt

Sales & Operations Planning (S&OP) Resource Requirement Planning

Master Production Schedule (MPS) Rough Cut Capacity Planning

Material Requirement Planning (MRP) Capacity Requirement Planning

Purchase Planning Production Production & Control

(Supplier Level)
 Demand Management & Strategic
Planning
Demand Management / Planning and Strategic Planning have very close interlinkage and they are often
iterative, with output from one being the input for the other.

First Cut Demand Forecast Revised Demand Forecast

Initial demand
forecast

Forecast after
considering new
product

Q1 Q2 Q3 Q4 Q5 Q6 Q1 Q2 Q3 Q4 Q5 Q6
Product 1 Product 2 Product 1
Strategic plan for Revised
the year decisions post
Strategic Plan – Decisions Revised Strategic Plans demand inputs

Additional Investment Product 1 Additional Investment Product 1

for Product 2 Sale Stops for Product 2 Sale Stops

Q1 Q2 Q3 Q4 Q5 Q6 Q1 Q2 Q3 Q4 Q5 Q6
Sales & Operations Planning
Sales & Operations Planning involves balancing the goals of each function with the constraints unique to each
function. The aim is to arrive at a balanced Plan for the whole organisation.

Goals Constraints Objectives of S&OP

Sales Demand Limit /
Increased Sale
Supply Capacity
Balance Supply Maintain correct
Budget / Demand with Demand inventory levels
Marketing Increased Demand
Limit S

Finance Increased Profit Investment & Translate Financial

Align different
targets into
departments
Supply Skilled Wages & Salary Operational plans
HR O
Manpower Budget

Fulfil Demand
Supplier / Logistics P Proactive planning Monitor
SCM Capacity rather than being performance
reactive against plan
Meet Demanded Manufacturing
Production Products Capacity
 Sync Supply Planning with Resource
Requirement
Supply plan is the output of S&OP andPlanning
it requires inputs from the Resource Requirement Planning of the
Capacity Planning Process. RRP defines the constraints under which the planning is done.

Primary Constraints Stage 1 Stage 2 Stage 3 Stage 4

Manpower
Production

Discuss with
Equipment & Facility Sales, HR,
If Operations Update supply
Compare with Finance, etc. &
had to deliver plan and create
available and determine:
the forecasted monthly
Time sales figures,
budgeted 1. Leeway in resource
resources for lead times
calculate the requirement &
the period and
Supplier Capacity resources 2. Additional budget
identify the gaps
Supply Chain

(constraints) budget requirement

in every
required to available plan for
Logistics resource.
achieve it. approval.
3. Manpower
available
Warehousing
Master Supply Schedule / Master Production Schedule (MPS)

MPS starts with the S&OP Output and breaks it down to more granular levels (weekly). MPS and Inventory
Control determines the precise supply schedules to the customer.
Product Family A Jan Feb Mar Apr

Working Days / Month 22 20 23 21

Approved Production / 16000 18000 17000 20000
Supply Plan from S&OP
Break it Break it
down from down from
product MPS Weeks for Feb Week 1 Week 2 Week 3 Week 4 monthly to
family to Product A1 1000 1000 1000 1000 weekly
individual levels.
Product A2 500 1000 1200 1500
SKU level.
Product A3 1500 1400 900 800
Product A4 1500 1100 1400 1200
Total 4500 4500 4500 4500

MPS is the bridge between production / supply plan and execution of that plan through detailed material &
capacity plans.
 MPS – Inputs & Outputs
The MPS Preliminary
Production plan from Evaluation Reevaluate
Development MPS Revise MPS Publish MPS
S&OP using RCCP using RCCP
development
Process:

Production Inventory Inter- and Service parts

Detailed Time fence Customer
plan from levels & intra-plant orders &
Inputs to MPS: S&OP
forecast
targets
policies order details
orders forecasts
What information is
required before Actual
building the MPS. Distribution Planning bills
production &
requirements of materials
supply levels

Weekly Projected Product

Projected
schedule of inventory availability
MPS Output: production levels
backlog levels
information
What we can expect
after completion of Order
the activity. promising
information
 Supply Planning – Using MPS and
Inventory
For any givenManagement
week, production decision depends on three primary factors:
1. Starting Inventory, 2. Projected & Actual Supply, 3. Minimum Inventory Level Standard

Projected Available Balance

Step 1: Calculate expected and Beginning Inventory Projected Supply
(PAB)
actual inventory level without
considering MPS Actual Supply from
Beginning Inventory Available to Promise (ATP)
Orders

Step 2: Production is required if Beginning Inventory for Next

Week Safety Stock
existing inventory is insufficient,
i.e.
Beginning Inventory for Next Projected Supply for
OR Week Safety Stock
Next Week

Beginning Inventory for Next

OR Actual Order Safety Stock
Week

Beginning inventory for the next week=

• ATP, if no production is planned in this week,
• (ATP + MPS production), if production is planned in this week.
 MPS & Supply Plan in Action
Decide the quantity of production, keeping in mind the following parameters:
• Production size must be in multiples of lot size.
• Production usually has a lead time. If production is required in Week 5 and the lead time is one week, the set-up needs to happen in Week 4. This is
why MPS cannot change very frequently.

Product: A
Minimum Lot Size 25
Production Lead Time (Weeks): 1
Order Lead Time (Weeks): 2
Safety Stock Level: 10
  Week 1 Week 2 Week 3 Week 4 Week 5 Week 6
Starting Inventory (ATP + MPS) 40 23 33 40 18 28
Demand Forecast 15 20 18 22 10 12
Supply Planned 15 20 18 22 10 12
PAB (Starting Inventory – Supply Planned) 25 3 15 18 8 16
 
Actual Customer Orders 17 15 18 22 15 5
ATP (Starting Inventory – Actual Orders) 23 8 15 18 3 23
 
MPS Production 0 25 25 0 25 0
MPS Start (Pre-Production) 25 25 0 25 0 0
Session 3
 Time Fencing – Demand & Planning
In real life, the kind of changes done on the example MPS would not be permitted as it will come within the “Time
Fence”. The two primary approaches to “Time Fencing” are below:

Fixed Duration Time Fence (time based): Variable Duration Time Fence (Activity based):
No changes permitted within certain no. of weeks of MPS. No changes permitted after certain activities are started.

• This is a simple solution, often deployed in places where the products In organisations with more complex product portfolio, fixed
have high level of uniformity. duration fencing is not always feasible. An activity based, two-
• This is also the easiest to communicate across the organisation stage fencing strategy is deployed there.

16-24 • Only Master Planner can change MPS.

<24 weeks 8-16 weeks <8 weeks Planning • Usually this starts when the lead time for
weeks Fencing
the longest lead component starts
• Plan changes • One product • Only • No changes
are permissible. can be configuration expect in
exchanged for changes extenuating Demand • Period when the product assembly /
another. allowed. circumstances. Time manufacturing start
Fence • Almost no changes allowed.

Whatever the approach, “Time Fence” exists to protect the supply plan.
 Planning & Production Strategies
Production strategies determine the steps taken in medium / short term planning, so we should recap the typical
production strategies before we begin. A production strategy is defined by the level of customisation. The more
customised the product, the more is the involvement of the customer.

Make to Stock Assemble to Order Configure to Order Make to Order Engineer to Order

• Standardized Product • Standardized • Modular products • Production starts on • Completely new

components created in whose individual demand creation, which are
• Standardized production
standardized processes components have created for specific
process • Many variants of
multiple variants or customers, although can
• Components brought product components,
• E.g. FMCG (Soap / can be tweaked easily be reused later
together according to including the base
Shampoo), White Goods
customer needs • E.g. Passenger cars platform • E.g. bespoke services like
(Fridge / TV)
that can be ad campaigns, big
• E.g. Computers, Subway • E.g. Aircrafts
customized with projects like buildings
Sandwich
specific features while
keeping the platform
the same
 Supply Planning & Production
Strategies
Clearly, Production & Supply Planning cannot work the same for every Production Strategy.

Make to Stock Assemble to Order Configure to Order Make to Order Engineer to Order

• Production planned • Very similar to Make to • Supply & Production • Production starts on • Unpredictable by
based on stock levels. Stock, but stock levels plans need to demand and long lead definition, this requires
being considered here consider not only the times are expected. very detailed planning.
• When stock levels go
are for the components. production times, but
below minimum • The quantity, delivery • Capacity management &
also the customisation
inventory (safety stock), • Demand forecast for timings and final raw material inventory
/ tweaking timelines.
production is required. final product product mix – all are management are
(independent demand) • Production and known only after order difficult as production
• Usually demands are
is not that steady, but configuration are is received. requirements can come
well understood & MPS
forecast of components usually two distinct with low lead time.
is not frequently • Cost of backlog is
is well understood. steps in the process.
changed. high from the
perspective of losing
business.
 Supply Planning & Production
Strategies
The actual scheduling decisions happen at different stages for different strategies.

Scheduling tries to achieve targets of

Make to Stock Design Procurement Production Delivery finished goods inventory.

Scheduling maintains individual

Assemble to Order Design Procurement Production Delivery component inventory.

Similar to ATO, but more

Configure to Order Design Procurement Production Delivery customisation at production stage.

Scheduling aims to achieve promised

Make to Order Design Procurement Production Delivery production schedule.

Project management more important

Engineer to Order Design Procurement Production Delivery than scheduling.
 Changes to Supply Plans
There’s a saying ascribed to German general Helmuth von Moltke: “No battle plan ever survives contact with the
enemy.” Supply and Production plans also need to evolve to cope with internal & external factors.

Changes in Demand Changes in Supply Changes in Engineering

• Customer’s Schedule changes
without notice.
• Rush orders received.
• Orders are cancelled and
production capacity is idle.
• Specifications change in ATO, CTO,
MTO or ETO cases
• Could not conform to schedule due
to:
• Production Downtime
• Capacity Unavailability
• Manpower Unavailability
• Raw Material Unavailability
• Non-Compliance to published to
desired specifications:
• Resulting in scrap
• Resulting in Lower Quality
• Engineering Changes are often
planned (e.g. enhanced capacity or
new technology). These need to be
built into the MPS.
• Unplanned engineering change:
• Process change due to new
regulatory guideline.
• Process change due to raw
material quality.
• Changes can be immediate or
phased in time.
 Managing Changes to Supply Plans
There are two obvious approaches to manage these changes.
1. Be prepared so that changes are not required. 2. Be prepared to make changes.

Safety Factors: Change Management:

Additional capacity built into the supply plan to reduce impact Processes to tackle changes to MPS when safety factors fail.

Safety Stock: Necessity:

Minimum finished goods / components / raw material Are changes necessary or can it be managed by
inventory that needs to be maintained at all times. modifying expectations?

Safety Capacity:
Capacity that’s left unused for any unplanned production Feasibility:
Is it technically feasible to make the changes?
Safety Lead Times:
Days built into the lead time to account for delays.
Availability:
Volume Hedge: Are enough resources available to make the changes?
Additional few days’ stock built into production plan.

Mix Hedge: Costing:

Same as Volume Hedge, but multiple related items are What are costs & risks? Is not making the changes
costlier than making them?
overplanned on purpose.
 Rough Cut Capacity Planning & MPS
Rough Cut Capacity Planning helps to plan production around possible bottlenecks. There are three methods of
RCCP, with increasing order of complexity.

• Considers overall capacity • Considers production + set-up • In addition to set-up times, it also
requirement only. time at every workcentre / step. considers production lead times.
Capacity
• Total hours required For every component. • Chronological order of operations
vs Total
Planning • For every productBill
hours available forUsing
production of
at every Resource
considered to increase utilisation.
Capacity:
workcentre, required hours Profiles:
Overall
Factors: include production time + set-up
time.

The above-mentioned processes aligns production capacity (i.e. machines & facilities) to MPS, but RCCP also
plans for manpower and raw materials.
Rough Cut Capacity Planning
Approaches
In Capacity Planning using Overall In Bill of Capacity approach, the data is broken down into
Factors, historical data is used to assign component and workcentre level before assigning exact
expected loads. load to each workcentre.

Product A Product A
Total Time / Unit 25 mins Components C1 C2 C3
Total Units Required 100
Historical Capacity break-up
Manufactured in Workcentre 1 2 3
Workcentre 1 20%
Lot size 25 50 50
Workcentre 2 65% Setup time / lot 30 mins 90 mins 40 mins
Workcentre 3 15% Manufacturing Time / Lot 4 hours 4 hours 100 mins
Total Units Required 100 Setup time / unit 1.20 mins 1.80 mins 0.80 mins
Total Time Required 2500 mins Manufacturing Time / unit 14.40 mins 4.80 mins 2.00 mins
Total Time / Unit 15.60 mins 6.60 mins 2.80 mins
Capacity required at each Workcentre
Capacity required at each Workcentre
Workcentre 1 500 mins
Workcentre 1 1560
Workcentre 2 1625 mins Workcentre 2 660
Workcentre 3 375 mins Workcentre 3 280
Session 4
Material Requirement Planning for
Production
While MPS is concerned about the final goods production, MRP goes into more granular level and determines
the exact components that need to be produced / ordered.

Step 1 Check PAB for finished goods and WIP inventory

• Determine weekly Projected Available Balance for every kind of product & finished goods.

Step 2 Calculate net requirement

• Calculate net requirement for each product with the following formula:
Net Requirement = PAB – planned delivery for the week + planned production for the week

Step 3 Determine additional production quantity

• If net requirement is less than the minimum balance inventory (i.e. safety stock), determine production volume
so that it reaches required levels.

Step 4 Plan production

• Plan production according to lead time for product.
Material Requirement Planning for
Procurement
MRP is still the most widely used framework for procurement management. The paradigm remains similar for
procurement.

Step 1 Check PAB for raw material inventory

• Determine weekly Projected Available Balance for each kind of raw material inventory.

Step 2 Calculate net requirement

• Calculate net requirement for each raw material with the following formula:
Net Requirement = PAB – planned consumption for the week + planned receivable for the week

Step 3 Determine order quantity

• If net requirement is less than the minimum balance inventory (i.e. safety stock), determine order quantity so
that it reaches required levels.

Step 4 Order
• Order according to lead time for raw material.
 Capacity Requirement Planning
(CRP)
As we go into shorter time frames and more detailed planning, capacity and production planning start to overlap
and become more difficult to separate.

Rough Cut Capacity Planning Capacity Requirement Planning

Gross Capacity  Net Capacity
Overall  Time Phased
Finished Goods Only  Finished + WIP Goods

Like MRP, CRP is concerned with component level and workcentre level planning.

• CRP for the week = Capacity required for net production for the week for each component at each workcentre.
• Net production = Gross Production – Present inventory (including WIP) + PAB at the end of the week.
• Inputs to CRP = Time-phased production plan from MRP
Production rate at each workcentre
Time-phased purchase plan from MRP
 Production & Control – Shop Floor
Level
At shop floor level, production planning and capacity planning blend together as capacity planning moves
towards feasibility assessment.

Capacity Requirement Planning Finite Capacity Planning

Required Capacity  Available Capacity
Fixed Priority Loading  Prioritised Loading
Idealistic Scheduling  Realistic Scheduling

Finite Capacity Loading provides minute-by-minute actual plan for the available workcentres.

• Finite Capacity loading takes the CRP output & limits it to resource availability so that a balanced output is obtained.
• Resource availability examples: no. hours a machine runs / total man-hours available in a week / raw material storage space.
• An illustrative example of how CRP is moulded into FCP:
NOTES
• Planning and • Planning is always • Granular-level
scheduling are top-down, as planning involves
holistic activities that strategic planning breaking the plan
involve almost all output and demand into smaller time
functions of the forecasts are the segment as well as
organization. starting points product families.

Multi-
Holistic Planning Top-down
dimensional

• At more granular • No planning or

levels, production forecasting is
planning & capacity completely accurate,
planning converge so contingency plans
and merge into one need to be built in.
another.

Convergence Contingency
 Measurement & Evaluation
A robust measurement & evaluation methodology is very important to determine the effectiveness of planning
& scheduling and to improve on them.

The best measure of production planning quality is On Time Delivery to customers, which is the
Production Planning primary responsibility of the planner. Planning efficiency is also measured by cost, inventory levels
and production times. The actual KPIs vary from organization to organization.

Capacity management is a good measure of planners’ effectiveness as inefficiency in planning is very

Capacity Planning
clearly visible here. The following measures help us determine the quality and relevance of planning.

 Capacity Utilization %  Capacity Efficiency %

= =

NOTES:
• Capacity efficiency % target is 100%.
• Design Capacity = Design Capacity is the maximum capacity of a system in a given period under ideal conditions.
• Effective Capacity = The actual maximum capacity of a system (= design capacity – allowances for real life constraints)
Summary
Forecasting & Demand Management
• Translates market information into internally actionable format and provides a starting point to S&OP.

Strategic Planning
• Sets organizational priorities and ensures all stakeholders are working towards a common goal.

Sales & Operations Planning

• Coordinates the actions of different departments and develops a balanced plan.

Master Production Scheduling

• Determines which items to produce, how much to produce and when to produce.

Material Requirement Planning

• Develops detailed production and procurement plan, including what, how much and when.

Capacity Planning
• Involves measuring and adjusting capacity in order to execute the production schedule.