MASTER SCHEDULES

(Expanding the Aggregate Plan)

Master Schedule Plan

We can expand the aggregate plan to give more details, which are shown in a master schedule.

Master Schedule
Aggregate Plan Disagregate
Plan

• Number of individual products

• Completion times of individual products
Master Schedule Plan
The master schedule is derived from the aggregate plan, so the total production given in the master
schedule must equal the production specified in the aggregate plan.

Master Schedule
Aggregate Plans
Plans

• 100 standard outboard motors

• 150 5kW electric motors
• 50 standard electric motors
• 1000 motors being made next month • 150 5 kW electric motors in a week
• .
• .
• .
Master Schedule Plan
Designing Master Schedule (Examp.)
FNT Outdoor Electronics plans to produce 2,400 units in June and 2,000 units in July in one of its
factories. Now they need to design a master schedule for their two main products, a high-powered
amplifier and a stadium display unit. They already have stocks of 140 units of the amplifier and 100
units of the display unit, and the factory has a capacity of 600 units a week. Sales of the amplifier are
normally twice as high as sales of the display units and FNT already have orders for:
Summary

The master schedule disaggregates the aggregate plan to give a detailed timetable for making each
product, typically each a week. Designing a master schedule is similar in principle to designing an
aggregate plan, and similar methods can be used. The subjective decisions and timing mean that
simpler methods are more likely to be used for master schedules.
Importance of Master Schedule Planning
• It is the link between what is expected (production planning) and what is actually to be built, i.e.,
material requirement planning and final assembly Schedule.

• It develops data to drive the detailed planning, MRP. MPS is a priority plan for manufacturing. It
keeps priorities valid.

• It is the basis for calculating the resources available (capacity) and the resources needed (load). It
provides devices to reconcile the customers’ demand and the plant’s capability.

• It makes possible reliable delivery promises. It provides salespeople information on available-to-

promise (ATP) indicating when end products are available. ATP will be discussed later.
Importance of Master Schedule Planning
• It is a tool that can be used to evaluate the effects of schedule changes. It is a device for
communication and a basis to make changes consistent with the demands of the marketplace and
manufacturing capacity.
• It is a contract between marketing and manufacturing departments. It is an agreed-upon plan. It
coordinates plans and actions of all organizational functions and is a basis to measure the functions’
performance.
• It provides management with the means to authorize and control all resources needed to support
integrated plans.
• In the short horizon, MPS serve as the basis for planning material requirement, production of
components, order priorities, and short-term capacity requirements.
• In the long horizon, MPS serves as the basis for estimating long-term demands on the company
resources such as people, equipment, warehousing, and capital.
Data sources for Master Schedule Planning
The data needed to develop an MPS include:
• Customer orders.
• Dealer orders.
• Inventory replenishment orders.
• Forecast for individual end products.
• Interplant requirements.
• Distribution center requirements.
• Inventory levels for end products.
• Safety stock.
• Released production orders for end products.
• Capacity constraints
 Production Control
Systems: Material Requirement
Planning (MRP)
MRP
The production plan may be broken down into several component parts: (1) the master production schedule
(MPS), (2) the materials requirements planning (MRP) system, and (3) the detailed job shop schedule. Each
of these parts can represent a large and complex subsystem of the entire plan.
We may consider the control of the production system to be composed of three major phases.
• Phase 1 is the gathering and coordinating of the information required to develop the master production
schedule.
• Phase 2 is the determination of planned order releases using MRP.
• Phase 3 is the development of detailed shop floor schedules and resource requirements from the MRP planned
order releases
MRP
Main outputs from MRP are:
• timetables to show when materials are needed;
• timetables to show when bought-in materials should be ordered;
• timetables for operations needed to make materials internally.

• Material requirements planning ‘explodes’ the master schedule to plan the supply of materials.
• It gives timetables for making and ordering materials, to make sure that they are available when
needed.
MRP
• MRP needs a lot of information, with three main sources being the master schedule, the bill of
materials and inventory records. We know that the master schedule shows the number of units of a
product to be made in each period, and the inventory records show the current state of the stocks.
The bill of materials, or parts list, is an ordered list of all the materials needed to make a product, and
also the order in which the materials are used.

You will often see bills of materials

simplified into a structured list, and for the
desk we could write:
Level 0
Desk
Level 1
Top (1)
Leg (4)
MRP
For each material:
• Gross requirements = number of units made × amount of material for each unit
• Net requirements = gross requirements − current stock − stock on order
MRP
We can summarize the overall MRP procedure in the following steps:
1. Use the master schedule to find the gross requirements of level 0 items.
2. Subtract any stock on hand and orders arriving to give the net requirements for level 0 items. Then
schedule production, with starting times to meet these net requirements.
3. If there are more levels of materials, use the bill of materials to translate the assembly or orders
from the last level into gross requirements for this level. If there are no more levels go to step 5.
4. Take each material in turn and:
• subtract the stock on hand and scheduled deliveries to find the net requirements, which are the amounts to order;
• use the lead time and any other relevant information to give the timing of these orders;
• go back to step 3.

5. Finalize the timetable for orders and production, adding any specific adjustments.
MRP(Example)
MarkMobil Ltd. assembles supermarket trolleys from a main body and four wheel assemblies. They
make the body themselves from a body kit and two handle kits. The lead times are one week for
assembling trolleys, three weeks for buying wheels, one week for assembling the body, three weeks
for buying the body kit and one week for the handle kit. MarkMobil receive orders for 100 trolleys to
be delivered in week 8 of a production period, and 200 trolleys in week 10. It has stocks of 20
complete trolleys, 110 bodies and 200 wheels, but no body kits (which must be bought in batches of
200) or handles (which must be bought in batches of 400). Design a timetable for production of the
trolleys.
The bill of materials for this problem is shown in Figure;
• The Harmon Music Company produces a variety of wind instruments at its plant in Joliet, Illinois. Because
the company is relatively small, it would like to minimize the amount of money tied up in inventory. For that
reason, production levels are set to match predicted demand as closely as possible. In order to achieve this
goal, the company has adopted an MRP system to determine production quantities.
• One of the instruments produced is the model 85C trumpet. The trumpet retails for $800 and has been a
reasonably, if not spectacularly, profitable item for the company. Based on orders from music stores around
the country, the production manager receives predictions of future demand for about four months into the
future.
Figure 1 shows the trumpet and its various subassemblies. Figure 2 gives the product structure diagram for the
construction of the trumpet. The bell section and the lead pipe and valve sections are welded together in final
assembly. Before the welding, three slide assemblies and three valves are produced and fitted to the valve
casing assembly. The forming and shaping of the bell section requires two weeks, and the forming and shaping
of the lead pipe and valve sections require four weeks. The valves require three weeks to produce, and the
slide assemblies two weeks.
MRP-Example

• The trumpet assembly problem is a three-level MRP system. Level 0 corresponds to the final product or end
item, which is the completed trumpet. Level 1, the child level relative to the trumpet, corresponds to the
bell and valve casing assemblies. Level 2 corresponds to the slide and valve assemblies. The information in
the product structure diagram is often represented as an indented bill of materials (BOM), which is a more
convenient representation for preparation of computer input. The indented BOM for the trumpet is;
1 Trumpet
1 Bell assembly
1 Valve assembly
3 Slide assemblies
3 Valves
MRP-Example

• It takes seven weeks to produce a trumpet. Hence, the company must begin production now on trumpets to
be shipped in seven weeks. For that reason, we will consider only forecasts for demands that are at least
seven weeks into the future. If we label the current week as week 1, then Harmon requires forecasts for the
sales of trumpets for weeks 8 to 17. Suppose that the predicted demands for those weeks are

These forecasts represent the numbers of trumpets that the firm would like to have ready to ship in the specified
weeks. Harmon periodically receives returns from its various suppliers. These are instruments that are defective for
some reason or are damaged in shipping. Once the necessary repairs are completed, the trumpets are returned to
the pool of those ready for shipping. Based on the current and anticipated returns, the company expects the
following schedule of receipts to the inventory:
 MRP-Example

• In addition to the scheduled receipts, the company expects to have 23 trumpets in inventory at the end of
week 7. The MPS for the trumpets is now obtained by netting out the inventory on hand at the end of week
7 and the scheduled receipts, in order to obtain the net predicted demand:

Assuming a lot-for-lot production rule, we obtain the following MRP calculations for the bell assembly:
MRP-Example

• Lot for lot means that the production quantity each week is just the time-phased net requirement. A lot-for-
lot production rule means that no inventory is carried from one period to another. As we will see later, lot for
lot is rarely an optimal production rule.
• The calculation is essentially the same for the valve casing assembly, except that the production lead time is
four weeks rather than two weeks. The calculations for the valve casing assembly are;
MRP-Example

• Now consider the MRP calculations for the valves. Let us assume that the company expects an on-hand
inventory of 186 valves at the end of week 3 and a receipt from an outside supplier of 96 valves at the start
of week 5. There are three valves required for each trumpet. (Note that the valves are not identical, and
hence are not interchangeable. We could display three separate sets of MRP calculations, but this is
unnecessary because each trumpet has exactly one valve of each type.) One obtains gross requirements for
the valves by multiplying the production schedule for the valve casing assembly by 3. Net requirements are
obtained by subtracting on-hand inventory and scheduled receipts. The MRP calculations for the valves are
MRP-Example

• Net requirements are obtained by subtracting on-hand inventory and scheduled receipts from gross
requirements. Because the on-hand inventory of 186 in period 3 exceeds the gross requirement in period 4,
the net requirements for period 4 are 0. The remaining 60 units (186-126) are carried into period 5. In period
5 the scheduled receipt of 96 is added to the starting inventory of 60 to give 156 units. The gross
requirements for period 5 are 126, so the net requirements for period 5 are 0, and the additional 30 units
are carried over to period 6. Hence, the resulting net requirements for period 6 are 96-30= 66.
ALTERNATIVE LOT-SIZING SCHEMES

• In the above examples, we assumed that the production scheduling rule was lot for lot. That is, the number of
units scheduled for production each period was the same as the net requirements for that period. In fact, this
policy is assumed for convenience and ease of use only. It is, in general, not optimal.
• The problem of finding the best (or near best) production plan can be characterized as follows: we have a
known set of time-varying demands and costs of setup and holding. What production quantities will minimize
the total holding and setup costs over the planning horizon?
• Therefore, we will discuss several popular heuristic (i.e., approximate) lot-sizing methods that easily can be
incorporated into the MRP calculus.
EOQ Lot Sizing-Example

• To apply the EOQ formula, we need three inputs: the average demand rate, ; the holding cost rate, h; and the
setup cost,K. Consider the valve casing assembly in Example 8.1. Suppose that the setup operation for the
machinery used in this assembly operation takes two workers about three hours. The workers average $22 per
hour. That translates to a setup cost of (22)(2)(3)$132.

• The company uses a holding cost based on a 22 percent annual interest rate. Each valve casing assembly costs
the company $141.82 in materials and value added for labor. Hence, the holding cost amounts to
(141.82)(0.22)52 $0.60 per valve casing assembly per week.

• The planned order release resulting from a lot-for-lot policy requires production in each week. Consider the
total holding and setup cost incurred from weeks 6 through 15 when using this policy. If we adopt the
convention that the holding cost is charged against the inventory each week, then the total holding cost over
the 10-week horizon is zero. As there is one setup incurred each week, the total setup cost incurred over the
planning horizon is (132)(10) $1,320.
EOQ Lot Sizing-Example

• This cost can be reduced significantly by producing larger amounts less often. As a “first cut” we can use the
EOQ formula to determine an alternative production policy. The total of the time-phased net requirements
over weeks 8 through 17 is 439, for an average of 43.9 per week. Using 43.9, h 0.60, and K 132, the EOQ
formula gives;
 EOQ Lot Sizing-Example

• If we schedule the production in lot sizes of 139 while guaranteeing that all net requirements are filled, the
resulting MRP calculations for the valve casing assembly are;

One finds the ending inventory each period from the formula
Ending Inventory= Beginning Inventory –Planned Deliveries- Net Requirements.
EOQ Lot Sizing-Example

Consider the cost of using EOQ lot sizing rather than lot for lot. During periods 8 through 17 there are a total of
four setups, resulting in a total setup cost of (132)(4) $528. The most direct way to compute the holding cost is
to simply accumulate the ending inventories for the 10 periods and multiply by h. The cumulative ending
inventory is 97+55+23+. . . +117=653. Hence, the total holding cost incurred over the 10 periods is (0.6)(653)
$391.80. The total holding and setup cost when lot sizes are computed from the EOQ formula is
$528+$391.80=$919.80. This is a considerable improvement over the cost of $1,320 obtained when using lot-
for-lot production scheduling. (However, this savings does not consider the cost impact that lot sizing at this
level may have upon lower levels in the product tree. It is possible, though unlikely, that in a global sense lot for
lot could be more cost effective than EOQ. This point will be explored in more depth in Section 8.5.) Note that
the use of the EOQ to set production quantities results in an entirely different pattern of gross requirements for
the valve and slide assemblies one level down. In particular, the gross requirements for the valves are now
The Silver–Meal Heuristic

The Silver–Meal heuristic (named for Harlan Meal and Edward Silver) is a forward method that requires
determining the average cost per period as a function of the number of periods the current order is to span and
stopping the computation when this function first increases.
Define C(T) as the average holding and setup cost per period if the current order spans the next T periods. As
above, let (r1, . . . , rn) be the requirements over the n-period horizon. Consider period 1. If we produce just
enough in period 1 to meet the demand in period 1, then we just incur the order cost K. Hence,
C(1) =K.
If we order enough in period 1 to satisfy the demand in both periods 1 and 2, then we must hold r2 for one
period. Hence,
C(2)=(K +hr2)/2.
Similarly,
C(3)=(K +hr2+2hr3)/3
The Silver–Meal Heuristic

In general,
• C( j) =(K+hr2 +2hr3 . . . + ( j-1)hrj)/j.
• Once C( j) > C( j -1), we stop and set y1 = r1 + r2 + . . . +rj-1, and begin the process again starting at period j.

Example : A machine shop uses the Silver–Meal heuristic to schedule production lot sizes for computer casings.
Over the next five weeks the demands for the casings are r = (18, 30, 42, 5, 20). The holding cost is $2 per case
per week, and the production setup cost is $80. Find the recommended lot sizing.
 Least Unit Cost-Lot Sizing

The least unit cost (LUC) heuristic is similar to the Silver–Meal method except that instead of dividing the cost
over j periods by the number of periods, j, we divide it by the total number of units demanded through period j,
r1+r2+ . . . +rj. We choose the order horizon that minimizes the cost per unit of demand rather than the cost per
period.
• Define C(T) as the average holding and setup cost per unit for a T-period order horizon. Then,

As with the Silver–Meal heuristic, this computation is stopped when C(j) >C(j -1), and the production level is set equal to r1+
r2+ . . . + rj-1. The process is then repeated, starting at period j and continuing until the end of the planning horizon
is reached.
 Example : A machine shop uses the Silver–Meal heuristic to schedule production lot sizes for computer casings.
Over the next five weeks the demands for the casings are r = (18, 30, 42, 5, 20). The holding cost is $2 per case
per week, and the production setup cost is $80. Find the recommended lot sizing.

As we have reached the end of the horizon, we set y4=r4+r5= 5+20 =25. The solution obtained by the LUC heuristic is y=
(48, 0, 42, 25, 0). It is interesting to note that the policy obtained by this method is different from that for the Silver–
Meal heuristic. It turns out that the Silver–Meal method gives the optimal policy, with cost $310, whereas the LUC gives
a suboptimal policy, with cost $340.
 Part-Period Balancing

Another approximate method for solving this problem is part period balancing. Although the Silver–Meal technique
seems to give better results in a greater number of cases, part period balancing seems to be more popular in practice.
The method is to set the order horizon equal to the number of periods that most closely matches the total holding
cost with the setup cost over that period. The order horizon that exactly equates holding and setup costs will rarely
be an integer number of periods (hence the origin of the name of the method).
Example : A machine shop uses the Silver–Meal heuristic to schedule production lot sizes for computer casings.
Over the next five weeks the demands for the casings are r = (18, 30, 42, 5, 20). The holding cost is $2 per case per
week, and the production setup cost is $80. Find the recommended lot sizing.

Because 228 exceeds the setup cost of 80, we stop. As 80 is closer to 60 than to 228, the first order horizon is
two periods. That is, y1 =r1 +r2 =18 +30 =48. We start the process again in period 3.
 Part-Period Balancing

We have exceeded the setup costs of 80, so we stop. Because 90 is closer to 80 than is 10, the order horizon is three
periods. Hence y3 =r3 +r4 +r5 =67. The complete part period balancing solution is y =(48, 0, 67, 0, 0), which is different
from both the Silver–Meal and LUC solutions. This solution is optimal, as it also has a total cost of $310.