Master Scheduling And Rough Cut Capacity Planning PDF

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Operations Management
An Integrated Approach byR. Dan Reid
Nada R. Sanders...

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Master Scheduling and Rough-Cut Capacity Planning

W

hen planning your social and work-related activities for the upcoming semester, you use the same logic that is used in developing a master

schedule and doing rough-cut capacity planning. You have a schedule of activities to do (the master production schedule), and you check to see whether you actually have the resources to do those activities (rough-cut capacity planning). Social activities could include sporting events, concerts, the movies, clubbing, dinners out, club meetings, shopping, family commitments, and/or just hanging out. You have work-related activities as well, such as classes, homework, an outside job, and/or group projects. Each of these activities requires some of your resources. At the very least, you must reserve time to do the activity. In some cases, you must also set aside some cash. Unfortunately, almost everyone has limited resources. The same is true for companies. You develop a list of the activities that you plan to do, estimate the resources required, and then determine whether your proposed list is feasible. Companies do the same thing: they develop a master production schedule, and then rough-cut capacity planning determines whether the schedule is feasible.

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D Before studying this supplement you should know or, if necessary, review 1. Capacity management concepts, Chapter 9. 2. Work standards, Chapter 11. 3. Relevant inventory costs, Chapter 12. 4. Order quantity models, Chapter 12. 5. Aggregate planning, Chapter 13.

Learning Objectives After studying this supplement you should be able to 1 Explain the role of the master

production schedule and describe the objectives of master production scheduling. 2 Develop a master production

schedule and project the capacity needed using roughcut capacity planning. 3 Calculate available-to-promise

quantities. 4 Describe time fence policies.

D1

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D2 SUPPLEMENT D • Master Scheduling and Rough-Cut Capacity Planning

Master Production Scheduling

Master production schedule (MPS) The anticipated production schedule for the company expressed in specific configurations, quantities, and dates. Master scheduler The person responsible for managing, developing, reviewing, and maintaining the master schedule.

Your company’s aggregate plan specifies the resources authorized for use by the company’s operations group. These resources include the size of the workforce, level of inventory held, number of planned shortages, authorized level of overtime and undertime, aggregate number of units or services to be produced in-house, and number of units or services to be subcontracted. The master production schedule (MPS) is often stated in product or service specifications rather than dollars. It shows how many products or services are planned for each time period, based on the resources authorized in the aggregate plan. In manufacturing, the master scheduler develops the schedule based on the available capacity. In service companies, the office manager, department manager, or assistant manager might develop the schedule. The MPS is the anticipated build schedule for manufacturing specific end products or providing specific services. The key distinction here is that the MPS is a statement of production or services and is not a statement of demand—a plan to satisfy customer demand while considering operational effectiveness and cost. Because of this, individual products can be finished ahead of time and held in inventory rather than finished as needed. The master scheduler or office manager balances customer service and capacity usage. The aggregate plan shows how many products or services are planned for each time period. The MPS identifies the specific products or services planned for a given time period. Let’s look at an example of how an aggregate plan is linked to the MPS. Although this example involves manufacturing, think about how an MPS might look in a service operation such as a law firm. The firm knows how many hours of staff time are available (resources) and its current case load (demands). It must now decide how best to use the attorneys and law clerks each period to satisfy the corporate objectives. EXAMPLE D.1 Developing the MPS at Amber’s Backpack Company Amber’s Backpack Company (ABC) produces three models of backpacks: the basic backpack, the urban backpack, and the evening backpack. Each model needs the same amount of production time. ABC’s aggregate production rate is 400 backpacks per week. A possible MPS for ABC is shown here.

Week Basic backpack

1

Urban backpack

3

4

400

400

250

Evening backpack Total

2

400

400

6

7

400

400

250

150 400

5

250

150 400

400

400

8

150 400

400

400

The aggregate plan states that ABC should produce 400 units each week. The MPS shows the models and quantities that constitute the 400 units to be produced each week of the schedule.

MPS as a Basis of Communication MKT

The MPS is a basis for communication between operations and other functional areas. It is stated in product or service specifications rather than dollars. Your company uses an effective MPS in making customer delivery promises, using company capacity wisely, achieving the company’s objectives, and making trade-off decisions between marketing and operations. Figure D.1 shows the connections between the master scheduling role and other

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Master Production Scheduling •

D3

FIGURE D.1 Master production schedule linkages Production plan

Rough-cut capacity planning

Demand management

Master production schedule

Material requirements planning

parts of the planning process. Let’s examine these connections, beginning with demand management. Demand management includes a company’s forecasting, order-entry, order-promis- Demand management ing, and physical distribution activities. Demand management captures all activities that The function of recognizing use capacity. These demands can be customer orders for products or services, a forecast all demands for goods and services to support the of demand for products and services, interplant requirements, service parts requirements, marketplace. and/or distribution requirements. If a demand is excluded, it will not be scheduled for completion. Communications between the master scheduler and demand management are ongoing. The production or aggregate plan supports the marketing plan. The master scheduler must work within the authorized resources of the plan. The process for developing an MPS is as follows: 1. The master scheduler develops a proposed MPS. 2. T he master scheduler uses a rough-cut capacity planning technique to calculate whether the company has the capacity to meet the proposed MPS. 3. If the proposed MPS is feasible, it is evaluated by the master scheduler in terms of customer service, effective use of resources, and inventory investment. 4. If the proposed MPS is accepted, it becomes the authorized MPS. If capacity is insufficient, either the MPS is modified or capacity is expanded. The authorized MPS is a critical input into the material requirements planning Material requirements (MRP) system. The MPS tells the MRP system what the company plans to build and planning (MRP) when. The MRP system then calculates the materials needed to build the products in the A system that uses the MPS, inventory record data, and schedule and plans for the necessary materials. (MRP systems are discussed in depth in BOM to calculate material Chapter 14.) requirements.

Objectives of Master Scheduling The master scheduler considers the following objectives when developing the MPS: 1. Achieve the desired customer service level either by maintaining finished goods inventory or by scheduling completion of the item or service to meet the customer’s delivery needs. 2. Make the best use of the company’s resources: material, labor, and equipment. 3. Ensure that the inventory investment is at the appropriate level.

MKT

ACC

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D4 SUPPLEMENT D • Master Scheduling and Rough-Cut Capacity Planning To meet these objectives, the master schedule must satisfy customer demand, not exceed operations’ capacity, and work within the constraints of the aggregate plan. Let’s look at how to develop an MPS.

Developing an MPS The master scheduler develops a proposed MPS, checks the schedule for feasibility in terms of available capacity, modifies as needed, and authorizes the MPS. The master scheduler starts by creating, revising, and finishing an MPS record for each product. The master scheduler uses the finished MPS records to develop a proposed master production schedule, which he or she then checks for feasibility with a rough-cut capacity planning technique. Consider the following examples of an MPS record for a product built in a make-to-stock environment with inventory held. The product is built in a fixed-order quantity of 125 units, and there are 110 units in beginning inventory. Table D.1 is an initial MPS record showing the demand forecasts for the next 12 weeks. The top row of the record shows the time periods (weeks, in our example); the forecast row shows the forecasted demand for the product. The projected available quantity row keeps track of how many units are available at the end of each time period. The MPS row shows when replenishment shipments need to arrive. MPS shipments arrive at the beginning of the time period. To calculate the projected available quantity, we use the following formula: Projected available = beginning inventory + MPS shipment − forecasted demand Period 1 To calculate the projected available quantity at the end of period 1, we take the beginning inventory (110 units), add any MPS shipments arriving that period (0 units), and subtract the forecasted demand for the period (50 units). This leaves the projected available quantity at the end of period 1, or (110 + 0) – 50 = 60 units projected available quantity. Period 2 The beginning inventory in period 2 is 60 units, no MPS shipment is scheduled, and the forecast is 50 units. Therefore, the projected available quantity at the end of period 2 is 10 units. Period 3 In period 3, we have 10 units beginning inventory, no MPS quantity, a forecast of 50 units, and a projected available quantity of –40 units; that is, we do not have enough of this product available to satisfy the forecasted demand in period 3. Thus we need to plan an MPS shipment to arrive at the beginning of period 3. We calculate the size of the replenishment order by the order quantity rule—in our case, a fixed-order quantity of 125 units. Table D.2 shows the revised MPS record with an MPS quantity of 125 units scheduled to arrive in period 3. We continue to calculate the projected available quantity until we find the next period in which the projected available quantity is negative, which is period 5. Therefore, we need to schedule another MPS replenishment for delivery at the start of period 5. At that point, we add another MPS shipment and continue forward. Table D.3 presents the completed MPS TABLE D.1

First MPS Record

Week

1

2

3

4

5

6

7

8

9

10

11

12

Forecast

50

50

50

50

75

75

75

75

50

50

50

50

Projected available

60

10

−40

0

0

0

0

0

0

0

0

0

0

0

0

MPS

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Developing an MPS •

TABLE D.2

First Revised MPS Record

Week

1

2

3

4

5

6

7

8

9

10

11

12

Forecast

50

50

50

50

75

75

75

75

50

50

50

50

Projected available

60

10

85

35

−40

0

0

125

0

0

0

0

0

0

0

0

0

12

MPS

TABLE D.3 Week

Completed MPS Record

1

2

3

4

5

6

7

8

9

10

11

Forecast

50

50

50

50

75

75

75

75

50

50

50

50

Projected available

60

10

85

35

85

10

60

110

60

10

85

35

0

0

125

0

125

0

125

125

0

0

125

0

MPS

D5

record, which shows replenishment orders needed in periods 3, 5, 7, 8, and 11. Each MPS quantity is determined using the given order quantity rule (125 units).

Rough-Cut Capacity Planning Rough-cut capacity planning (RCCP) calculates a rough estimate of the workload placed on critical resources by the proposed MPS. This workload is compared against demonstrated capacity for each critical resource. This comparison enables the master scheduler to develop a feasible MPS. Among the several approaches to rough-cut capacity planning is capacity planning using overall planning factors (CPOPF). Capacity planning using overall planning factors (CPOPF) is a simple, rough-cut capacity planning technique. CPOPF develops a planning factor for each critical resource based on historical data. A planning factor shows how much of a resource is needed for one completed unit. Table D-4 shows the procedure for using CPOPF. Next, we will work through an example using the procedure. TABLE D.4

Procedure for CPOPF

1. Determine the appropriate planning factors using historical data. 2. Multiply the MPS quantities by the appropriate planning factor. 3. Sum capacity requirements for each resource by time period. 4. Allocate capacity requirements to individual work centers based on historical percentages. 5. Evaluate the workload at each resource to validate MPS feasibility.

EXAMPLE D.2 CPOPF at Heavenly Ballroom Shoes Heavenly Ballroom Shoes, Inc. (HBS) produces two models of ballroom dance shoes. One model is for men (Model M) and the other is for women (Model W). Charles, the master scheduler, has accumulated the following historical data. During the past three years, HBS has produced 72,000 pairs of Model M, using 21,600 hours of direct labor and 5760 machine hours. During that same period, HBS produced 108,000 pairs of Model W, using 43,200 hours of direct labor and 12,960 hours of machine time.

Rough-cut capacity planning (RCCP) The process of converting the master production schedule into requirements for key resources such as direct labor and machine time. Demonstrated capacity Proven capacity calculated from actual performance data. Capacity planning using overall planning factors (CPOPF) A rough-cut capacity planning technique. MPS items are multiplied by historically determined planning factors for key resources.

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D6 SUPPLEMENT D • Master Scheduling and Rough-Cut Capacity Planning • Before You Begin: To implement capacity planning using overall planning factors (CPOPF), planning factors are needed. In this case, we have two products, Model M and Model W. Each product requires both direct labor and machine time. We have historical data to determine, on average, how much of each resource has been used in the past to build these products. After developing the planning factors, determine how much capacity is needed to satisfy a specific proposed master production schedule. That is, if you know how many Model M’s you plan to produce and you know how much direct labor each Model M takes on average, you can calculate the total amount of direct labor needed to build the Model M’s for a particular period. You do the same thing for Model W’s. Then do this for all periods in your plan. Summing these requirements will give you the total amount of direct labor and machine hours you need to build the units in the proposed master production schedule. These data can be further broken down by individual work centers based on historical data.

Step 1 Determine the planning factors. Charles uses two resources, direct labor and machine time, for each of the products. He needs four planning factors: direct labor for Model M, machine time for Model M, direct labor for Model W, and machine time for Model W. Using the historical data, Charles computes the planning factors as follows: Planning factor for direct labor =

total direct labor spent building model number of units of model built

For Model M, this translates to 21,600 hours of direct labor 72,000 pairs

Planning factor for direct labor =

The planning factor for direct labor for Model M is 0.30 hour. That means he allows for 0.30 hour of direct labor for each pair of Model M shoes. To calculate the planning factor for machine time for Model M, Charles substitutes total machine hours spent building Model M into the numerator as shown. Planning factor for machine time =

total machine hours spent building model number of units of mode...