The master production schedule is a production planning tool that defines how much of a product needs to be manufactured at different periods. This simple schedule can be used as a basis for further planning and scheduling throughout the business.
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What is a Master Production Schedule (MPS)?
Master Production Schedule (MPS) is the part of production planning that outlines which products need to be manufactured, in which quantity, and when. A master production schedule does not usually go into detail regarding the materials to be used in production, employees assigned to tasks, etc. Rather, it is like a contract between the sales department and the manufacturing department that balances supply and demand by defining the necessary quantities to produce and the timeframes of production.
The Master Production Schedule is a vital tool in Make-to-Stock manufacturing environments where a demand forecast drives production planning. As an MPS is often used as the main driver of production activity, it needs to be accurate and viable for it to have a positive effect on the profitability of a business.
The MPS can also be used in certain Make-to-Order environments and mixed-mode manufacturing where a business manufactures standard products. In this case, the sales forecast and master production schedule are used to plan the inventory needed for production.
A standard master production schedule is a long-term plan made for each product separately. It is done with a planning horizon of 3 months to 2 years, with a minimum time bucket (smallest timeframe specified) of 1 week.
The basic inputs you need to create a viable master production schedule are the following:
1. Starting inventory. How many units are already available in stock?
2. Sales forecast. How many orders are expected for the period?
3. Current order portfolio. How many orders are already planned for the period?
4. Quantity to produce. How many units need to be produced during the period to keep supply and demand in balance?
Let’s say you produce wooden furniture such as chairs, dining tables, and coffee tables.
At the start of the period, you have 40 chairs in stock. Your sales forecast says that you will sell 200 of them. That means you will need to produce 160 chairs during that period in order to match the demand.
As a consequence, the beginning inventory of your next period will be 0. As business is steady, another 200 chair sales are forecasted. This means that now you will need to produce 200 chairs within a period in order to match demand.
Master Production Schedule and Safety Stock
Unless you have absolutely perfected the Just-in-Time manufacturing model, you would always want to keep a certain amount of units for backup in case there is an unforeseeable spike in demand. That is why we can complement the master production schedule with:
5. Safety stock. How many units do you want to keep in inventory in case there are spikes in demand?
In the master production schedule, safety stock will be expressed as part of the period’s ending inventory that will be transferred to the next period as beginning inventory.
Now, continuing with the previous example let’s say that you always want to keep 40 chairs as safety stock. Therefore, 160 chairs will not be enough to meet demand and replenish your safety stock during the first period. This means that you will need to produce 200 chairs altogether to satisfy your customers and maintain the required buffer.
Learn more about Safety Stock and How to Calculate It.
Master Production Schedule and Rough-Cut Capacity Planning
When planning production, you always need to keep in mind how much exactly you are able to produce in a given period. If you take in orders that require you to produce a thousand chairs in a month, but you only have the means to produce 500, you will let down your customers and your company. That is why you would always want to account for:
6. Production capacity. How many products would you be able to produce during the period, given that everything is running smoothly?
Rough-cut capacity planning is an important tool to use alongside the master production schedule. To calculate your production capacity, you will need to know your products’ throughput time and the total productive hours of your shop floor.
Once you have created your initial master production schedule, you can test its viability by creating a rough-cut capacity plan according to the MPS. If the capacity plan shows that your production capacity cannot accommodate the production levels in any period set in the MPS, you will need to find ways to increase capacity or modify the MPS.
Master production scheduling and rough-cut capacity planning is a back-and-forth process. That means any change in either of them requires reviewing the other.
Learn more about Production Capacity and Rough-Cut Capacity Planning.
Additional considerations regarding MPS
Master Production Schedule freezing
Freezing the MPS means locking the first couple of periods a certain amount of time, e.g. a week or two, before production according to the schedule starts. This is done to prevent last-minute changes that create confusion and bottlenecks that slow down production and, ultimately, ruin your plans.
Available to Promise
Available to promise is the number of units that you can additionally promise to deliver to customers (as firm orders) in the period at hand. It is calculated according to the master production schedule. It takes into account all the firm orders and the planned quantities across the MPS horizon. ATP plays an important role in supply chain management.
When drawing up a master production schedule, you should always consider your batch sizes, i.e. how many products do you make in one run. That will determine the step of your quantities. For example, if you manufacture in batches of 25 products then your quantity to produce cannot be 240, it needs to be 250 or 225.
The MPS is a great tool for planning and preparing early for surges in demand. However, there are physical and practical limitations to the quantities you can store in stock. Even if you had the production capacity, it may not be possible to utilize it if your stock is full. Or beyond a certain inventory level, too much cash may be tied up in inventory.
Benefits of a Master Production Schedule
There are multiple benefits to introducing an MPS in a manufacturing business:
- It provides a solid base for building, improving, and tracking the sales forecast.
- It provides a solid base for determining the desired inventory levels.
- It provides a solid base for calculating the quantities of parts, subcomponents, or raw materials to purchase or produce, as part of the next stage of Material Requirements Planning.
- It provides a solid base for calculating the required amount of labor and shifts.
- It allows for optimizing the installed capacity and balancing the load of the plant.
- The manufacturing department can estimate the production and maintenance costs associated with the workstations.
- The financial department of the company can derive expected revenues and expenses from the MPS and generate a cash flow forecast. Among other benefits, this will help build investment plans.
- The HR department can take advantage of the MPS to anticipate the requirements of hiring labor.
The MPS should reflect the business plan as closely as possible. This requires a constant update by all departments of the company.
For example, if the marketing department plans a sales promotion, the increase in demand must be reflected in the MPS and the forecast. If the sales team discourages the sale of a product line in favor of another new one, the MPS and the forecast need to be adjusted.
Master Production Schedule vs. Manufacturing Resource Planning
The master production schedule is one of the jumping-off points for manufacturing resource planning (MRP II). Apart from the MPS, however, MRP II uses additional inputs such as inventory statuses, BOMs, routings, material requirements and costs, financial records, staffing and machine capacity, etc. This allows the MRP II system to create a highly detailed plan for all of the different resources related to production and provide you with a real-time overview of your business.
Unlike creating a master production schedule, the complexity of manufacturing resource planning makes it impossible to do manually. Today, there are many different software providers offering MRP systems, but many of them have grown out of accounting or inventory management software and are limited in their manufacturing resource planning capabilities. Using proper MRP software, however, is becoming more and more important when it comes to staying competitive in the manufacturing business.
- A Master Production Schedule (MPS) outlines which products need to be manufactured, in which quantity, and when.
- It is a vital tool in make-to-stock manufacturing environments where a demand forecast drives production planning.
- A standard master production schedule is a long-term plan made for each product separately. It is done with a planning horizon of 3 months to 2 years, with a minimum time bucket of 1 week.
- The inputs a viable master production schedule has are: starting inventory, sales forecast, current order portfolio, quantity to produce, safety stock, production capacity.
- When creating an MPS, you can also consider your batch criteria, Available to Promise, and maximum inventory.
- MPS freezing is necessary to lock parts of the schedule in place a certain amount of time before the schedule is taken into use. This helps to avoid confusion caused by last-minute changes.
- The MPS benefits any further planning done in the company, be it related to finances, inventory, HR, or production itself.
- Manufacturing Resource Planning software is a huge advancement from the manual MPS process. It uses an array of different inputs to create detailed plans and provide a real-time overview of the whole business.
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