Logistics and Supply

Chain Management

Lecture 30

Production Planning Methods

Session Objective
At the end of this session, you will be able
to:
■ Recognize and Understand the following:

■ Master Production Scheduling (MPS)

■ Material Requirements Planning (MRP)

■ Capacity Requirements Planning (CRP)

■ Finite and Infinite Capacity Planning

 Are you aware of master
production scheduling (MPS)
in supply chain management?
Master Production Schedule (MPS)

It is responsible for specifying the products

to be manufactured, their production timing,
and the quantities to be produced.

To determine the necessary raw materials

for production, the MPS utilizes data from
the finished goods Bill of Materials (BOM),
which is then integrated with the current
inventory data to generate the Material
Requirements Planning (MRP) for the
procurement of raw materials.
Master Production Schedule (MPS)

The MPS serves as the cornerstone of

communication between the sales and
manufacturing departments.

Essentially, the MPS functions as a

contractual agreement between sales and
production, enabling sales to commit to
deliverables that production can feasibly
meet.

Importantly, the Master Production

Schedule is a flexible and adaptable plan
that can be modified in response to shifts in
demand or changes in production capacity.
Role of Master Production Scheduling
Role of Master Production Scheduling

Master production scheduling software assists in creating a comprehensive plan to

achieve the following aims:

▪ Maintaining the seamless flow of production

▪ Minimizing product lead times
▪ Enhancing internal communication within your organization
▪ Establishing and adhering to production priorities
▪ Developing a coherent manufacturing plan
▪ Attaining desired customer service levels
▪ Optimizing resource utilization. Sustaining an appropriate level of inventory
 Components of a
Master Production Schedule
Product Inventory
This includes a comprehensive listing of all the
products in your manufacturing portfolio, with
an emphasis on the most frequently ordered
items, which should be prioritized.
Sub-Product Categories
Within the product list, account for specific
product variations or Stock Keeping Units
(SKUs).

For instance, if you produce chairs, categorize

them by stain color, leg type, fabric, and other
distinguishing factors.
Timeframes
The schedule should be divided into months
and weeks, allowing for planning several
months ahead and periodic reviews for
adjustments.

Flexibility is crucial in case of alterations in

demand before the scheduled timeframe.
Production Volumes
Determine the raw material requirements
based on the quantities of each product type,
including variations or SKUs.

This calculation is fundamental for effective

production planning.
Now, let us learn about material
requirements planning (MRP) in
supply chain management
Material Requirements Planning (MRP)

It is a comprehensive system employed for

the strategic planning and control of
resources and inventory required in the
production of goods.

It effectively manages all stages of

production, encompassing the procurement
of raw materials to the distribution of final
products.
Material Requirements Planning (MRP)

In supply chain management, the role of

MRP entails a nuanced approach, as it
necessitates the consideration of the
company's supply chain collaborators.

This entails a thorough evaluation of both

upstream and downstream processes in the
supply chain.
Material Requirements Planning (MRP)

Therefore, beyond its core functions of

inventory management and production
scheduling, an MRP system must possess
the capability to monitor supplier
performance and delivery timelines.

Such data is indispensable for ensuring

timely material deliveries and the seamless
execution of production plans.
MRP Steps and Processes
1 Determining Demand Requirements

The initial phase of the MRP process entails recognizing customer demand and the
essential prerequisites to fulfill it. This commences with the input of customer orders
and sales projections.

MRP dissects this demand by utilizing the bill of materials necessary for production. It
breaks down the demand into individual components, raw materials, and, if applicable,
required sub-assemblies.
2 Inventory Assessment and Resource Allocation

Through MRP, a comprehensive assessment of demand is performed in relation to

available inventory.

Resources are allocated accordingly, offering insights into the existing stock and its
whereabouts.

This is particularly vital for businesses managing inventory across multiple locations.
2 Inventory Assessment and Resource Allocation Cont’d

It also provides visibility into the status of items, identifying those already assigned to
other production processes, as well as items that are either in transit or on order but
not yet physically in the warehouse.

The MRP system facilitates the relocation of inventory to its appropriate locations
and generates suggestions for reorders.
3 Production Scheduling

The MRP system relies on the master production schedule to ascertain the time and
labor requirements for each step of the production process.

It determines when each step should occur to ensure a seamless production flow
without delays.
3 Production Scheduling Cont’d

The production schedule also outlines the machinery and workstations needed for
each phase, and it generates the corresponding work orders, purchase orders, and
transfer orders.

In cases involving subassemblies, the system accounts for the time required for each
subassembly and schedules them accordingly.
4 Issue Identification and Recommendations

In the final step, the MRP system links raw materials to work orders and customer
orders, enabling automatic notifications to your team in case of delays.

It also offers recommendations for existing orders, such as the automatic adjustment
of production schedules, conducting what-if analyses, and devising exception plans
to meet the necessary production requirements.
Moving on, let us discuss capacity
requirements planning (CRP) in
supply chain management
Capacity Requirements Planning

Capacity Requirements Planning, often

abbreviated as CRP or capacity planning,
is the procedure of evaluating whether a
company's production capacity aligns
with its production objectives.

The CRP system begins by scrutinizing

the company's intended manufacturing
schedule.

Subsequently, it assesses whether the

actual production schedule is in harmony
with the available capacity.
Let us see an example of
capacity requirements
planning (CRP)
Example
Imagine you are a retailer gearing up for the
fast-approaching holiday festivities. You're
tasked with swiftly devising a plan based on
the demand patterns, which entails
considering various crucial factors.

The initial step involves evaluating past

season sales and comparing them to the
current market demand. Upon analyzing
these trends, the next move is to engage
with suppliers to secure the necessary
resources required to meet the heightened
demand.
Example
Given the holiday season's unique demands,
a comprehensive assessment of the labor
force is essential. It's common practice to
bring in seasonal workers to handle the
increased workload during this period.

In the concluding step, meticulous tracking

of items sold and products warehoused
assumes great importance. Precise tracking
facilitates a deeper understanding of
demand patterns and ensures that products
are replenished before running out of stock.
When conducting capacity requirements planning, it's
imperative to adhere to the following sequential steps
1. Assess Existing Capacity

In this initial phase, a comprehensive

examination of several critical aspects is
essential.

This includes gathering data related to time

studies and real-time information on equipment
capabilities.

It involves considering variables such as the

number of operational hours, available shifts,
factors such as absenteeism, and supply chain
elements such as vendor performance, lead
times, and inventory data.
2. Formulate a Robust Demand Plan

The formulation of a demand plan holds pivotal

significance in capacity planning.

Leveraging supply chain management software

proves invaluable as it facilitates the
acquisition of precise data, enabling aggregate
demand planning.

This data-driven approach calculates work

center capacity, proactively identifies potential
bottlenecks, conducts scenario analysis,
master scheduling, and other essential
functions.
3. Determine Capacity Adjustment Requirements

The insights gleaned from the first two steps

provide a clear grasp of both existing capacity
and demand.

This phase empowers decision-makers to make

necessary adjustments based on demand
determinations.

Evaluations may involve considerations such as

the need for additional shifts or overtime.
Furthermore, it entails analyzing specific
production components for potential
outsourcing.

If consistent demand patterns emerge,

contemplating the acquisition of additional
equipment becomes a viable option.
 Are you aware of finite and
infinite capacity planning in
supply chain management?
Finite Capacity Planning

It is a method for planning and scheduling

production that involves a detailed
evaluation of a manufacturing facility's
production capacity.

This approach is based on determining the

maximum capacity of the facility and all its
associated resources, which encompass
machinery, work centers, staffing,
inventories, work-in-process (WIP) buffers,
and other relevant elements.

Subsequently, the scheduling of

manufacturing activities is conducted in
accordance with this calculated capacity.
 Characteristics of Finite Capacity Planning

▪ Resource-Centric: Finite capacity planning starts with a thorough analysis of available

resources, their capacities, and constraints.

▪ Accurate Scheduling: It aims to create schedules that are based on the actual, finite
capacity of the production facility. This means that it considers the limitations and
bottlenecks in the production process.

▪ Planning: Finite capacity planning ensures that production plans are feasible, taking
into account the constraints and availability of resources.
Infinite Capacity Planning

It follows a contrasting trajectory. It

initiates with a predetermined end date
for the production phase.

This approach doesn't consider

constraints related to resource
availability.

Instead, it begins with the specified

quantity of products required to fulfill an
order and subsequently works backward
to accommodate these requirements
within the facility's resources.
 Characteristics of Infinite Capacity Planning

▪ Time-Centric: Infinite capacity planning starts with the fixed end date for production
and works backward, ignoring resource constraints.

▪ Focus on Order Fulfillment: It aims to meet customer orders by any means necessary,
adjusting production schedules without regard for resource availability.

▪ Risk of Overloading Resources: This approach can lead to overloading resources and
causing delays or inefficiencies in the production process.