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Master Production Schedule

Part 1 of 4

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Master scheduling is more art than science. Although the master schedule itself may be composed of several thou­sand numbers upon which management decisions are made every day, the job of master scheduling goes well beyond just creating the numbers. For instance, the num­bers may indicate that the plant is in an overloaded condition. Now what? How does the master scheduler get out of this overloaded condition and how does the company stay out of it? Correctly handling situations like the over­loaded master schedule is the real job the master scheduler must face everyday, that of making critical decisions using the information provided by the numbers.
It has long been said that the challenge of master schedul­ing is to balance the demand for a product with a supply of that product. This balancing act requires an artist's touch that goes well beyond the numbers contained on the master schedule. For example, numbers may show or indicate that customer orders are not coming in as forecasted, but what does the master scheduler do about it? How about the problem where customer orders exceed the forecast? What if a product is recalled? How about dealing with a plant shutdown, either for a period of time or permanently? Sometimes customers change their mind and want a deliv­ery either earlier or later; how should the master scheduler address moving orders in and out when production stabil­ity is so important?

Inaccurate Forecasts

Master scheduling is a demand driven process. Although there are a few companies which build product strictly to customer orders or contracts, most would acknowledge that there is some type of forecasting that takes place prior to receiving the order. Companies have engineers on staff, skilled people in the plant, inventory in the stockroom, and tooling in the crib. Why do they have these resources? Well, it's because they believe they will need them to fulfill upcoming customer demand. So, here's the first problem the company must face, that of hiring engineers, hiring manufacturing people, buying inventory, and possibly de­signing, making, and procuring needed tooling, all based on a forecast that is bound to have some inaccuracies.

Referring to the table, we see that the actual demand for the quarter is very close to the forecasted demand (102%), but it becomes quite erratic when it comes to the monthly numbers (124%, 56%, 126%). This is typical of companies that must rely on forecasts; the accuracy of the forecast is dependent upon two things, the level in the structure that is forecasted (the higher the level, the better the accuracy) and the time period forecasted (the closer to the current period, the better the accuracy). The other problem is that the master scheduler schedules in weeks or days and the forecasts come in monthly totals.

When someone forecasts, things happen! Materials are ordered, people start thinking about adding or reducing capacities, money is spent, etc. These efforts can be costly. Forecasts are not always taken seriously. Sales sometimes gets into the habit of overstating the forecast to insure less stockouts. On the other hand, sales sometimes understates the forecast because of commission structures, bonus plans, and performance club objectives. Many times there is no reward or penalty for forecast accuracy.
One might ask, what are the real costs of forecast inaccu­racy? Let's start with the customer not getting the product as requested or promised. How about excess inventories, overtime expense, production people stressed, less produc­tivity, idle production hands, idle capacity, marketing trend analysis, and second guessing to name just a few. What about the revenue projections being off, and a sales force that is scared to guarantee delivery to the customer.

Master schedulers know that actual demand will not match the forecast, except in very rare circumstances. Therefore, the master scheduler as well as manufacturing must remain flexible. Both functions must be able and willing to shift capacity and materials as necessary while keeping a somewhat stable manufacturing run rate. The master scheduler must also know who approves changes to the schedule in the various time zones (e.g., two weeks prior to shipment, one month prior to shipment).
It takes courage to look beyond the customer order backlog and rely on forecast numbers. Since MRP II and master scheduling is a demand driven process, what else is there? The forecast should be constantly monitored to improve its accuracy. People involved in forecasting must understand the importance the forecast plays in the overall picture and the actions taken based on the forecast. These manage­ment issues and problems must be addressed and not swept under the rug. Many answers to production prob­lems lie in the hands of the forecaster and master scheduler..

To be Continued

For balance of this article, click on the below link:
Lean Manufacturing Articles and go to Series 02


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