Manufacturing Planning 212




While separating Master Planning and Scheduling was a priority, building a link between Master Planning and Market Forecasting was an even bigger priority. Dollar forecasts are nearly worthless for Master Planning so a Master Plan becomes the forecast in the hands of Manufacturing. During the life of a Master Plan, the unexpected will happen, usually because of a change in demand, either up or down. Downward demand changes result in a temporary increase in warehouse inventory because in the absence of direct customer orders, the Shop will produce additional "stock" for the warehouse. If this possibility was anticipated at the time the Plan was created, then a "back door" is included in the Plan. The back door is designed primarily to protect the skilled labor in the plant by giving them another group of work cells that they may be moved to. This activity results in no change to the Master Plan. It is when demand surges upward suddenly that production is put at a disadvantage. A technique named "virtual warehousing" was incorporated into the Master Planning pro­gram. In virtual warehousing an additional bubble of finished goods inventory is added to the planning horizon just outside the commitment time fence. In our case that fence is 5 weeks from current date. If the need for the additional inventory in the virtual warehouse arises, the planned orders are made firm and allowed to move towards current week. Since the lead time for most purchased material is greater than 5 weeks, procurement for this material has already been accomplished and is therefore available for use. If the anticipated increased demand does not occur, then Master Planning moves the virtual warehouse further out in the planning horizon. The purchased material has already been ordered so MRP will simply delay the release of the next planned release. This additional W.I.P. will be carried as long as the virtual warehouse is in effect, but only for that material that will be affected by lead times in excess of the commitment time fence. If pull systems are used in the manufacturing shop, then W.I.P. will be held to a minimum since only purchased inventories will be increased.

Obviously the use of the back door at the finished goods planning level is dependent upon the careful execution of the virtual warehouse but the technique does not require a very complicated or sophisticated computer program, and in fact could be done manually.

For those product families that carry minimal inventory in the distribution warehouse, virtual warehousing is an ideal technique for protecting customer service. For product families that are heavily warehoused in the distribution centers, virtual warehous­ing is unnecessary because the additional inventory is simply converted to finished goods.

Real-World Planning Bills

Traditional planning bills are percentage based and generally require Master Planning to apply percentages to the items in the bill. This is cumbersome and typically innaccurate. Since plan­ning bills are an integral part of the Master Planning process in the Circuit Breaker Division, a quick and easily maintainable system for these bills was needed. By defining each family of products as a Planning Bill and then attaching an annual usage to each item in the bill, the relationship of each item to the total usage of the family is established by simply dividing the individual item usage by the total family usage (Table 1).


Table 1. S Family Planning Bill


Annual Usage






















This type of planning bill is easily maintainenced and has a high degree of accuracy since the annual usage will be representative of the actual amount that will be in the Master Plan and each item will have the proper relationship within its respective product family.

Building Blocks

With the foundation firmly in place for a flexible as well as responsive Master Planning system, several enhancements were possible within the manufacturing system. Continuing Engineer­ing developed an on-line real-time bill of material creation system, which allowed for new customer orders to be entered; item masters, bills, and routings created; and the order on the shop floor within 4 hours. In a market where typical delivery times average 8 weeks, the company has been able to average 2 weeks or less. New Product Engineering has adopted some specific Master Planning procedures for the introduction of new products so that prototype production looks the same as all other production and labor management and resource planning is always complete. In the 8 years since the changes began, personnel in the manufac­turing and planning areas has been reduced by over 50% and those people have been reassigned to other priority areas.

The revamping and simplification of the Master Plan and the inclusion of some simple new techniques have made it possible for the three plants in the division to achieve some dramatic improvements in their planning and manufacturing activities without investing in a major new software product. Those tech­niques have laid the foundation for future improvements through­out the system and more importantly have revised the culture in place in the plant.


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