Master Scheduling and Production Planning: A Case Study Approach with ATP

In today's fast-paced manufacturing environment, effective supply chain management is critical to ensuring that production processes run smoothly and meet customer demand. One of the most powerful tools for managing production and inventory levels is the Master Production Schedule (MPS), which aligns production with forecasted demand while ensuring that inventory levels are optimized. In addition to MPS and Planned Available Balance (PAB), a key concept in modern supply chain management is Available to Promise (ATP). ATP helps companies effectively manage customer order promising and ensures that they can fulfill orders without overcommitting resources. In this article, we’ll explore how companies can leverage MPS, PAB, and ATP to maintain an efficient supply chain through a practical example.

What is the Master Production Schedule (MPS)?

The Master Production Schedule (MPS) is a plan for the production of finished goods, breaking down forecasted demand into specific weekly production targets. It helps manufacturers plan what to produce, when to produce, and how much to produce. The MPS aligns production with customer demand, ensuring that manufacturers meet their targets without overproducing or underproducing.

The Planned Available Balance (PAB) represents the inventory level at any given point in time, factoring in the opening inventory, planned production, and demand. By calculating the PAB weekly, companies can monitor their inventory levels and adjust production schedules to meet fluctuating demand.

Introducing Available to Promise (ATP)

Available to Promise (ATP) is a vital concept in managing customer orders. ATP refers to the uncommitted portion of inventory and planned production maintained in the MPS to support customer order promising. ATP helps ensure that a business can fulfill customer orders without overcommitting its production capacity or inventory.

ATP is calculated by ignoring forecast demand and focusing solely on customer orders. The ATP calculation is performed for the first period of the MPS grid and subsequently calculated for periods where there is an MPS receipt (production).

There are two primary methods for calculating ATP:

1. Discrete ATP: This method focuses on individual customer orders, determining how much inventory is available to fulfill each specific order.
2. Cumulative ATP: This method accumulates available inventory and planned production over multiple periods, providing a broader view of inventory availability.

Case Study: Calculating MPS, PAB, and ATP

Let’s break down an example scenario where a manufacturer uses an MPS and PAB to manage production across six weeks and incorporates ATP for customer order fulfillment.

Here’s the information we have:

• Opening Inventory (Week 1): 200 units
• Lot Size: 1000 units (the quantity produced at one time)
• Forecast Demand: Week 1: 100 units Week 2: 500 units Week 3: 250 units Week 4: 500 units Week 5: 100 units Week 6: 150 units
• Customer Orders: Week 1: 50 units Week 2: 200 units Week 4: 400 units

Step-by-Step Calculation

Week 1:

• Opening Inventory: 200 units
• Forecast Demand: 100 units
• Customer Orders: 50 units
• Planned Production (MPS): No production is required, as the opening inventory is sufficient to meet both forecast demand and customer orders.
• PAB: PAB1=200 (Opening Inventory)+0 (Planned Production)−100 (Demand)=100 units
• ATP: ATP1=Opening Inventory−Committed Orders=200−50=150 units

Week 2:

• Opening Inventory: 100 units (from Week 1)
• Forecast Demand: 500 units
• Customer Orders: 200 units
• Planned Production (MPS): To meet the forecast demand and customer orders, 1000 units of production are planned.
• PAB: PAB2=100 (Opening Inventory)+1000 (Planned Production)−500 (Demand)=600 units
• ATP: ATP2=Opening Inventory+Planned Production−Committed Orders−Demand=100+1000−200−500=400 units

Week 3:

• Opening Inventory: 600 units (from Week 2)
• Forecast Demand: 250 units
• Customer Orders: No new customer orders
• Planned Production (MPS): No production is required, as the inventory is sufficient.
• PAB: PAB3=600 (Opening Inventory)+0 (Planned Production)−250 (Demand)=350 units
• ATP: Since no customer orders are pending, ATP remains unchanged at 350 units.

Week 4:

• Opening Inventory: 350 units (from Week 3)
• Forecast Demand: 500 units
• Customer Orders: 400 units
• Planned Production (MPS): To meet the forecast demand and customer orders, 1000 units of production are planned.
• PAB: PAB4=350 (Opening Inventory)+1000 (Planned Production)−500 (Demand)=850 units
• ATP: ATP4=Opening Inventory+Planned Production−Committed Orders−Demand=350+1000−400−500=450 units

Week 5:

• Opening Inventory: 850 units (from Week 4)
• Forecast Demand: 100 units
• Customer Orders: No new customer orders
• Planned Production (MPS): No production is required, as the inventory is sufficient.
• PAB: PAB5=850 (Opening Inventory)+0 (Planned Production)−100 (Demand)=750 units
• ATP: Since no customer orders are pending, ATP remains unchanged at 750 units.

Week 6:

• Opening Inventory: 750 units (from Week 5)
• Forecast Demand: 150 units
• Customer Orders: No new customer orders
• Planned Production (MPS): No production is required, as the inventory is sufficient.
• PAB: PAB6=750 (Opening Inventory)+0 (Planned Production)−150 (Demand)=600 units
• ATP: Since no customer orders are pending, ATP remains unchanged at 600 units.

Summary Table

Conclusion

By carefully managing Master Production Scheduling (MPS), Planned Available Balance (PAB), and Available to Promise (ATP), companies can more effectively align their production capacity with forecasted demand and customer orders. ATP, in particular, plays a crucial role in customer order fulfillment by ensuring that companies can commit to delivering on time without overcommitting resources. The example above demonstrates how integrating these concepts into a cohesive strategy can optimize inventory management, production planning, and customer service.

In today’s competitive supply chain landscape, understanding and implementing these tools is essential for businesses to remain agile and responsive to customer needs. By leveraging MPS, PAB, and ATP, manufacturers can achieve operational efficiency while ensuring that customer expectations are met.