Optimizing Inventory Planning: A Practical Approach to Projected Available Balance and Master Production Scheduling

In today’s fast-paced supply chain environment, maintaining optimal inventory levels is essential to balance cost efficiency and service quality. This article explores the practical application of Projected Available Balance (PAB) and Master Production Scheduling (MPS) to ensure a seamless flow of goods while preventing stockouts or overproduction. Using a straightforward example, we will illustrate how these principles can be effectively implemented in real-world scenarios.

Understanding the Fundamentals

Projected Available Balance (PAB): This metric predicts the inventory level at the end of a specific period, considering starting inventory, scheduled receipts, and expected demand. It is calculated as:

Ending PAB=Beginning PAB+Scheduled MPS Receipts−Demand (Orders or Forecasts)

Master Production Schedule (MPS): The MPS outlines planned production to meet demand while maintaining inventory levels. A lot size strategy, such as “make-to-stock,” is commonly employed to align production with demand fluctuations.

A Step-by-Step Example

Scenario:

A company operates with the following parameters:

• Forecasted weekly demand: [0, 50, 60, 70, 90, 70, 20] (Week 0 to Week 6)
• Beginning inventory: 70 units
• Lot size: 100 units
• Strategy: Schedule MPS lots whenever PAB would go negative.

Calculations:

Using the PAB formula and scheduling MPS to avoid negative balances, the inventory levels and production plans are determined as follows:

Key Observations:

1. Week 2: The PAB would have turned negative due to high demand (60 units). An MPS of 100 units is scheduled to replenish stock, resulting in a PAB of 60.
2. Week 4: After fulfilling a demand of 90 units, the PAB drops to 0. A new MPS of 100 units is scheduled in Week 5 to maintain inventory levels.
3. Final Outcome: The PAB remains non-negative throughout the planning horizon, ensuring uninterrupted supply.

Practical Implications for Supply Chain Management

1. Proactive Inventory Control: The use of PAB allows businesses to anticipate potential shortages and schedule production effectively, minimizing the risk of stockouts.
2. Cost Efficiency: By employing a lot size strategy, organizations can optimize production runs and reduce operational costs.
3. Demand Responsiveness: MPS enables companies to align production with fluctuating demand patterns, enhancing customer satisfaction.

Conclusion

The integration of PAB and MPS into supply chain planning provides a robust framework for balancing inventory levels with production efficiency. By using data-driven strategies and proactive planning, businesses can achieve operational excellence while staying agile in a competitive market.

Implementing these principles doesn’t require sophisticated systems—just a clear understanding of demand forecasts, inventory status, and production capabilities. Start optimizing your supply chain today to unlock new levels of efficiency and customer satisfaction.