Page 246 - Orlicky's Material Requirements Planning

CHAPTER 12 Master Production Schedule 225

of certain design has a so-called overarm that is required in the fourth week of the
machine’s final assembly. The overarm is a simple steel cylinder involving little machin-
ing with minor setup, but it is a massive and relatively expensive part. It is assembled
into the milling machine by inserting it into the proper hole in the column and fastening
it inside the column. Such an item is assigned properly to final assembly schedule con-
trol and is machined in quantities perhaps as small as one or two during the final assem-
bly cycle for specific machines being built.
An example of a purchased part under final assembly schedule control is a tractor
rear tire, a very expensive item. These tires (of which there are many varieties, makes,
sizes, and tread patterns) are shipped by the vendor at very short notice in any quantity
needed to meet the current requirements of the tractor assembly schedule. Quantity dis-
counts may apply to total annual consumption of all tire models rather than to individ-
ual orders.
In both of the preceding examples, significant inventory investment is avoided or
minimized and the possibility of surplus is precluded by gearing the manufacture or pro-
curement of the items in question to the final assembly schedule.

FUNCTIONS OF MASTER PRODUCTION SCHEDULING
An MPS serves two principal functions, namely:

1. Over the short horizon, to serve as the basis for the planning of material require-
ments, the production of components, the planning of order priorities, and the
planning of short-term capacity requirements
2. Over the long horizon, to serve as the basis for estimating long-term demands on
the company’s resources such as productive capacity (i.e., square footage,
machine tools, personnel), warehousing capacity, engineering staff, and cash
These two functions relate to the “firm”‘ and “tentative” portions of the MPS men-
tioned earlier. A well-implemented MRP system encompasses the entire planning hori-
zon; that is, both the firm and tentative portions of the MPS are reflected in the time-
phased inventory records. While only the firm portion of the planning horizon is, strict-
ly speaking, required for purposes of order release and order-priority planning, the sys-
tem maintains data on tentative (but formally planned per the master schedule) require-
ments and planned orders to provide visibility into the future on an item-by-item basis.
These data can be put to a variety of uses, including lot sizing, projections of capacity
requirements and inventory investment, serving to guide the negotiation of blanket-
order contracts with vendors, determining inventory obsolescence and indicated write-
offs, and others.
The MPS should strive to maintain a balance between the scheduled load (input)
and available productive capacity (output) over the short horizon, and it forms the basis
for establishing planned capacity over the long horizon. This represents long-term esti-
mates of resources required to execute the MPS. Some of these resources, such as plant