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Inventory Management 101 – The Master Production Schedule (MPS) Explained

In previous articles, we introduced Bills of Materials (BOM) and Material Requirements Planning (MRP), two legs of the inventory planning tripod. The third is the Master Production Schedule (MPS). As the name implies the MPS decides what products are manufactured and when. The required raw materials are then identified by the finished goods BOM, the data from which is then integrated with current inventory data to create the MRP for raw materials procurement.

The Master Production Schedule Defined

MPS is the process that helps manufacturers plan which products and related quantities to produce during certain periods. MPS is proactive in that it actually drives the production process in terms of what is manufactured and what materials are procured. MPS also serves a bridge to sales as it informs them about what is available to promise to customers and when deliveries can be made.

MPS is a Crucial Planning Function

As part of a fully integrated ERP system, MPS typically provides a crucial planning function, extracting actual supply and demand data, as well as forecasts, to deliver accurate and timely production plans that help manufacturers achieve their production objectives and minimize procurement costs. MPS also takes into account the manufacturing capacity of the plant in its calculations. Once production orders have been analyzed and approved, the MRP process is initiated and purchase orders can be generated. MPS also provides protection against shortages, unexpected scheduling snafus and inefficient allocation of resources.

MPS and MRP – Their Relationship

While MPS and MRP have some similarities, including the ability to generate planned manufacture, purchase and transfer orders, there are a few characteristics that set them apart. For example, unlike MRP, MPS tends to focus its planning capabilities on the production of finished goods, components or parts that generate the greatest profitability for the manufacturer and are therefore likely to constitute the lion’s share of the resources needed for production.

Another difference is that the MPS operates only within one level of an item’s BOM, while MRP can be utilized at every level. Also, MRP focuses its planning capabilities more toward meeting demand for component parts or subassemblies, while MPS focuses more on establishing production plans to satisfy the actual demand for finished products, as well as to meet projected customer delivery dates.

MPS plans are typically based upon input such as actual sales orders, service orders, available resources, inventory levels, capacity constraints or forecasts. These forecasts give manufacturers the ability to anticipate product demand and the flexibility to adjust production plans based on seasonality, promotions and fluctuating demand for particular items and/or finished products. The output from MPS includes quantities of an item to be produced, due dates and quantities available to promise.

The Benefits of MPS

  • Ability to make adjustments to fluctuations in demand and still minimize waste
  • Helps prevent shortages and scheduling mishaps
  • Improves efficiency in the location of production resources
  • Provides more effective cost controls and more accurate estimates of material requirements and delivery dates
  • Reduces lead times throughout the year
  • Provides an effective communication conduit with the sales team for planning purposes

MPS Is at the Heart of a Manufacturing ERP System

MPS lies at the heart of a manufacturing ERP system, and connects to multiple modules including Accounts Payable (AP), Accounts Receivable (AR), General Ledger (GL), Customer Relationship Management (CRM), Inventory, Purchasing, Lot Tracking and Human Resources (HR), just to name a few.

Common MPS Reports

Some of the standard reports created by a MPS include:

  • Available-to-Promise –Presents the available-to-promise quantities for each MPS line item. The report is time-phased, usually into weekly or monthly “buckets.”
  • Demand Tracking Report – Provides historical data on actual shipments and order bookings as compared to management forecasts.
  • Forecast Data Report – Summary of historical demand activity, which indicates the significance of errors between forecast and actual, and provides a statistical summary.
  • Period Summary Forecast – Forecast by line item within a product group for each period through the future 12 periods, with summaries by period for the group and yearly for line items.
  • Item Demand and Forecast – Presents several years of historical data (user-specified) and the next 12 months of forecast demand for each item. Typical data elements can include YTD totals, total yearly demand and quarterly totals, with comparisons by percent between items and their total product group.
  • Build Schedule Report – Reports the build schedule for one or all assemblies.
  • Schedule versus Actual Output – Reports the actual output compared with the scheduled output at a particular work center.
  • Where Used Report – Lists all parts/tools used at each work center/machine.

Inventory Management 101

The art of efficient inventory management is to maintain the minimal level of raw materials on hand to feed the production of the maximum quantity of finished goods at any point in time. The integrated Master Production Schedule (MPS), Materials Requirements Planning (MRP) and Bill of Materials is the engine that drives optimal inventory management.

If you want to learn more about Inventory Management Best Practices, watch our on-demand webinar on Implementing Inventory Management Best Practices.