Disaggregation

Working with aggregate units facilitates intermediate planning. But to put this plan into action we should translate it, decompose it, disaggregate it and state it in terms of actual units of products and for a shorter period Aggregate planning was for 12 or more months. Now we should break it down into shorter periods, say 2-3 months. Disaggregation:

Breaking down the aggregate plan into specific products - from aggregate product to real specific products - based on the specific products, then calculating detail of manpower, material and inventory requirements.

Disaggregation

Aggregate Plan Month Jan Feb Lawn Mower 200 300 Master Schedule Push 100 100 Self-propelled 75 150 Riding 25 50 Total 200 300 Total of aggregate and disaggregate products are not necessarily equal

Mar 400 100 200 100 400

Master Schedule
The result of disaggregation is a master schedule. The Master Schedule shows quantity and timing of specific products. It usually covers 6 to 12 weeks. After preparing a tentative Master Schedule, a planner can do Rough-cut Capacity Planning. Rough-cut capacity planning is to check the feasibility of the Master Schedule with respect to available manpower and machinery capacities, storage spaces, and vendor capabilities.

It is just a rough check to ensure that the master schedule is achievable.

The master schedule then is used as the basis for short term planning.

Master Schedule Aggregate plan: 12 months. Master schedule: 12 weeks.

Master schedule is updated every 2 weeks.

Therefore, it is on a rolling basis, always we have a disaggregated plan for the next 12 weeks.

Master Production Schedule (MPS)

Master schedule states quantity and delivery time of specific products.

It says we need 75 push lawnmowers in January. But it does not say how we get it - from production, or from inventory.
Master Production Schedule (MPS) is developed based on Master Schedule. MPS: Quantity and timing of planned production.

MPS determines the Promised Inventory, and the Production Requirements available to promise inventory for each period.

Master Scheduling Process

Inputs
Beginning inventory Forecast Customer orders

Outputs
Master production schedule

Master scheduling

Projected inventory Uncommitted inventory (Available to Promise)

The key idea is: we have a forecast, but it turns into and actual order when we receive a customer order.
MPS starts with a preliminary calculation of projected inventory. This reveals when we need production to get additional inventory.

Example; Projected on-hand Inventory

Beginning Inventory

64 Forecast Customer Orders (committed) Projected on-hand inventory

Customer orders are larger than forecast in week 1

1 30 33 31

JUNE 2 3 30 30 20 1 10 -29

4 30 4

5 40 2

JULY 6 7 40 40

8 40

Forecast is larger than Customer orders in week 3

Forecast is larger than Customer orders in week 2

Master Production Scheduling Process

Negative projected on-hand inventory is the signal for production. Suppose the economic production lot size for this product is 70 units. Whenever production is called, 70 units are produced. The negative projected inventory of -29 in period 3 calls for production, 70 units are produced, the projected inventory becomes 41. The same calculation continues across the whole planning horizon.

Example; Projected on-hand Inventory

64 Forecast Customer Orders (committed) Projected on hand inventory MPS 1 30 33 31 June 2 3 30 30 20 10 1 41 70 July 6 7 40 40

4 30 4 11

5 40 2 41 70

8 40

31 70

61 70

Example; Projected on-hand Inventory

64 Forecast Customer Orders (committed) Projected on hand inventory MPS 1 30 33 31 June 2 3 30 30 20 10 1 41 70 July 6 7 40 40

4 30 4 11

5 40 2 41 70

8 40

31 70

61 70

Available To Promise (ATP)

64 Forecast Customer Orders (committed) Projected on hand inventory MPS 1 30 33 31 2 30 20 1 June 3 30 10 41 70 4 30 4 11 5 40 2 41 70 6 40 1 July 7 40 31 70 8 40 61 70

Now we can determine available to promise at each period. We use a look ahead procedure. Sum booked customer orders week by week up to (not including) the next week of production. This is booked orders. The remaining inventory is ATP. ATP is only calculated for the first week and for weeks in which there is a MPS quantity. (In this example: weeks 1, 3, 5, 7, 8)

Available To Promise (ATP); First week

64 Forecast Customer Orders (committed) Projected on hand inventory MPS ATP 1 30 33 31 11 2 30 20 1 June 3 30 10 41 70 56 4 30 4 11 5 40 2 41 70 68 6 40 1 July 7 40 31 70 70

8 40 61 70 70

Available to promise in week 1 = Inventory in week 0 + Production in week 1 - Customer Orders at week 1 - Customer Orders at week 2 ATP(1) = I(0)+ P(1) - CO(1) - CO(2) ATP(1) = 64+0 -33 -20 = 11

This is an uncommitted inventory. It can be assigned to week 1, week 2, or both.

Available To Promise (ATP); Other weeks

For other weeks, beginning inventory is removed from the formula: ATP(3) = P(3)-CO(3)-CO(4) ATP(3)= 70-10-4= 56
64 Forecast Customer Orders (committed) Projected on hand inventory MPS ATP 1 30 33 31 11 2 30 20 1 June 3 30 10 41 70 56 4 30 4 11 5 40 2 41 70 68 6 40 1 July 7 40 31 70 70 8 40 61 70 70

64 Forecast Customer Orders (committed) Projected on hand inventory MPS ATP 1 30 33 31 11 2 30 20 1

June 3 30 10 41 70 56 4 30 4 11 5 40 2 41 70 68 6 40 1

July 7 40 31 70 70

8 40 61 70 70

For weeks 7 and 8, no CO, therefore ATP = MPS

Updating ATP

As additional orders are booked, they would be entered into the schedule. ATP would be updated to reflect new booked orders. Marketing can use updated ATP amounts to provide realistic delivery dates to customers

Updating MPS
Changing to a master production schedule can be disruptive. Particularly changes in the immediate periods of the schedule Aggregate Plan is developed for say 1 year Master Production Schedule is developed for a period of say 12 weeks. MPS is updated say every 2 weeks, it is on a rolling basis.

6 Firm

8 Full

10

11 Open

12

Frozen

Assignment

Problem 1. Book Page 627. Forecast of demand for the next four months is 70 units per month

Committed customer orders for the next four months are 80, 50, 30, and 10, respectively. Order size is 100 units. Beginning inventory is 0.
Prepare MPS Prepare ATP

Solution to Problem 1

Month Forecast Customer Orders Inventory on hand MPS ATP 1 70 2 70 3 70 4 70

Month Forecast Customer Orders Inventory on hand MPS ATP 1 70 80 2 70 50 3 70 30 4 70 10

Solution to Problem 1
Month Forecast Customer Orders Inventory on hand MPS ATP 1 70 80 20 100 2 70 50 3 70 30 4 70 10

Month Forecast Customer Orders Inventory on hand MPS ATP 1 70 80 20 100 2 70 50 50 100 3 70 30 4 70 10

Solution to Problem 1
Month Forecast Customer Orders Inventory on hand MPS ATP 1 70 80 20 100 2 70 50 50 100 3 70 30 80 100 4 70 10

Month Forecast Customer Orders Inventory on hand MPS ATP 1 70 80 20 100 2 70 50 50 100 3 70 30 80 100 4 70 10 10

Solution to Problem 1
Month Forecast Customer Orders Inventory on hand MPS ATP 1 70 80 20 100 20 2 70 50 50 100 3 70 30 80 100 4 70 10 10

Month Forecast Customer Orders Inventory on hand MPS ATP 1 70 80 20 100 20 2 70 50 50 100 50 3 70 30 80 100 4 70 10 10

Month Forecast Customer Orders Inventory on hand MPS ATP 1 70 80 20 100 20 2 70 50 50 100 50 3 70 30 80 100 60 4 70 10 10