Creating and Validating the Master Schedule

Creating and Validating the Master Schedule – CPIM Exam Guide

Why Is Creating and Validating the Master Schedule Important?

The master schedule is the backbone of a company's production planning system. It translates the broader production plan (which deals with product families) into a specific, actionable plan that details what end items or product configurations will be produced, how many, and when. Without a properly created and validated master schedule, a company risks:

• Overcommitting resources, leading to missed delivery dates and customer dissatisfaction
• Underutilizing capacity, resulting in wasted resources and higher costs
• Poor coordination between sales, operations, and supply chain functions
• Inaccurate material requirements planning (MRP) outputs, since MRP is directly driven by the master schedule
• Excess or obsolete inventory from building the wrong products at the wrong time

In the CPIM body of knowledge, understanding how the master schedule is created and validated is essential because it sits at the intersection of demand management, capacity planning, and production execution.

What Is the Master Schedule?

The Master Production Schedule (MPS) is a detailed statement of what a company plans to produce, expressed in specific configurations, quantities, and dates. It is not a forecast—it is a plan that reflects management decisions about what will be built.

Key characteristics of the master schedule include:

• Time-phased: It is organized into planning periods (typically weekly buckets) across a planning horizon.
• Item-specific: Unlike the production plan (which covers product families), the MPS deals with individual end items, shippable products, or key components (depending on the manufacturing environment).
• Disaggregated from the production plan: The sum of all MPS quantities for items within a product family should be consistent with (roll up to) the production plan for that family.
• Constrained by resources: It should be validated against available capacity and material availability before being authorized.

Where the MPS Is Stated (By Manufacturing Environment):

• Make-to-Stock (MTS): MPS is stated at the finished goods level (end items).
• Assemble-to-Order (ATO): MPS is typically stated at the major subassembly or module level, with a Final Assembly Schedule (FAS) handling the final configuration.
• Make-to-Order (MTO): MPS is stated at the end item level, driven by actual customer orders.
• Engineer-to-Order (ETO): MPS is stated at the end item or major component level, with significant design and engineering lead times considered.

How the Master Schedule Is Created

Creating the master schedule is a multi-step process:

Step 1: Start with the Production Plan
The production plan sets the overall output rate for each product family. The master scheduler must disaggregate (break down) the production plan into specific end items or modules.

Step 2: Consider Demand Inputs
Demand inputs to the MPS include:
• Forecasts (for anticipated demand)
• Actual customer orders (booked orders)
• Interplant orders
• Safety stock requirements
• Distribution warehouse replenishment needs
• Service parts requirements

Step 3: Develop the Preliminary MPS
Using demand data, lot-sizing rules, lead times, and inventory targets, the master scheduler creates a time-phased plan. The key MPS row calculations include:

• Gross Requirements: The greater of forecast or customer orders (in MTS), or actual orders (in MTO), depending on the environment and time fence logic.
• Projected Available Balance (PAB): Beginning inventory + MPS receipts – gross requirements. PAB must remain at or above the safety stock level; if it drops below, an MPS receipt is planned.
• Available-to-Promise (ATP): The uncommitted portion of inventory and planned production. ATP is calculated by looking at MPS quantities minus customer orders already promised, up to the next MPS receipt.
• MPS (Planned and Firmed Orders): The planned production quantities the scheduler intends to release.

Step 4: Apply Time Fence Logic
Time fences are critical for managing schedule stability:

• Demand Time Fence (DTF): Inside this fence, only actual customer orders drive requirements (forecast is ignored or consumed). Changes inside the DTF are tightly controlled.
• Planning Time Fence (PTF): Between the DTF and PTF, the master scheduler manually manages the schedule. The system does not automatically create or reschedule orders inside this fence.
• Beyond the PTF: The system can automatically generate and adjust MPS orders based on forecast and planning logic.

The purpose of time fences is to prevent unnecessary nervousness in the schedule caused by frequent changes, especially close-in changes that are costly and disruptive.

How the Master Schedule Is Validated

A master schedule that cannot be executed is worse than useless—it creates chaos. Validation ensures the MPS is realistic and achievable.

Validation Method 1: Rough-Cut Capacity Planning (RCCP)
RCCP checks the MPS against key or critical resources (bottleneck work centers, key suppliers, critical labor skills). It answers the question: Do we have enough capacity at key resources to execute this schedule?

Common RCCP techniques include:
• Capacity Planning Using Overall Factors (CPOF): Uses historical ratios to allocate total hours across work centers.
• Bill of Labor (Resource Profile): Uses a predefined list of labor/machine hours per unit at each key resource, time-phased by lead time offset.
• Resource Bills: Similar to bill of labor but often less detailed, showing total hours required at key resources without lead time offsetting.

If RCCP reveals an overload, the master scheduler must revise the MPS—shift quantities, add overtime, subcontract, or negotiate changes with management and sales.

Validation Method 2: Consistency with the Production Plan
The MPS must roll up to equal the production plan for each product family. If the sum of individual MPS items in a family doesn't match the production plan, there is a disconnect that must be resolved. This check ensures alignment between strategic plans and operational execution.

Validation Method 3: Material Availability Check
A preliminary MRP explosion may be run to verify that critical materials and components are available or can be procured in time. If long-lead-time components are not available, the MPS must be adjusted.

Validation Method 4: Financial Review
The master schedule should be validated against budgets and financial plans. Producing more than planned may consume more cash (for materials, labor, overhead) than budgeted, while producing less may result in lost revenue.

Validation Method 5: Management Authorization
Once validated technically (capacity, material, financial), the master schedule should be reviewed and authorized by management. This ensures organizational commitment and accountability.

Key Concepts to Remember

• The master scheduler is the gatekeeper of the MPS. They must balance demand with supply and resist the temptation to overload the schedule.
• A realistic MPS is one of the most critical success factors for effective MRP and overall supply chain performance.
• Schedule stability is crucial. Frequent changes inside time fences lead to expediting, excess costs, and poor delivery performance.
• Forecast consumption: As actual customer orders come in, they "consume" (replace) the forecast. This prevents double-counting demand.
• The MPS drives MRP. If the MPS is flawed, every downstream plan will be flawed.
• Available-to-Promise (ATP) is a key tool for the sales/order entry function—it tells them what can be promised to customers without overcommitting.
• Order promising should be done from ATP, not from PAB or total inventory.

Common MPS Calculations You Should Know

• Projected Available Balance (PAB): PAB = Prior period PAB + MPS receipts – Gross requirements. If PAB goes negative or below safety stock, schedule an MPS receipt.
• Available-to-Promise (ATP) – Discrete method: For the first period: ATP = On-hand + MPS – Customer orders (until the next MPS). For subsequent MPS periods: ATP = MPS – Customer orders (between this MPS and the next MPS). Negative ATP in a period means you've over-promised.
• Cumulative ATP: Running total of period ATPs; useful for seeing total uncommitted supply over time.

Exam Tips: Answering Questions on Creating and Validating the Master Schedule

1. Know the MPS grid calculations cold. Practice calculating PAB and ATP from sample data. Many exam questions will give you a scenario and ask you to determine the correct PAB or ATP value.

2. Understand time fence logic deeply. Expect questions like: "What happens when a new customer order arrives inside the demand time fence?" Answer: The master scheduler must evaluate it manually; the system won't automatically adjust. Changes inside the DTF require management approval.

3. Distinguish between the production plan and the MPS. The production plan is at the family level and is developed through Sales & Operations Planning (S&OP). The MPS is at the item level. They must be consistent (MPS rolls up to the production plan).

4. Remember which environments use which MPS level. MTS = finished goods, ATO = modules/options, MTO = end items driven by orders, ETO = end items with engineering. This is a frequently tested concept.

5. RCCP is the validation tool for the MPS. Don't confuse RCCP (which validates the MPS) with CRP (Capacity Requirements Planning, which validates the MRP). RCCP is a rougher, higher-level check at key resources.

6. Know the difference between ATP and PAB. PAB shows projected inventory levels; ATP shows what's available to promise to new customers. They serve different purposes and are calculated differently.

7. Forecast consumption questions are common. Understand that as actual orders arrive, they replace (consume) the forecast within the demand time fence, and that gross requirements reflect the greater of forecast or orders (in typical MTS environments).

8. Overloaded schedules = bad practice. If a question asks about a schedule that exceeds capacity, the correct answer almost always involves revising the MPS or adjusting capacity—never simply ignoring the overload.

9. Watch for trick answers involving automatic system changes inside time fences. Inside the planning time fence, the system should not automatically reschedule orders. It generates action messages, but the master scheduler must decide.

10. Read questions carefully for the manufacturing environment. The correct approach to master scheduling depends heavily on whether the scenario is MTS, ATO, MTO, or ETO. Pay attention to context clues in the question.

11. Think about the role of safety stock. When PAB drops below the safety stock level (not zero), an MPS receipt should be triggered. Some questions will test whether you use zero or safety stock as the trigger point.

12. Link concepts together. The exam often tests your understanding of how the master schedule connects to other processes: S&OP feeds the production plan, which feeds the MPS, which feeds MRP, which feeds capacity planning and purchasing. Understanding this flow helps you answer scenario-based questions correctly.

By mastering the creation and validation process for the master schedule, you demonstrate competence in one of the most critical areas of production and inventory management—and position yourself well for success on the CPIM exam.