Master Production Scheduling (MPS) is a critical planning tool that bridges the gap between high-level strategic planning and detailed operational execution. It serves as the primary driver for manufacturing operations by defining what finished products or major assemblies need to be produced, in what quantities, and when they must be completed.

The MPS translates the aggregate production plan into a specific, time-phased schedule for individual end items. It considers customer orders, demand forecasts, current inventory levels, and capacity constraints to create a realistic and achievable production timeline. The MPS operates within a defined planning horizon, typically divided into time buckets (weekly or daily), and establishes firm, planned, and forecast zones to manage schedule stability.

Key fundamentals of MPS include:

1. **Demand Management Integration**: The MPS reconciles forecasted demand with actual customer orders using techniques like consumption logic, ensuring accurate planning signals.

2. **Available-to-Promise (ATP)**: MPS calculates uncommitted inventory projected into the future, enabling sales teams to make reliable delivery commitments to customers.

3. **Time Fences**: These define zones within the planning horizon — a demand time fence (frozen zone) where changes are restricted, and a planning time fence where modifications require approval, promoting schedule stability.

4. **Rough-Cut Capacity Planning (RCCP)**: MPS works alongside RCCP to validate that the proposed schedule is feasible against key resource constraints before passing requirements to Material Requirements Planning (MRP).

5. **Order Policy and Lot Sizing**: The MPS applies rules such as lot-for-lot, fixed order quantity, or period order quantity to determine optimal production batch sizes.

6. **Input to MRP**: Once validated, the MPS drives MRP, which explodes the bill of materials to determine component and raw material requirements.

Effective MPS management balances customer service levels, inventory investment, and manufacturing efficiency. It requires cross-functional collaboration among sales, operations, and finance to ensure alignment with business objectives while maintaining operational feasibility.

Creating and Validating the Master Schedule is a critical process in supply chain management that bridges the gap between strategic planning and operational execution. The master schedule, often referred to as the Master Production Schedule (MPS), defines what products will be produced, in what quantities, and when, over a specific planning horizon.

**Creating the Master Schedule:**
The process begins by translating demand inputs—including forecasts, customer orders, safety stock requirements, and inventory targets—into a detailed production plan. Key inputs include the Sales and Operations Plan (S&OP), bill of materials (BOM), current inventory levels, open purchase orders, and available capacity. The scheduler determines planned order releases by considering lot sizing rules, lead times, and production constraints. The MPS operates at the end-item or finished-goods level and typically covers a medium-term horizon, often spanning weeks to months.

**Validating the Master Schedule:**
Validation ensures the master schedule is realistic, achievable, and aligned with business objectives. This involves several checks:

1. **Rough-Cut Capacity Planning (RCCP):** This validates whether critical resources—such as labor, equipment, and key materials—are sufficient to support the proposed schedule. Bottleneck work centers are evaluated to identify potential overloads.

2. **Material Availability:** Ensuring raw materials and components are available or can be procured within required lead times.

3. **Demand Alignment:** Confirming the schedule meets customer service level targets and aligns with the approved S&OP output.

4. **Financial Feasibility:** Verifying that the schedule supports budgetary and profitability goals.

5. **Stakeholder Review:** Cross-functional collaboration with sales, manufacturing, procurement, and finance teams to gain consensus.

If constraints are identified, the schedule is adjusted through iterative re-planning. The validated master schedule then drives Material Requirements Planning (MRP), triggering detailed procurement and production activities.

Effective master scheduling balances demand fulfillment with resource optimization, minimizes excess inventory, reduces lead times, and improves customer satisfaction—making it a cornerstone of internal supply source management.

Using and Maintaining the Master Schedule is a critical function in planning and managing internal supply sources within the Certified in Planning and Inventory Management (CPIM) framework. The master schedule, often referred to as the Master Production Schedule (MPS), serves as the primary driver for production planning, bridging the gap between demand forecasts, customer orders, and manufacturing operations.

The MPS translates the aggregate production plan into specific product quantities and timing, detailing what will be produced, in what quantities, and when. It acts as a communication tool between sales and manufacturing, ensuring alignment between customer expectations and production capabilities.

Using the master schedule effectively involves several key activities. First, planners must continuously monitor demand inputs, including forecasts, customer orders, and interplant requirements. Second, they must balance supply and demand by evaluating available-to-promise (ATP) quantities, which indicate uncommitted inventory that can be promised to customers. Third, rough-cut capacity planning (RCCP) is employed to validate that sufficient capacity exists to execute the schedule.

Maintaining the master schedule requires ongoing review and adjustment. Planners must manage changes carefully within established time fences—zones that define how and when modifications can be made. The demand time fence restricts changes to protect near-term production stability, while the planning time fence allows more flexibility for adjustments further out. This disciplined approach prevents excessive nervousness in the system while maintaining responsiveness.

Key maintenance activities include reviewing exception messages from MRP systems, resolving scheduling conflicts, updating the schedule based on actual production performance, and incorporating engineering changes. Planners must also track schedule adherence metrics to ensure execution aligns with the plan.

Effective master scheduling requires collaboration across functions, including sales, marketing, finance, and operations. Regular schedule review meetings help maintain consensus and address conflicts proactively. Ultimately, a well-maintained master schedule improves customer service levels, optimizes inventory investment, and enhances manufacturing efficiency by providing a stable yet responsive production plan.

Available-to-Promise (ATP) and Capable-to-Promise (CTP) are critical concepts in planning and managing internal supply sources, enabling organizations to make accurate delivery commitments to customers.

Available-to-Promise (ATP) refers to the uncommitted portion of a company's current inventory and planned production. It calculates the quantity of products available to promise to new customer orders based on the master production schedule (MPS). ATP considers existing on-hand inventory, scheduled receipts, and already committed customer orders. It answers the question: 'Can we fulfill this order from what we already have or have planned?' ATP is typically calculated at each MPS period by identifying surplus inventory not yet allocated to existing orders. The calculation involves subtracting committed orders from available supply (on-hand inventory plus planned production). ATP is a relatively straightforward, time-phased analysis that helps sales and customer service teams confirm delivery dates without overcommitting resources.

Capable-to-Promise (CTP) extends beyond ATP by evaluating an organization's actual production and supply chain capabilities. When ATP shows insufficient inventory, CTP determines whether the organization can produce or procure the required items in time to meet the customer's requested delivery date. CTP considers available capacity, raw material availability, supplier lead times, and production scheduling constraints. It essentially performs a real-time check across the entire supply chain to determine feasibility.

The key difference is that ATP looks at existing inventory and planned production, while CTP dynamically assesses the organization's ability to create new supply. ATP is simpler and faster to compute, while CTP requires integration with capacity planning, material requirements planning (MRP), and supplier management systems.

Together, ATP and CTP form a comprehensive order promising framework. Organizations first check ATP for immediate availability, and if insufficient, CTP evaluates whether new production can meet the demand. This dual approach improves customer satisfaction through reliable delivery commitments while optimizing inventory levels and production resources, ultimately enhancing supply chain responsiveness and efficiency.

A Bill of Materials (BOM) is a comprehensive, structured list of all components, sub-assemblies, raw materials, and quantities required to manufacture a finished product. In the context of planning and managing internal supply sources, BOM structure and management is fundamental to effective production planning, inventory control, and material requirements planning (MRP).

**BOM Structure:**
BOMs are typically organized in a hierarchical, multi-level format resembling a tree structure. The top level (Level 0) represents the finished product, while subsequent levels (Level 1, 2, 3, etc.) represent sub-assemblies and individual components. A single-level BOM shows only the immediate parent-child relationships, while an indented (multi-level) BOM displays the complete product structure from finished good to raw materials.

**Types of BOMs:**
- **Engineering BOM (EBOM):** Designed by engineering teams reflecting product design.
- **Manufacturing BOM (MBOM):** Reflects how the product is actually assembled on the shop floor.
- **Planning BOM:** Used for forecasting and master scheduling, often representing product families with proportional percentages.
- **Modular BOM:** Organizes components by sub-assemblies, useful for products with multiple configurations.

**Key BOM Management Considerations:**
Accurate BOM management ensures proper material planning, cost estimation, and production scheduling. Key elements include maintaining correct quantities per assembly, unit of measure, lead times, scrap factors, and effectivity dates for engineering changes. BOM accuracy directly impacts MRP calculations, procurement activities, and inventory levels.

**Best Practices:**
Organizations should maintain BOM accuracy rates above 98% to ensure reliable planning outputs. Regular audits, controlled change management processes, and cross-functional collaboration between engineering, manufacturing, and supply chain teams are essential. Proper BOM management reduces excess inventory, prevents material shortages, minimizes production delays, and supports accurate product costing—all critical for effective internal supply source management and overall supply chain performance.

Material Requirements Planning (MRP) is a systematic computation method used to determine what materials are needed, in what quantities, and when they are needed to fulfill production schedules. The core logic operates through three fundamental inputs: the Master Production Schedule (MPS), the Bill of Materials (BOM), and Inventory Status Records.

The MRP process begins with the MPS, which defines the quantity and timing of finished goods production. The BOM provides the hierarchical structure of components, subassemblies, and raw materials required to build each finished product. Inventory records track on-hand balances, scheduled receipts, and lead times.

The mechanics follow a top-down explosion process through several key steps:

1. **Gross Requirements Calculation**: MRP explodes the MPS through the BOM to determine gross requirements for each component at every level.

2. **Netting**: The system subtracts available inventory (on-hand plus scheduled receipts) from gross requirements to calculate net requirements, eliminating unnecessary procurement or production.

3. **Lot Sizing**: Net requirements are grouped into appropriate order quantities using techniques such as lot-for-lot, economic order quantity (EOQ), or period order quantity.

4. **Time Phasing (Offsetting)**: Planned order releases are offset backward by the item's lead time to determine when orders must be placed to meet required dates.

5. **BOM Explosion**: Planned orders at one level become gross requirements for components at the next lower level, and the process repeats through all BOM levels.

MRP generates three primary outputs: planned order releases (when to initiate orders), order rescheduling notices (expedite or defer existing orders), and cancellation notices. These action messages guide planners in maintaining material availability while minimizing excess inventory.

Key concepts include dependent demand (component needs driven by parent item schedules), low-level coding (ensuring complete requirements calculation), and regenerative versus net-change processing approaches. MRP enables organizations to synchronize material flows with production plans, reducing shortages and excess inventory simultaneously.

Material Requirements Planning (MRP) is a critical system used in planning and managing internal supply sources. It operates through a structured framework of inputs, outputs, and action messages to ensure materials are available when needed.

**MRP Inputs:**
MRP relies on three primary inputs: (1) The **Master Production Schedule (MPS)**, which defines what finished goods are needed, in what quantities, and when. It drives the entire MRP process. (2) The **Bill of Materials (BOM)**, which details the hierarchical structure of components, sub-assemblies, and raw materials required to produce each finished product. It enables MRP to explode demand from parent items down to individual components. (3) **Inventory Status Records**, which track current on-hand inventory, scheduled receipts, open orders, lead times, lot sizing rules, and safety stock levels. These records ensure MRP accurately calculates net requirements.

**MRP Outputs:**
MRP generates several key outputs: (1) **Planned Order Releases**, which recommend when and how much to order or produce to meet demand. (2) **Order Rescheduling Notices**, which suggest changes to the timing of existing open orders. (3) **Net Requirements Reports**, detailing the exact quantities needed after accounting for on-hand inventory and scheduled receipts. (4) **Exception Reports**, highlighting items requiring immediate planner attention due to issues like late orders or capacity constraints.

**Action Messages:**
Action messages are system-generated recommendations that alert planners to necessary corrective actions. Common action messages include: **Release Order** (initiate a planned order), **Expedite** (move an order forward due to increased urgency), **De-expedite** (delay an order when demand has shifted later), **Cancel** (eliminate an order no longer needed), and **Increase/Decrease Quantity** (adjust order quantities to match revised requirements). These messages help planners maintain alignment between supply and demand, enabling proactive decision-making rather than reactive problem-solving. Effective use of MRP inputs, outputs, and action messages ensures efficient inventory management and optimized production planning.

Capacity Requirements Planning (CRP) is a critical process within supply chain management that determines the amount of labor and machine resources required to accomplish the tasks of production. It operates as a key component in the planning hierarchy, sitting below the Master Production Schedule (MPS) and Material Requirements Planning (MRP), translating planned and released orders into detailed capacity needs at each work center over specific time periods.

CRP takes inputs from MRP, including planned order releases and open (scheduled) orders, and converts them into hours of work by work center using routing data and time standards. This provides a detailed, time-phased view of the capacity required versus the capacity available at each work center or resource. The output is typically displayed as a load profile or capacity requirements report, highlighting periods of over-load or under-load.

Unlike Rough-Cut Capacity Planning (RCCP), which validates the MPS at a higher level using key resources, CRP provides a more granular and detailed analysis. It considers all components and operations, accounting for lead time offsets, lot sizes, setup times, run times, queue times, and move times. This level of detail allows planners to identify specific bottlenecks and capacity constraints that may not be visible at higher planning levels.

When CRP reveals capacity imbalances, planners can take corrective actions such as adjusting workforce levels through overtime or additional shifts, rerouting work to alternative work centers, subcontracting operations, adjusting lot sizes, or renegotiating delivery dates. If demand cannot be reconciled with available capacity, feedback is sent upstream to revise the MPS or MRP plans.

CRP is considered an infinite loading technique, meaning it calculates required capacity without automatically considering capacity constraints. It assumes unlimited capacity and relies on planners to resolve overloads manually. This distinguishes it from finite capacity scheduling, which automatically adjusts schedules based on available capacity. Effective CRP enables organizations to proactively manage internal supply sources, ensure on-time delivery, and optimize resource utilization.

Rough-Cut Capacity Planning (RCCP) is a long- to medium-term capacity planning technique used to validate whether sufficient capacity exists to meet the requirements established in the Master Production Schedule (MPS). It serves as a critical checkpoint between production planning and detailed capacity requirements planning, ensuring that the MPS is feasible before committing resources to more granular scheduling.

RCCP focuses on evaluating capacity at key or critical resources—often referred to as bottleneck work centers, critical machines, or constrained labor pools—rather than examining every resource in the production process. This makes it a simplified yet highly effective approach for quickly identifying potential capacity shortfalls or overloads at the aggregate level.

Three common techniques are used in RCCP:

1. **Capacity Planning Using Overall Factors (CPOF):** This method uses historical data to distribute total capacity requirements proportionally across work centers. It is the simplest approach but least detailed.

2. **Bill of Labor (BOL):** This technique uses a predefined bill of labor that specifies the standard hours required at each key work center for each end item. It provides greater accuracy than CPOF by linking capacity needs directly to specific products.

3. **Resource Profiles:** The most detailed RCCP method, resource profiles consider both the labor/machine hours required and the timing (lead time offsets) of when capacity is needed at each work center. This approach provides a time-phased view of capacity requirements.

RCCP plays a vital role in the planning hierarchy by acting as a reality check on the MPS. If RCCP reveals that capacity is insufficient, planners can take corrective actions such as adjusting the MPS, adding overtime, outsourcing, or acquiring additional resources. Conversely, if excess capacity is identified, production schedules can be optimized to improve utilization.

By bridging the gap between high-level production plans and detailed scheduling, RCCP helps organizations proactively manage internal supply sources, balance workloads, reduce bottlenecks, and ensure customer demand commitments are realistic and achievable.

Make-or-Buy Analysis and Decision Making is a critical strategic process within supply chain management that determines whether a company should produce goods or services internally (make) or purchase them from external suppliers (buy). This analysis is fundamental to planning and managing internal supply sources effectively.

The decision involves evaluating multiple factors across several dimensions:

**Cost Analysis:** Organizations compare total costs of internal production—including raw materials, labor, overhead, equipment, and facility costs—against the total cost of purchasing, which includes unit price, transportation, quality inspection, and supplier management costs. Hidden costs such as inventory carrying costs and opportunity costs must also be considered.

**Strategic Considerations:** Core competencies play a vital role. Activities central to competitive advantage are typically kept in-house, while non-core functions may be outsourced. Companies must assess intellectual property risks, supply chain control, and long-term strategic alignment.

**Capacity and Capability:** The analysis evaluates whether the organization has sufficient production capacity, technical expertise, and infrastructure to manufacture internally. If capacity is constrained, buying may be more practical.

**Quality and Reliability:** Internal production may offer greater quality control, while external suppliers might provide specialized expertise and superior quality in certain areas.

**Risk Assessment:** Both options carry risks. Making internally involves risks of technology obsolescence and fixed cost commitments, while buying introduces supply disruption risks and dependency on suppliers.

**Quantitative Tools:** Break-even analysis, total cost of ownership (TCO), and net present value (NPV) calculations help quantify the financial implications of each option.

**Qualitative Factors:** Market conditions, supplier availability, flexibility requirements, workforce implications, and regulatory compliance also influence the decision.

The make-or-buy decision is not permanent—it should be periodically reviewed as market conditions, technology, costs, and organizational capabilities evolve. Effective decision-making requires cross-functional collaboration among procurement, operations, finance, and engineering teams to ensure alignment with overall business strategy and supply chain objectives.

MRP (Material Requirements Planning) Lot Sizing and Lead Time Offsetting are two critical concepts in planning and managing internal supply sources within the CPIM framework.

**MRP Lot Sizing** refers to the process of determining the optimal order quantity for materials or components needed in production. Rather than ordering exact net requirements for each period, lot sizing techniques group demand into economically viable order quantities. Several common lot sizing methods include:

1. **Lot-for-Lot (L4L):** Orders exactly what is needed for each period, minimizing carrying costs but potentially increasing ordering costs.
2. **Fixed Order Quantity (FOQ):** Orders a predetermined fixed quantity whenever replenishment is needed.
3. **Economic Order Quantity (EOQ):** Balances ordering costs and carrying costs to find the most cost-effective order size.
4. **Period Order Quantity (POQ):** Covers demand for a fixed number of periods in each order.
5. **Part Period Balancing and Wagner-Whitin:** More advanced techniques that attempt to minimize total inventory costs by dynamically evaluating trade-offs between setup and holding costs.

The choice of lot sizing method impacts inventory levels, carrying costs, ordering frequency, and overall supply chain efficiency.

**Lead Time Offsetting** is the process of determining when to release an order by subtracting the lead time from the date the material is needed. MRP calculates when finished goods or components are required (based on the master production schedule and dependent demand), then offsets backward by the cumulative lead time to establish planned order release dates. This ensures materials arrive precisely when needed for production.

For example, if a component is needed in Week 10 and has a two-week lead time, MRP will schedule the planned order release in Week 8.

Together, lot sizing and lead time offsetting form the backbone of MRP logic. Lot sizing determines how much to order, while lead time offsetting determines when to order. These calculations cascade through the bill of materials, ensuring that all dependent demand items are planned appropriately, maintaining production flow while balancing cost efficiency and inventory management objectives.

Closed-Loop MRP and Manufacturing Resource Planning (MRP II) represent significant evolutionary stages in production planning and inventory management systems.

**Closed-Loop MRP** extends the basic Material Requirements Planning (MRP) system by incorporating feedback mechanisms that connect planning functions with execution functions. While traditional MRP generates planned orders based on the Master Production Schedule (MPS), Bill of Materials (BOM), and inventory records, Closed-Loop MRP adds capacity planning tools such as Rough-Cut Capacity Planning (RCCP) and Capacity Requirements Planning (CRP). The 'closed loop' refers to the feedback from execution back to planning — meaning that production activities, purchase order statuses, and shop floor performance data are fed back into the system to verify that plans are realistic and achievable. If capacity constraints are identified, the system enables planners to adjust schedules accordingly. This ensures plans are not only materially feasible but also capacity-feasible, improving reliability of delivery commitments.

**Manufacturing Resource Planning (MRP II)** further expands upon Closed-Loop MRP by integrating additional business functions beyond materials and capacity. MRP II incorporates financial planning, sales and operations planning (S&OP), demand management, and business planning into one unified system. It links operational plans directly to financial outcomes, enabling management to simulate scenarios and understand the monetary impact of production decisions. MRP II connects the shop floor to the top floor by translating production plans into financial terms such as revenue projections, cost estimates, and cash flow analysis.

Key components of MRP II include the business plan, sales plan, production plan, MPS, MRP, CRP, and shop floor/purchase execution systems — all integrated with financial modules. This holistic approach ensures alignment between strategic objectives and operational execution.

Together, Closed-Loop MRP and MRP II represent the progression from simple material ordering systems to comprehensive enterprise-wide planning frameworks, forming the foundation for modern Enterprise Resource Planning (ERP) systems used in managing internal supply sources effectively.