What does MPS stand for in manufacturing?

If you are looking for ways to streamline your manufacturing process, you might already have heard about MPS and MRP. But do you really know what each of them means and what is the difference between MPS and MRP? – Other than what the acronyms stand for. 

In this article, Tigernix Software Experts explain what is MPS and MRP and what makes them different from each other in simple English. Let’s begin.

MPS or Master Production Schedule and MRP or Material Requirements Planning are two separate software systems that help you streamline your manufacturing process.

Before we discuss further MPS and MRP, let’s define demand. Demand is what drives any inventory planning and manufacturing system. Mainly there are two types of demands. They are 

Independent Demand Item – An item whose demand comes directly from the customer. These items are also known as Top-level items and the demand for these items comes from Sales or Service Orders, or forecasts.

Dependent Demand Item – An Item whose demand depends on the Independent Demand Items or items that require to be produced. Usually, raw materials and subassemblies come under the dependent demand items. These items are also known as Lower Level Items.

For an example, in a garment manufacturing factory, a specific style of garment is an Independent Demand Item. The fabrics, threads, buttons, labels, embellishments…etc., that are essential to make the garment fall into the Dependent Demand Item category.    

Since now you have a clear idea on what is Independent Demand and what is Dependent Demand Items, let’s discuss the differences between MPS and MRP.

Master Production Schedule (MPS)
In simple words, MPS helps you plan the manufacturing process of Independent Demand Items. It will help you plan your purchases depending on the customer demands or forecasts. Here the system plans the production of individual commodities considering a range of elements such as inventory costs, production costs, lead time, capacity, working hours, inventory levels, available storage…etc. 

Although it won’t be considering every aspect of the production, the system can help achieve improved factory activity, accuracy, and viability leading you to a higher profitability. MPS run on a weekly bases depending on the orders and forecast period. 

Material Requirements Planning (MRP)
MRP is quite similar to MPS in terms of the algorithm. The difference of MRP is that it plans for items needed to be produced. Or in other words for Dependent Demand Items. MRP will give you answers to, 

• How much more do we need based on what we have?
• How much we need to purchase? 
• How much we expect to consume?

Here the system will consider reordering levels, minimum quantities, order up to levels, and order multiples during the planning to fine-tune the orders to address the variation in demands while improving order economics and balancing order costs. 

Plus, the system will help you to manage order due dates ensuring that the products arrive on time to meet the demand and order placement date to ensure lead time to give the supplier enough time to fulfil the order. Other main difference of MRP is that it runs daily to fulfil the material or parts needed to produce the plan.

MPS Vs MRP

Conclusion 
MPS and MRP are two completely different systems that have some similarities. Although at this point you might feel like all you need is an MRP and there is no big deal in not having a MPS.

Yes, in many cases, you can use an MRP to plan for you Independent Demand Items. However, you won’t be able to include forecasts in the algorithm for your planning without a MPS. Another benefit of having separate MPS and MRP is that it will help you cope with the change requests come with new orders well with efficiency. Because your MRP will run frequently managing the products required while MSP will make sure you are on the production schedule

The master production schedule is a production planning tool that defines how much of a product needs to be manufactured at different periods. This simple schedule can be used as a basis for further planning and scheduling throughout the business.

You can also listen to this article:

• What is a Master Production Schedule (MPS)?
• Master Production Schedule and Safety Stock
• Master Production Schedule and Rough-Cut Capacity Planning
• Additional considerations regarding MPS
• Benefits of a Master Production Schedule
• Master Production Schedule vs. Manufacturing Resource Planning
• Key takeaways

Master Production Schedule (MPS) is the part of production planning that outlines which products need to be manufactured, in which quantity, and when. A master production schedule does not usually go into detail regarding the materials to be used in production, employees assigned to tasks, etc. Rather, it is like a contract between the sales department and the manufacturing department that balances supply and demand by defining the necessary quantities to produce and the timeframes of production.

The Master Production Schedule is a vital tool in make-to-stock manufacturing environments where a demand forecast drives production planning. As an MPS is often used as the main driver of production activity, it needs to be accurate and viable for it to have a positive effect on the profitability of a business.

The MPS can also be used in certain Make-to-Order environments and mixed-mode manufacturing where a business manufactures standard products. In this case, the sales forecast and master production schedule are used to plan the inventory needed for production.

A standard master production schedule is a long-term plan made for each product separately. It is done with a planning horizon of 3 months to 2 years, with a minimum time bucket (smallest timeframe specified) of 1 week.

The basic inputs you need to create a viable master production schedule are the following:

1. Starting inventory. How many units are already available in stock?

2. Sales forecast. How many orders are expected for the period?

3. Current order portfolio. How many orders are already planned for the period?

4. Quantity to produce. How many units need to be produced during the period to keep supply and demand in balance?

You can download a free master production schedule template here.

Example

Let’s say you produce wooden furniture such as chairs, dining tables, and coffee tables.

At the start of the period, you have 40 chairs in stock. Your sales forecast says that you will sell 200 of them. That means you will need to produce 160 chairs during that period in order to match the demand.

As a consequence, the beginning inventory of your next period will be 0. As business is steady, another 200 chair sales are forecasted. This means that now you will need to produce 200 chairs within a period in order to match demand.

Master Production Schedule and Safety Stock

Unless you have absolutely perfected the Just-in-Time manufacturing model, you would always want to keep a certain amount of units for backup in case there is an unforeseeable spike in demand. That is why we can complement the master production schedule with:

5. Safety stock. How many units do you want to keep in inventory in case there are spikes in demand?

In the master production schedule, safety stock will be expressed as part of the period’s ending inventory that will be transferred to the next period as beginning inventory.

Example cont.

Now, continuing with the previous example let’s say that you always want to keep 40 chairs as safety stock. Therefore, 160 chairs will not be enough to meet demand and replenish your safety stock during the first period. This means that you will need to produce 200 chairs altogether to satisfy your customers and maintain the required buffer.

Learn more about Safety Stock and How to Calculate It.

Master Production Schedule and Rough-Cut Capacity Planning

When planning production, you always need to keep in mind how much exactly you are able to produce in a given period. If you take in orders that require you to produce a thousand chairs in a month, but you only have the means to produce 500, you will let down your customers and your company. That is why you would always want to account for:

6. Production capacity. How many products would you be able to produce during the period, given that everything is running smoothly?

Rough-cut capacity planning is an important tool to use alongside the master production schedule. To calculate your production capacity, you will need to know your products’ throughput time and the total productive hours of your shop floor.

Once you have created your initial master production schedule, you can test its viability by creating a rough-cut capacity plan according to the MPS. If the capacity plan shows that your production capacity cannot accommodate the production levels in any period set in the MPS, you will need to find ways to increase capacity or modify the MPS.

Master production scheduling and rough-cut capacity planning is a back-and-forth process. That means any change in either of them requires reviewing the other.

Learn more about Production Capacity and Rough-Cut Capacity Planning.

Additional considerations regarding MPS

Master Production Schedule freezing

Freezing the MPS means locking the first couple of periods a certain amount of time, e.g. a week or two, before production according to the schedule starts. This is done to prevent last-minute changes that create confusion and bottlenecks that slow down production and, ultimately, ruin your plans.

Available to Promise

Available to promise is the number of units that you can additionally promise to deliver to customers (as firm orders) in the period at hand. It is calculated according to the master production schedule. It takes into account all the firm orders and the planned quantities across the MPS horizon. ATP plays an important role in supply chain management.

Batch criteria

When drawing up a master production schedule, you should always consider your batch sizes, i.e. how many products do you make in one run. That will determine the step of your quantities. For example, if you manufacture in batches of 25 products then your quantity to produce cannot be 240, it needs to be 250 or 225.

Maximum inventory

The MPS is a great tool for planning and preparing early for surges in demand. However, there are physical and practical limitations to the quantities you can store in stock. Even if you had the production capacity, it may not be possible to utilize it if your stock is full. Or beyond a certain inventory level, too much cash may be tied up in inventory.

Benefits of a Master Production Schedule

There are multiple benefits to introducing an MPS in a manufacturing business:

• It provides a solid base for building, improving, and tracking the sales forecast.
• It provides a solid base for determining the desired inventory levels.
• It provides a solid base for calculating the quantities of parts, subcomponents, or raw materials to purchase or produce, as part of the next stage of Material Requirements Planning.
• It provides a solid base for calculating the required amount of labor and shifts.
• It allows optimizing the installed capacity and balancing the load of the plant.
• The manufacturing department can estimate the production and maintenance costs associated with the workstations.
• The financial department of the company can derive expected revenues and expenses from the MPS and generate a cash flow forecast. Among other benefits, this will help build investment plans.
• The HR department can take advantage of the MPS to anticipate the requirements of hiring labor.

The MPS should reflect the business plan as closely as possible. This requires a constant update by all departments of the company.

For example, if the marketing department plans a sales promotion, the increase in demand must be reflected in the MPS and the forecast. If the sales team discourages the sale of a product line in favor of another new one, the MPS and the forecast need to be adjusted.

Master Production Schedule vs. Manufacturing Resource Planning

The master production schedule is one of the jumping-off points for manufacturing resource planning (MRP II). Apart from the MPS, however, MRP II uses additional inputs such as inventory statuses, BOMs, routings, material requirements and costs, financial records, staffing and machine capacity, etc. This allows the MRP II system to create a highly detailed plan for all of the different resources related to production and provide you with a real-time overview of your business.

Unlike creating a master production schedule, the complexity of manufacturing resource planning makes it impossible to do manually. Today, there are many different software providers offering MRP systems, but many of them have grown out of accounting or inventory management software and are limited in their manufacturing resource planning capabilities. Using a proper MRP software, however, is becoming more and more important when it comes to staying competitive in the manufacturing business.

Key takeaways

• A Master Production Schedule (MPS) outlines which products need to be manufactured, in which quantity, and when.
• It is a vital tool in make-to-stock manufacturing environments where a demand forecast drives production planning.
• A standard master production schedule is a long-term plan made for each product separately. It is done with a planning horizon of 3 months to 2 years, with a minimum time bucket of 1 week.
• The inputs a viable master production schedule has are: starting inventory, sales forecast, current order portfolio, quantity to produce, safety stock, production capacity.
• When creating an MPS, you can also consider your batch criteria, Available to Promise, and maximum inventory.
• MPS freezing is necessary to lock parts of the schedule in place a certain amount of time before the schedule is taken into use. This helps to avoid confusion caused by last-minute changes.
• The MPS benefits any further planning done in the company, be it related to finances, inventory, HR, or production itself.
• Manufacturing Resource Planning software is a huge advancement from the manual MPS process. It uses an array of different inputs to create detailed plans and provide a real-time overview of the whole business.

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