MASTER SCHEDULING: MORE ART THAN SCIENCE

BY JOHN F. PROUD.
SEPTEMBER 1995 IIE SOLUTIONS
T

he master scheduler's real Job involves handling daily situations correctly—making critical
decisions using the information available. Although the master sched-ule itself may be
composed of several thousand numbers— which management uses to make decisions
dailv, the job of master scheduling goes well beyond simply creating numbers. For
instance, the numbers in a master schedute may indícate that the plant is in an
overloaded condition. How does the master scheduler get out of this overloaded condi-
tion? How does the company stay out of it?
Balancing the demand for a product with the supply is the biggest challenge of
master scheduling. This banlancing act requires creativity that goes well beyond the
numbers con-tained on the master schedule. For example, numbers may indícate that
customer orders are being received as forecasted. What does the master scheduler do
about it? What does the master scheduler do when customer orders exceed the forecast?
What if a product is recalled? How about dealing with a plant shutdown. either for a
period of time or permanently? Sometimes customers change their minds and want an
earlier or later dilevery. How should the master scheduler address moving scheduled
orders in and out when production stability is so important? Let's take a close look at tech-
niques that should be used to deal with these situations.
Inaccurate forecasts
The obvious place to start looking for problems is with ina- curate forecasts. Master
scheduling is a demand-driven process. Although a few companies build products strictlv
to customer orders or contratcs, some versión of forecasting takes place in most
companies prior o receiving the order. Companies have engineers on statf; skilled people in
the plant; inventory in the stockroom; and tooling in the crib. Why do they have these
materials and resources? Because they believe those materials and resources will be
needed to fulfill upcoming customer demand.
The first problems the company must face involve hiring engineers; hiring manufacturing
people; buying inventory; and possibly designing, making, and procuring needed tooling—
all based on a forecasi that is bound to have some inaccuracies. In Table 1, the actual
demand for the quarter is very close to this forccasted demand (102 percent). The accuracy
of the fore-cast becomes quite erratic, however, when it comes to the

Table 1
Periods July Auj;. Sept, Quarter
Forecast 5,000 5,000 5.000 15,000
Demands 6,200 2,800 6,300 15,300
Variance + 1,200 -2,200 +1,300 +300
124% 56% 126% 102%

monthly numbers. Difficulty in predicticing the timing of demand is typioal of companies

that must rely on forecasts. Thi accuracy of the forecast is dependet upon two things:
the level of accuracy in the structure that is forceasted (the higher the level, the better the
accuriicv), and the time period forecasted (the closer to the current period, the better the
accuracy). Another problem is that the master scheduler will mostt likely schechule in weeks
or days, while the forecast is presentad in monthly totals.
Inaccurate forecasts can have serious consequences for companies. When someone
forecasts, things happen. Materials are ordered; people start thinking about adding or
reducing capacities; and in many instances, money is spent. These efforts can be costly
when forecasts are inaccurate.
Another problem occurs when forecasts are not taken seriously. Sales sometimes
gets into the habit of attempting to ensure fewer stockouts by simply overstating the
forecast.
Sales also will sometirnes understate the forecast because of commission structures,
bonus plans, and performance club objectives. All too often, there is no reward or penalty
for the accuracy of forecasts.
Real costs of inaccuracy
What are the real coss of forecast inaccuracy? Let´start with The situation where the costumer
does no get the product as Requested or promised. Then consider excess inventories; overtime
expense; production people stressed;less productivity,idle production hands, idle capacity;
marketing trend analysis an second guessing, ton name just a few. Wath about the revenue
projections being off, and a sales force that is afraid to guarantee delivery to the customer?
Master schedulers know that actual demand will not Match the forecast, except in rare
circusntace . therefore Scheduling, as well as manufacturing, must always be flexible, both
functions must be willing and able to shift capacity and materials as necessary, while maitinning
a somewath stable manufacturin run rate. The master schudeler must also know who approves
changes to the schedule in the various time zones(e.g two weeks prior to shipment,

Case Example: Producüon slowdown at Xerox

In 1976, a leading medical group announced its conclusion that women
below the age of 55 should not nave regular mammograms. In its opinión,
the danger of repeated radiation exposures outweighed the benefits of
regular mammo-grams to detect breast cáncer in younger women. For Xerox
Corporation's Xeroradiography Operations Unit, this announcement scored
a direct hit on their operations, and threatened to elimínate a large chunk of
the market for its mammography machines.
Though some of its backlogged orders held firm in the wake of the
announcement, many orders were canceled, and only a few new customers
demonstrated interest in the product. With its demand forecast sinking rapidly,
managers and production schedulers had to react to new estimates of furure
demand and dramatically revise their production plan.
In the fast-paced business environment of 1976, vvhere producís were
quickly undercut by new technology, new competi-tors, and reguiatorv or
scientific judgments, Xerox faced a similar situation. Just about everyone in
the business unit, including the master scheduler, was forced to make
dramatic course corrections. For example, consider the following set of
numbers for a hypothetical manufacturing operation:
Period 1 Period 2 Period 3 Period 4
Original Forecast 100 100 100 100
| New Forecast 30 10 10 10
Master Schedule 60 0 0 0
The original forecast had been for 100 units per period, but new
developments have cut deeply into that figure. With future demand slowed to
a trickle, and the future of the product clearly in doubt, management sees a
shutdown of the production line as its best option. But, the important factor is
deciding just exactly how that shutdown should be scheduled?
In this simple hypothetical situation, let's say that management decides to
keep the production line open during the next period and build for a!l demand
anticipated over the next four periods. This plan will result in heavy initial
inventory, but financial managers determine that the inventory costs will be
less than the costs associated with maintaining a !ow-volume production line
over time. Once its inventory of built products is exhausted, the product will
be terminated due to insufficient demand. When management agrcemerí is
reached on the approach, the plan ir. communicated to all and execution of the
plan takes place.
So what happened in the case of Xerox? The Xeroradiography Operations
Unit determined that the comhination of existing finished goods, current
production scheduled during the next severa! months, and machines sent back
for refurbishing would satisfv reduced market demand for a period of two
years. Current work was- completed, and the production Une was shut donwn.
T'wo other devoloprnents occurred within those two years. Medical opinión on
the risk/benefits of mammograms for women under 55 was reserved. And
engineering changes at Xerox were succcssiu! in reducing the radiation levels
of the next generation of mammogram machines.

one month prior to shipment)

It takes courage to look beyond Ihe custoiner order backlog and reiy on íorecast
nuinbers. Since MRP 11 and master sched-uling are demand-driven processes, vvhat else can
be done to improve forecast accuracy?
The forecast should be constantly monitored to improve its accuracy. People involved in
forecasting must understnnd the importance the forecast plays in the overall picture and in the
aetions taken based on the forecast. These management issues and problems must be
addressed, not swept under the rug. Many answers to production problerns lie in the hands of
the forecaster and master scheduler.
Overloaded master schedule
Some cornpanies are habitually behind schedule. it is impos-sible for them to ever build a
product on time or, even worse, ship the product on time. If you think Friday afternoons are
bad, Monday mornings are worse. it is hard enough just deal-ing with the current week's
expected production. When work goes uncompleted one week and is then added to the
current work load, it soon becomes an overloaded condition.
There is an important principie to be remembered: time that passes is gone forever. The
inexperienced master scheduler may let the past-due load remairn past due—it should be
against the law to allow the master schedule to go past due— or simply move it to the current
period. Although the second solution seems better, it still leaves much to be desired. Either
way, what now exists is a master schedule that cannot be met
Several major problems surface when the master schedule is overloaded. Production
inefficiencies become the norm; poorly timed line changes occur; downtime due to material
shortages is common; stress is rampant; mixed priority signals are sent to production;
product is not shipped as promised; partially built product rernains as work-in-process; and
financial problems occur. But that's not all.
As costs are being driven higher through overtime, expediting, and air freight,
compensations are being made to irr.te customers. The planning and control system is
probably in shambies; budgets are a joke; everyone is confused; coordina-tion issues surface
throughout the plan: capacity problems are not solved; and quality drops.
This environment easily deteriorates into false forecasts based on bias, as well as false
order piacing—asking for more than what is needed and asking for it earlier than is needed.
Sales, marketing, and management tend to discount production capabilities and fall into the
trap of overloading the master schedule. This is a natural response to lack of performance.
Fortunately, or unfortunately, the master scheduler also knows the game that's being played.
The point here is that the game is being played for sorne pretty high stakes.
Management must create an environment of honesty about the numbers. Sales and
manufacturing must form partner-ships if the company is ever to work its way out of the
over-loaded master schedule situation. The fear of being wrong or making a mistake must be
removed if the “blame game “ is to be buried. Once this is done, the overloaded. master
schedule should be rescheduled to meaningful and valid due dates. In addition to
rescheduling, a realistic approach to order-promising needs to be established and
implemented with the rescheduling effort.

Demand falls short of forecast

Someone once said. "Those who tell. don't know: and those who know, don't tell.” When
expected sales are forecasted people jump into action. The master scheduler creates a
schedule that triggers material purchases. The schedule also causes manutacturing to
begin building components; engineering to work on new designs; and finance to look into
securing the money required to pay for all this accelerated activity. Customer orders are
now what are needed. What happens if the expected orders do not materialize? take a
look at Table 2.

Table 2
Periods July Aug Sept
Original Forecast 50 50 50
Actual Demand 35 22 14
Master Schedule 50 50 50

When expected orders don't materialize, several events occur. Marketing starts to wonder
why the forecast was so far off. Sales management begins to panic—thoughts turn to ‘’let’s
rnake a deal." Concurrently, manufacturing also moves into action. Sometimes the master
scheduler looks for work to eliminate idle capacity. This may be okay for the current period,
but what about the periods that follow? The optimist may continue to build product in the
hopes that orders will materialize. The pessimist may start to immediately reduce capacity
by laying of people prematurely.
The pragmatist looks at all the available alternatives. Maybe the right thing to do is to build
sets of common parts, or reschedule some of the material to a later date. Looking at the
manufacturing resources available, maybe some of the people can be assigned to other
useful work. Of course, this requires flexibility in the hands of the master scheduler.
At this juncture, company management must decide whether it wants to sell what is made
or make what is sold. This is a key decisión. Production-oriented companies contin ue to
work their technical capabilities; they may slow, but rarely stop production; and they invest in
sales marketing tool sets, such as price flexibility, attractive financing, and warrantee
extensions. Sales- and marketing-oriented companies answer brisk sales with a "Yes"
production response—the "You've done it before" attitude. Production slows accordingly if
sales are off.
Earlier delivery requested
"Reschedule our order" is not something that most manufacturing companies want to hear.
Although such requests may cause disruption and other unwanted problems, they are
better than the alternative, which is "Cancel our order." How does the master scheduler
handle these requests to satisfy the customer while keeping a stable schedule. Table 3
illustrates the situation.

Table 3
Periods July Aug. Sept

CUSTOMER ORDER 30 30 30
Revised order 30 40 20
Master Schedule 30 30 30

The first thing to note is that the customer's request is for change in timing, not a change
in volume. A timing request usually requires a shift in materials and resourees. When
responding, it's important for the scheduler to understand Why the request to
change in timing is being made. it could be that the customer needs the product. it
also could be that a sales representative wants the order moved up because of a
sales contest: an order clerk is simply reacting to an order point being tripped; or
safety stock needs replenishment. Some of these conditions may suggest that
shifting resources and expediting materials are inappropriate. But many such
requests do deserve positive responses.
There are several questions that need to be answered before the master
scheduler responds to such a request:
• Why is the request being made?
• Can the n ecessary materials be secured?
• Is capacity available?
• How much will this change cost ?
• Is t he master scheduler authorized to make the change?
Additionally the master scheduler should also ask, "What happens if the schedule
is not changed?" Most changes, especially if they occur within lead time, are
disruptive to the manufacturing floor and could well affect shop personnel morale. If
the master scheduler plans to change the schedule, he should ensure that positive
results occur.
Moving a manufacturing order to an earlier date
Pulling w ork forward is not always a bad thing to do. It might be manufacturing's
request to build early, and it may benefit the company. Maybe the pull-up is
required due to a pre-ship test surfacing a quality problem; the cyde counting
program uncovering an error in the inventory; or a new safe ty stock level needing
to be established.
Changes like the on e suggested in Table 4 may be diffi- cult are expensive to
implement. The key questions listed earlier must be answered before the master
scheduler changes the numbers.
 Table 4
Periods July Aug. Sept

ANTICIPATE DEMAND 30 30 30
Master Schedule 30 30 30

Revised Schedule 30 35 25

Moving manufacturing orders up in the schedule can affect materials, capacities,

and the master scheduler's credibility. Remember, manufacturing has a historv of
respondmg. As stated earlier, the master scheduler and manufacturing must be
flexible, to a point.
How about moving a manufacturing order out? After all the best expending; tool is
de-expending. The last point is that, before the reschedule is made, the master
scheduler before must secure approval according to the company’s reschedule time
zone policy .
Inventory build-up
For a company in a seasonal business, planing f or the large order or changing the
manufacturing strategy from make-to-order to make-to-stock may cause an
inventory build-up sit- uation. In, this instance, the forecast is extremely important, to
sav the last. If the master scheduler does not schedule enough product to be made.
There may be no product for the customers when requested. The result would be a
lost sale.It
the master scheduler schedule s too much product to be built, the company could
find itselt with inventory thatt cannot be sold. Additionally, there might be shelf-life
issues that may cause the product to be scrapped.
The master scheduler must analyze the entire situa tion and decide how important it
is to stabilize the schedule. Considerations that must be taken into account when
attempt- ing to stabilize the schedule include carrying inventory versus carrying
capacity, and the risk of losing business versus the cost of carrying product in a
finished state.
Companies faced with t his situation should look into their design—both product and
process—to determine whether the lead time required to produce the product can be
shortened so they won't have to build to a complete finished goods state.
Production shutdown, product close-out
Product life cycles seem to be getting shorter and shorter in today's manufacturing
arena. Therefore the master scheduler sometimes may be faced with a production
shutdown for a product line or even an entire plant.
Plant shutdowns and product close-outs are m anagement decisions that can
sometimes be difficult to make Once one of these decisions is made, the
management team has several other decisions to make. The team may decide that it
is better to keep the production line open and build enough product to cover the next
several periods of expected demand before the line is shut down. Here, the tradeoff is
production efficiency versus carrying the inventory. An analysis might reveal that it.
may cost less to carry the inventory than to maintain low pro- duction volumes. Once
the product is buiit, the line would then be shut down.
There are several other issues that must be addressed when the demand for the
product is reduced, recalled, or stopped. What about the materials that are already
in the stockroom; the materials that are on order; the people in pro- duction; the
production facility itself? Should the company try to rebuild the demand through
aggressive public relations and advertising or should the company just let it go?
Answers to these types of question require more than just the master scheduler’s
input.
The key is managing change
Successful companies have a way in which. they meet these challenges. Watching a
successful master scheduler at work is like watching an artist paint a beautiful
seascape or mountain scene. If a true artist makes a mistake or wants to change the
picture, he or she merely puts a few more brush strokes to the canvas. When a skillful
master scheduler decides to change the picture, he or she makes a few well-thought
out key- strokes on the computer and the problem generally is brough under control.
What the master scheduler and artist have in common that they both understand the
overall picture and how to use the necessary tools to manage change.