Recently, I was asked to explain the difference between RCCP and MPS by a prospect. The question seemed interesting enough that I decided to blog about it.
Master Production Scheduling (MPS) plans for items that are independent (or direct) demand. Independent Demand is a demand that comes from Sales Orders, Service Orders, or forecasts on end items, i.e., items that we sell to customers. This demand is directly from the customer requirements (or forecasted requirements). By contrast, dependent demand is a demand that is passed down because of the need to produce the end item. For example, if a company makes and sells orange juice, then the orange juice is the end item with the independent demand, whereas the orange is the consumed item with the dependent (or derived) demand.
MPS schedules (or plans) the production of the abovementioned end items and states the quantity and timing of the production of specific end items. The time buckets are typically weeks. Production for end items is scheduled over several time periods and recorded on a master production schedule.
The essential question that is being answered by the MPS scheduler is this: Accounting for the starting and incoming inventory, how much more should I make when and where to meet the demand and inventory targets in a capacity feasible way?
Read More: An Example of When Optimization Is Helpful in Supply or Central Planning
There are several ways to do this: The easiest way is to set up a spreadsheet program where all the ins and outs are shown. Then, the user does the planning by moving production from one period to another. The spreadsheet is programmed in a way that as production is moved around, the projected capacity used is highlighted. If the projected usage goes above a threshold, it is flagged as an alert for the planner to then work on.
The programming of the above spreadsheet is relatively straightforward. However, the data volume can be tricky. Imagine if a company sells 5 products. Well, one needs 5 sheets then; that is easy. How about 100; how about 1000?
As one gets towards higher SKU counts, it simply becomes impossible to deal with this in a spreadsheet format. This then presents two choices to the business:
Employ an advanced program that can crunch the numbers at the SKU-production resource-time bucket level and show the results to the users in a meaningful way. This type of a program can be inside an ERP or a best of breed SCP system. The engine can be either rule-based or optimization-based.
Decide to do the MPS at some higher level, say, product family. So, if 1000 end items can be collapsed into 5 families, and one could do some approximation about production rates, etc., then the problem can again be solved in a spreadsheet. In this scenario, we are making decisions at the product family level and leaving the SKU level detail for later. This is called Rough Cut Capacity Planning (or RCCP).
In RCCP, the principle assumption is that family-level assumptions are good approximations for the SKU level detail and the change in the mix will not have a big impact on the capacity projection. This, of course, is not a workable assumption in industries where the production rates for SKUs inside a family differ greatly from each other.
Neither MPS nor RCCP gets into the finite scheduling question where exact timing, as well as sequencing decisions, are made.
Read More: Rough Cut Capacity Planning – A Place to Start
It is a good idea to proceed in steps. Jumping directly to an SKU level MPS calculation can be hard for an organization to absorb. A good path forward for a company is to do family level RCCP, break it up into MPS using rules, and then evaluate the right time to do it all in a more detailed, rule or optimization-based MPS. In this sense, RCCP and MPS are sequential steps in a process and are complementary to each other. When done as two sequential steps:
- From an RCCP perspective: You first work on a strategic decision (inventory levels, extra capacity) at an S&OP level which makes sense for the entire organization and that can be easily executed. It drives strategic decisions.
- When working from MPS standpoint: Calculate MPS at a lower level after you have agreed on inventory buildup and capacity level (which is how you connect RCCP and MPS).
Evidently, there are factors to consider when deciding on what method or approach to work with. Here are a few points to pay attention to.
- Firstly, RCCP will:
- Work on a strategic or S&OP decision (inventory levels, extra capacity) which makes sense for the entire organization.
- Act as the first check at your capacity
- Define when to build stock (for peak season)
- Define when to get extra capacity (perhaps by increasing workdays in a week or adding shifts.
- Reduce firefighting by increasing visibility
- Be used as a green light to move to a more detailed MPS
- On the other hand, MPS will
- Work at a lower level after one has decided on inventory build-up and capacity and staffing levels
- Read data (decision) taken in the RCCP for example, it will feed the MPS process with shift regime (available capacity) and decision on when to start building stock.
- On a future date, the MPS might replace RCCP with a more detailed calculator at SKU level
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