The effects of environmental factors on the design of master production scheduling systems

In uncertain environments, firms often use a rolling schedule to implement a master production schedule (MPS). The rolling schedule involves replanning the MPS periodically and freezing a portion of the MPS in each planning cycle. Two important decisions which have a significant impact on the cost performance of a rolling schedule are the choice of a replanning interval (R), which determines the replanning frequency of the MPS, and the selection of a frozen interval (F), which represents the number of periods the MPS is frozen in each planning cycle. The determination of the appropriate F and R values has been an important research issue, especially in an uncertain environment. This paper examines the effects of environmental factors such as cost structure, bill of material (BOM) structure, cumulative lead time, magnitude of MPS change costs, and the magnitude of forecast error on the choice of F and R for a single end item in an uncertain environment where a rolling schedule is used. Results of our investigation show that the choice of F affects total system costs per period (TC) but the effects of the choice of R on TC is situational. In addition, the analysis indicates that the magnitude of the MPS change costs, the BOM structure, and the cumulative lead time of the product are important considerations in the design of MPS systems. Results also show that the magnitude of the forecast errors and the cost structure play relatively minor roles in the choice of F and R. We also show that even when MPS change costs are high, greater freeze intervals and more frequent replanning may be cost effective.