Projected available balance is an inventory balance projected into the future. It is the running sum of on-hand inventory minus requirements plus scheduled receipts and planned orders.
Definition of projected available balance
It is defined as the balance projected in the future, as the available balance of the on-hand inventory. It is derived after netting the requirements, and adding the scheduled receipts and planned orders that are about to arrive.
Once the projected availability has been determined, and there is a clear understanding of the remaining inventory to be utilized, an MPS is released accordingly. If the projected available balance,
- Is more than zero
- Or equal to zero
No net requirement exists, and thus MPS is not released. This is because the available balance is a substantial amount, and the demands for the next batch could easily be met with it.
If the projected available balance was less than zero, only then would there be a release from the MPS according to a specified lot size.
An MPS is also known as a planned order schedule. This lot size is specified, keeping in mind the company’s gross requirements and regular proceedings.
Example of the projected available balance
Let us suppose our company generally has a lot size of 60 units.
The on-hand inventory present at a given moment is 40.
The demand for the first week is 45.
Now, as the demand is more than the projected balance, the entire balance is used up along with five more units.
This makes the projected available balance for the next week in a negative (-5). Now, as the projected balance is negative, an MPS is released, of 60 units which make the balance 55.
Now this week, there is a demand for 40units. This makes the projected available as 15. As the projected available is now positive, it does not require any MPS to be released. Hence, MPS is 0.
Now, in the coming week, already a scheduled release of 60 units is set up from beforehand.
This makes the next projected available as 60+ (15-40) = 35.
This balance is now used up in the next week, where there is also a demand of 40 and a scheduled order of 60, already placed from before.
Hence the projected available is 60+ (35-40) =55.
These 55 units are now available for the next week as an on-hand inventory.
What is MPS?
An MPS or Master Planning Schedule is a computer-based program that maintains orders for a firm. It keeps a tab on the orders scheduled to arrive and how much to be ordered.
An MPS also maintains a clear schedule of the projected available balance, scheduled receipts, planned releases, etc., and does not allow any order to be placed when projected available is 0, within a given time fence. But once outside the time fence, it will automatically order if the projected available is negative.
The formulas used by an MPS
The projected available balance calculator can make use of the below rules for their calculations.
Projected Available Balance (PAB) in the first period = Current on-hand inventory + MPS Receipts – Safety Stock – Orders
Projected Available Balance (PAB) after the first period before time fence = Prior period PAB + MPS receipts – Customer Orders
Projected Available Balance (PAB) after the first period after demand fence = Prior period PAB + MPS receipts – Greater of Forecast/Customer Orders
Benefits of MPS
- Helps to prevent stockouts
- Helps to balance demands, the capacity of the equipment, requirement of the labors.
- Gives a clear picture of the number of products to be manufactured in a given period of time.
- Helps to improve efficiency
- With rough-cut capacity planning, it helps to find the real capacity to meet customer demands.
Hence, the MPS is known as a master planner, which keeps track of the order schedule efficiently.