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How to Create a Master Production Schedule (MPS)

Manufacturing is a complex process. It requires balancing production capacity, inventory levels, material requirements and other aspects to fulfill orders. Once you’ve aligned these project aspects, you need to schedule your production.

Creating a master production schedule is crucial in ensuring your supplies match demand. A robust master production schedule also supports your sales force and strengthens your capacity to meet the needs of your customers.

What Is a Master Production Schedule?

A master production schedule (MPS) outlines which products will be manufactured and when they are made. This schedule outlines the various processes and resources needed to make production move forward smoothly while identifying potential bottlenecks and creating plans to avoid them.

A master production schedule is critical in manufacturing, as it can be the difference between an organization making a profit or experiencing a loss in revenue. To make sure you don’t miss anything, there are several data sources you can use as input for the development of a master production schedule. Here are some of the most commonly used ones.

To create an effective master production schedule, it’s important to use the right project management software. ProjectManager’s Gantt charts, kanban boards, and project calendars allow you to create an interactive MPS so you can assign work, track timelines and collaborate with your team online in real time. Get started for free.

Why Should You Use a Master Production Schedule?

Having a plan that can forecast the demand for your product over a period of time is the primary purpose of a master production schedule. However, there are other key important roles that a MPS plays in manufacturing and production planning.

The main functions of a master production schedule include:

Another function is to keep your commitments to your customer base. Manufacturing only works when it serves its customers on time and within budget.

When you have the right master production schedule process, your demand flows smoother, lead times improve, communication is standardized, requirements are prioritized and production is stabilized.

How to Create a Master Production Schedule

When making a master production schedule, you need to follow a process to fulfill the function of the schedule. The best way to do that is by following these steps.

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What Should Be Included in a Master Production Schedule?

Before you make your master production schedule, you need a demand plan to understand what your customers want. A demand plan depends on accurate historical sales data, which helps you figure out what demand will be in the coming weeks. The demand plan must be regularly reviewed and updated.

It’s helpful to have what’s called a safety stock stored in case demand unexpectedly spikes. This will carry you through the period while you update your master production schedule. Don’t neglect to replenish your safety stock after you use it.

The master production schedule will include these parts.

Master Production Schedule Template

Our free master production schedule template is a great tool to get started with production planning. It can be easily customized to fit your business’s needs.

Production schedule template in ProjectManager

Benefits of Using a Master Production Schedule

Using a master production schedule is a necessity for manufacturing businesses. The better you understand your manufacturing process, the better you can meet the changing demands of your customer base. Here are some of the main benefits of using one.

A master production schedule also serves as a channel for communication between the sales and manufacturing teams. Because this is a continuous dialogue, the master production schedule is flexible and open to change as needed.

To summarize, it’s a plan for making whatever commodity your organization produces. It schedules the production of that commodity, but also includes the staffing and inventory that are required. The plan itself is determined by the demand for the product, and this information is provided by sales.

How ProjectManager Manages Your Master Production Schedule

ProjectManager is award-winning software that organizes work, teams and projects. Using project management tools can help you plan, schedule and implement manufacturing processes more efficiently.

Use our online Gantt chart to create a master production schedule that lets you map tasks across a timeline while keeping track of costs and resources to make sure you’re never overspending. Even better, the dynamic Gantt chart is flexible and can be quickly edited to reflect changes in orders and capacity.

Gantt charts are planning tools that help you schedule tasks across a timeline. You can then link any dependent tasks to avoid bottlenecks in your manufacturing cycle. For example, if a strap needs to be stitched to the body of a handbag before the embroidery can be added, you identify this dependency and link the two tasks to keep production running smoothly.

See how to do that and more by watching this short video on how to schedule with ProjectManager.

The Gantt can also be shared, and because the project management tool is online, all data about your manufacturing process is collected in real-time. If there’s a delay with needed materials, you can easily adjust the schedule.

screenshot of the dashboard in ProjectManager

The master production schedule needs to reflect demand and supply. This means it also needs a tool that can give you a high-level view of your production. The real-time dashboard collects data and automatically calculates time, costs and other metrics to give you a high-level view of your production.

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What Is Production Scheduling and Why Is It Important?

By Joe Weller | March 9, 2023

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If you walk into a store and see that your favorite brand of frozen pizza is out of stock, you’ll probably be disappointed and choose a different item. Customers often opt for convenience, especially with so many different product variations available.

Companies shouldn’t lose revenue and let customers slip through the cracks by underestimating demand and resources or failing to meet deadlines. Production scheduling helps you anticipate demand, stock resources, manage labor, and prioritize on-time production in order to avoid these crucial business objectives.

In this guide, you’ll learn the importance of production scheduling , the steps for creating a schedule , and optimization practices to help keep your company on track .

What Is Production Scheduling?

Production scheduling is the process of determining when products will be manufactured to maximize efficiency while limiting stockouts and unbalanced inputs and outputs. This process includes optimizing where, when, how, and what materials you will use to manufacture your products.

Production scheduling definition with an abstract calendar and scheduling illustration.

A successful production schedule will help you do the following:

These schedules are flexible documents, and may include different variables relevant to the current production period. A successful production schedule will also report on critical supply chain key performance indicators (KPIs), including the following:

Successful production schedules will plan, refine, organize, and standardize projects.

Production Scheduling vs. Production Planning

While a production schedule is determined by short-term factors, production planning takes a longer time frame into consideration. Production plans are determined by the ideal times to produce products for on-time deliveries, capacity plans, and material requirements.

Production schedules are relatively flexible and adapt to changes in manufacturing operations, but production plans are required to stick to predetermined timelines. Production planning also considers the following:

The Importance of Production Scheduling

Production scheduling is a crucial part of the manufacturing process that helps to ensure efficient production times, decrease costs and product shortages, and eliminate interruptions, delays, and waste.

Production scheduling also concerns the following eight elements:

Production templates can help you keep these priorities in mind while creating a top-notch schedule personalized for your organization.

Six Production Scheduling Steps

Creating a production schedule requires you to balance customer needs with your organization’s available time and resources. Whether you’re creating a product or producing a video , your production schedule should consider or include steps for planning, routing, scheduling, dispatching, executing, and maintaining.

These six steps are outlined in more detail below.

1. Planning

During the first step, a company will analyze resources, budgets, staff, stock, and timelines to evaluate the status of the production processes. There are two types of planning methodologies:

At this stage, you should also set strategic goals and calculate labor and capacity.

In the routing step, a company will determine the path that raw materials must take from their original form to a finished product. This also includes determining the most efficient, cost-effective steps in the manufacturing processes.

3. Scheduling

This step is used to officially determine the dates and times for a project using a company’s specific methodology. You can create different types of schedules, including the following:

4. Dispatching

Dispatching refers to issuing orders concerning the locations of people, parts, and products. In this step, a company determines how these items will reach their designated locations during the entire scheduling process.

5. Executing

This is when the company actually carries out the production schedule from beginning to end — and thus, sinks or swims. If researched and created effectively, the schedule should create a smooth production process.

6. Maintaining

After a company executes the production schedule, two-way communication between management and workers begins. This step can help a company determine areas for improvement, which it can then take action on.

Common production scheduling steps including planning, executing, and maintaining.

Production Scheduling Methods

While there are six main steps to the production scheduling process, there are different methods companies can use to optimize their own systems. Capacity planning and forward and backward scheduling are the most common methods used to create production schedules.

Capacity Planning

If client satisfaction is a main concern for your company, consider capacity planning as your main scheduling method. Capacity planning is mainly concerned with resource availability, service delivery, and customer satisfaction.

There are two main types of capacity planning:

Companies with a few larger, simultaneous projects should consider an infinite capacity methodology, while those with many simultaneous complex projects will likely benefit from finite capacity. If you are considering using this methodology for your production scheduling, capacity planning templates can help you quickly produce schedules specific to your company’s resources.

Forward and Backward Scheduling

You can also use forward and backward scheduling to determine a project’s production order. This method bases the project timeline on either the first step or the due date, as described below:

Backward scheduling is also known as a workback schedule and is best suited for a project with a hard deadline. If you’re using a forward and backward scheduling methodology, first determine if your project depends on strict due dates or tight schedules.

Gantt production schedule, which is also known as a workback schedule.

How to Optimize Production Scheduling

Since there are different methodologies, contributors, and factors that either change or depend on an up-to-date production schedule, it’s crucial to continually optimize. One of the best ways to do this is to incorporate agile planning into your scheduling process.

To do this, consider the following:

What Is Production Scheduling Software?

Production scheduling software allows you to determine, build, and manage your production schedule from one platform. This type of software — also known as Advanced Planning and Scheduling (APS) software — allows you to create dynamic, up-to-date schedules across diverse teams.

Many companies use simplified tools for scaled-down operations schedules. However, there are some downsides, as tools like Excel and Google Sheets can:

For companies with larger-scale scheduling or enterprise resource planning needs, production scheduling software can be an incredibly powerful tool with a variety of benefits and capabilities.

If you’re considering a software program, evaluate your options by examining the following:

Overlapping views of production scheduling software.

Benefits of Production Scheduling Software

Production scheduling software can be expensive, and new programs can take time and resources to implement. However, the following seven benefits often outweigh the costs and setup times:

Optimize Production Scheduling With Real-Time Work Management in Smartsheet

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When teams have clarity into the work getting done, there’s no telling how much more they can accomplish in the same amount of time. Try Smartsheet for free, today.

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How to manage your production schedule and hit your deadlines

how to make production schedule in business plan

Not everything will go according to plan on the shop floor. That’s just a fact of life that you have to deal with — like how Snapple discontinued their glass bottles.

But to maintain steady production and good relationships with your customers, you need a reliable production schedule.

In the past, a notebook, checklists, and thorough daily inspections and interviews were the only way to control the production schedule.

While new digital tools have made this process a lot easier, it can be hard to set up the right platform.

In this article, we’ll cover what a production schedule is, common production strategies, pitfalls to watch out for, and how to effectively manage one in 2021.

What is a production schedule in manufacturing?

In manufacturing, a production schedule is a timeline set up to create the right amount of products to meet the demand within a timeframe. It helps you keep your costs low and avoid overproduction while still meeting your deadlines.

For a manufacturer, a solid production schedule is the foundation of a healthy customer relationship.

Note: The term production schedule is also used in video production , but that’s not what we’ll cover in this post. We’ll focus on the production of physical products.

Get started with monday.com

What does a production schedule include?

A production schedule includes the necessary inputs and outputs, like raw materials, labor, routing, and more.

It covers the expected demand and the process of sourcing and turning enough raw materials into products during a limited timeframe.

A basic high-level overview might look something like this:

But you’d also need to plan out quantities of raw materials, timelines for supplier deliveries, and more. Tailor the master production schedule to your company’s unique process.

In production scheduling, you can’t just copy and paste a template and celebrate a job well done. You must make sure that it outlines all the moving parts in your production process.

To keep track of everything, teams often divide a master production schedule into 5 stages.

If you only cover production planning, routing, and scheduling with no system for dispatching or execution, your plan is limited.

Standardizing these processes and having fail-safes in place is crucial to stable production and sturdy customer relationships.

But the first stage of production planning is crucial. It sets the tone for all the following elements of the schedule and implementation. After all, producing 1,000 units and 10,000 units is a different ball game.

That’s why your planning approach is so important.

What are the basic production planning strategies?

Some of the most common strategies are level production, make-to-stock, and assemble-to-order. (There’s also the chase strategy, but we don’t recommend it.)

You can also categorize these even broader into push (expect demand) and pull (make only after orders).

( Image Sources )

The epitome of the push approach is level production. On the other side of the spectrum, make-to-order is the best example of pull.

The upside of a push approach is that you have more leftover inventory during a crisis. But most companies avoid this approach because of high overhead costs and a much slower cash flow.

You also may not store all the products in a way where your supply will truly last much longer. Unforeseen fluctuations in demand can mean that you need to change your priorities.

A company that’s used to a static production plan will often struggle to adjust.

Next up, we’ll explore some of the most common issues with production scheduling.

Common production schedule pitfalls

Some of the most common pitfalls include too much faith in your supply chain and over or understocking.

Let’s take a closer look.

Thinking that the supply chain is infallible

The global lockdowns in 2020 proved how fragile most companies’ supply chains are. But even in the non-pandemic year of 2019, there were 1,000s of supply chain disruptions that impacted US businesses.

( Image Source )

The outcome of a disruption can be devastating:

To solve this problem, supply chain leaders are focusing on resilience. They’re increasing their number of suppliers and focusing more on local or regional supply chains.

Improving robustness is a core principle of good supply chain management.

Get started

Keeping too much or too little safety stock

If the production process takes a long time, the last thing you want is to keep your customers waiting.

Can you handle a few days less production if a supplier’s shipment is late? Do you have a stock buffer? If your answer is “no” to both, you’re asking for a disruption.

But on the other hand, having too much stock hanging around isn’t good, either. You effectively slow down your cash flow and ability to invest in other products and projects.

So, calculate the ideal safety stock based on average delivery issues and the demand cycle.

You also need a bare minimum of excess supply and materials to handle return requests at an acceptable rate.

Miscalculating when you’ll need the materials

You must know when in the manufacturing process you need each raw material in what quantities.

If you miscalculate when you need some materials in the production process, that’s it. Production has to pause or pivot to another product until it arrives.

The cost of unplanned downtime varies based on your company size and industry. In oil and gas, the average cost of unplanned downtime was $5 million last year.

Make sure that you don’t fall victim to these basic pitfalls when creating your production schedules.

How to manage your production schedule with monday.com

monday.com’s wide range of native integrations and extensibility through our automation builder and application programming interface (API) can help you modernize your production workflow.

You can use our robust platform to build the exact production scheduling software your company needs. Get more work done and avoid mistakes with all the information you need in one place.

Create a custom production schedule using our templates.

monday.com offers a basic manufacturing production process and schedule template. You can easily customize this with the necessary information and timelines.

For example, you can add material tags and deadlines for material shipments. If there are other specifications than colors, you can add that in too.

You can also upload relevant files, like CAD drawings, directly to each order. Essentially, you want to outline your entire process from start to finish.

If you don’t cover all your bases, you leave room for error or misinterpretation.

Keep track of supply orders and inventory in real-time.

With monday.com, you can also handle cloud inventory management from the same dashboard.

For example, you can monitor all incoming supply orders and compare them to your current inventory.

With these boards readily available, it’s easy to assess any potential cash flow or inventory issues.

Use automations and integrations to keep the right people informed at all times.

Use our 40+ native integrations and powerful automation builder to keep everyone on the same page. For example, send automatic Slack messages or emails when you exceed a due delivery date.

For B2B companies who use a bulk ordering and invoicing system, you can even set up order forms directly from monday.com.

If you use enterprise resource planning (ERP) software, you can easily build an integration using our API and 50+ pre-made adaptors.

On-time production is key to healthy customer relationships

If you can’t deliver products on time, your customers won’t be happy. It doesn’t matter if they’re resellers or end consumers — you need to keep your deadlines.

A healthy production schedule that factors in risk buffers, combined with a bare minimum stock surplus, is crucial to any manufacturing company.

Use monday.com’s ready-made manufacturing template to start taking back control of your production.

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With monday.com work os.

What is a master production schedule? The complete guide

A master production schedule is the backbone of every productive manufacturing business. With this article, you can learn about a master production schedule and how to implement it into your processes.

Here it is — A path to mastery over your day-to-day manufacturing challenges .

It’s called a master production schedule .

It’s an essential supporting document for your entire production planning and scheduling.

In short, it’s a big deal. It’s one of those secret ingredients that takes your business from a good earner to a truly outstanding enterprise. But how can something like a master production schedule do this?

Imagine you’re following a complex recipe from your favorite celebrity chef cookbook.

How would it turn out if the instructions did not give you any information about the amount of each ingredient or the time it takes to prepare and cook? You would spend a long time figuring out how to produce the finished product by looking at videos and pictures. Maybe you’d get it somewhat right, but along the way there would be a lot of thinking time and uncertainty.

This is the difference between having a master production schedule and making do without one.

A small change makes all the difference. That’s why investing time in master scheduling boosts your business’s power and capabilities.

It’s a force multiplier.

In this article, we will look into the master production schedule, its benefits, and the tools you can use to piece your master schedule together.

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If the download doesn’t start, get your free production schedule template here .

A master production schedule (MPS) is the overall plan to assess the production of your finished goods, detailing what you need to produce, how much you need to produce, and when you need to produce it.

In short, it contains any relevant information related to production, including time frames, such as your manufacturing lead time . Here is a quick overview of the master production schedule process steps you’ll need to follow when putting this together:

Once you’ve implemented your master schedule, every employee on your shop floor is clear about what needs to be produced each week. Your master production schedule ensures everyone in your business is working towards the same goal. The master scheduler — the MPS architect — can then forecast relationships between demand and supply so you know when to increase or decrease production.

The master production schedule is a crucial input into the aggregate operations plan, giving an overview of everything your business needs to do for 100% order fulfillment.

This is producing sales orders and delivering them on time, without any problems or defects. This is known as a perfect order — which is what every business should strive for on all their sales channels.

The purpose of a master production schedule is to save you time by making the hours you spend managing your production flow much more efficient, giving you more space to scale your manufacturing business. Once you understand this ultimate goal of the master schedule, you can make sure that the other objectives are all aligned toward achieving this goal. Here are the other functions of a master production schedule.

1. Translating production plans

How will you manage operations to balance demand, labor requirements, and equipment capability? MPS in operations management will help you determine how many items you need to produce within a specific period.

2. Evaluating alternative schedules

A master production schedule should consider multiple manufacturing routes to determine the most efficient and consider any problems that might occur along a production line.

3. Produce capacity requirements

Rough-cut capacity planning with your master production schedule helps you figure out the realistic capacity you need to meet demand, increase profits, and minimize your costs.

4. Facilitating information processing

The master schedule helps you set your reorder points to make deliveries that need to be placed. You can coordinate different management information systems such as marketing, finance, etc.

5. Utilization of capacity

Finally, a master production schedule will help you establish the loads and utilization requirements for machines and equipment.

The other master production schedule objectives are:

Those are the desired outcomes of your master schedule. Now let’s look at the ingredients of the ideal master production schedule.

You’ll need a demand plan when you put together your production calendar. You need up-to-date and accurate historical sales data to generate said demand plan. You can use this to determine your projected demand for the upcoming weeks.

Just make sure that you adjust this on a week-to-week basis.

Keeping some safety stock around is good in case you receive an unusually large or uncommon order. If your demand grows, you need to increase your order policy so it does not frequently eat into your safety stock.

So as each week passes, you update your demand plan to create a more accurate production calendar. Your MPS manufacturing may be a work-in-progress, but you will fine-tune it, making it a valuable tool for your business’ order fulfillment .

The correct procedure for developing a master production schedule is to include the following elements:

What benefits can you expect to reap once you implement a master production schedule into your business planning?

Let’s review a master production example for a leather manufacturer selling bags.

To simplify this production schedule example, let’s look at just two products, with two variations each, making four SKUs:

First, let’s see how this looks in a run-of-the-mill master production schedule that thousands of businesses currently use.

Hard on the eyes, right? Apart from being hard on the eyes, one downside to this approach is that the master production schedule is not dynamic.

It doesn’t change based on actual orders and capacity. You have to update it yourself as it is based on a spreadsheet program. Excel is inefficient and vulnerable to business-harming errors.

That’s why manufacturers, especially scaling ones, turn to tools such as MES software to help them put together a more visually appealing and dynamic master production schedule.

But before we look into a master production schedule being used within a cloud-based manufacturing system, let’s quickly look into the difference between a master production scheduling and production scheduling, both very important steps in manufacturing.

So, what kind of manufacturers use a master production schedule?

Well, no matter the size or type of your manufacturing business , the sooner you start, the better. This is because it fosters good business habits , so things like creating and managing a master schedule become second nature when you finally scale up. Your business habits are a key predictor of long-term success.

The master production schedule is compatible with different production workflows:

Master production scheduling focuses on producing finished goods or components (if you have an ATO workflow).

The most profitable goods for your business will likely make up most of the resources needed for production. Ultimately, manufacturers use their master production schedule to help them:

So, when you’re putting together your master production schedule, you also need to consider these other important variants when utilizing your MPS:

Create a master production schedule automatically

There can be confusion between a master production schedule and a production schedule since the processes to develop the two can be similar.

So, to tell them apart, here is the difference between an MPS and a production schedule:

Master production schedule

The continuous optimization process that businesses need to carry out determines the number of finished goods they need to produce based on the inputs and constraints of their production.

Production planning

On the other hand, production planning is the early stages of your manufacturing process , where you’ll define the production levels with limited and fewer details. Production planning aims to determine the production of items in terms of families or groups.

Now you’re updated on what is a master production schedule and the difference between production planning, you might realize that putting together an MPS is a lot of work.

Fortunately, software on the market can automate this process for you , so you can put together your master production schedule in no time and get right back to growing your business.

Katana is a tool for manufacturers looking to centralize their entire business, from master production planning to manufacturing and even sales.

Katana comes with a master production schedule or real-time master planner, which automates the tasks associated with your master schedule and streamlines the entire process. So, using the earlier example, let’s take another look at a master production schedule in Katana.

This is the “Make” screen in Katana.

All the information you require from a master production schedule is here – amounts, production time, and deadlines. You can access the bill of materials for any manufacturing order by clicking on the row you want to access. Every staff member also has their own personalized schedule.

Pro tip: Click on “All Dates” below the “Production Deadline” (4th column from the right) to change the date range. You can review your schedule for the current day and the next seven days. In fact, you can set “Custom Dates” to customize your master production schedule as much as you need.

See how subtle changes can make all the difference?

But what about your raw materials planning ? Easy. Click on an MO (manufacturing order) field to open up a detailed breakdown of its production schedule.

This is the manufacturing order (MO) card in Katana. It is the part of the master production schedule that contains the bill of materials (BOM) and product recipe. It is very useful as it contains all your quantities and process, so you or your staff are never lost for how to produce something.

The product is split up into every part and component, which is given its own deadline for completion.

This advanced tool ensures you never slip up on the details, keeping you on schedule. Finally, you can review your staff members’ schedules. Do this by clicking on “Tasks” in the “Make” screen (the make screen is the central hub for your master production schedule).

The production schedule for each person in your team is laid out clearly.

Everyone has a job to do every minute of every day. You just need to decide when to break for lunch. When no time is wasted or lost, you’ll get your orders done much quicker.

This is the “Tasks” screen in Katana which shows you all the necessary operations for open MOs. You can assign and reassign tasks in a matter of seconds using a drag-and-drop system. All processes and sub-processes are scheduled so you know how long production will take, and hit your deadlines.

Pro tip: Katana gives manufacturers access to the Shop Floor Control App , perfect for managers with multiple employees who need a clear communication channel with their shop floor, available on the Advanced plan .

The trick is to find master production scheduling software that doesn’t make you shudder with dread when you open it. Seriously — the better you feel about your software, the more motivated you will feel to learn it thoroughly, and the more likely you are to use it effectively.

And there, you have everything you need to know about the master production schedule and how you can put yours together.

However, it’s one thing to know, but without using cloud manufacturing software to manage your master production schedule, you’re going to be stuck with a system like using inefficient Excel spreadsheets. This is why manufacturers turn to online ERP software to help them automate the process of making their master production schedule automated and easy to understand. Why not try out an automated master production schedule within your business with a 14-day free trial to see how much it can improve the efficiency of your production lines.

We hope you found this article useful, and if you have any questions, feel free to message us here or over on our social media channels, and until next time, happy manufacturing.

The main functions of an MPS are as follows:

Production planning

The MPS helps plan the production process by providing a detailed schedule of what products will be produced, how much will be produced, and when production will occur.

Resource planning

The MPS helps to ensure that the necessary resources, such as raw materials, labor, and equipment, are available to meet the production schedule.

Inventory control

The MPS helps to control inventory levels by determining the quantity of finished products that should be produced and when they should be produced.

Customer service

The MPS helps improve customer service by ensuring products are produced on time and delivered to customers as promised.

Capacity planning

The MPS helps to plan and optimize the capacity of the production process to ensure that it can meet the demand for products.

Performance evaluation

The MPS provides a basis for evaluating the performance of the production process by comparing actual production against the planned schedule.

Material requirements planning (MRP) and master production schedule (MPS) are two different but related manufacturing planning tools. The main differences between MRP and MPS are:

MRP is concerned with managing the materials required for production, whereas MPS is concerned with managing the overall production plan.

Time horizon

MRP focuses on the short-term, typically covering the next few weeks or months, while MPS is a longer-term plan, usually covering a period of several months to a year.

MRP relies on inputs such as the bill of materials, inventory levels, and customer orders, while MPS relies on inputs such as sales forecasts, production capacity, and inventory policies.

The main output of MRP is a list of materials and quantities required for production, while the main output of MPS is a detailed production schedule that outlines what will be produced, how much, and when.

In summary, MRP is a material-focused planning tool that calculates material requirements to meet the production schedule, while MPS is a production-focused planning tool that outlines the production plan and schedules required to meet demand.

The main difference between a master schedule and a production schedule is their level of detail and time horizon.

A master schedule is a high-level plan that outlines the overall production plan for a specified period, typically several months to a year. It provides a general overview of what products will be produced, the quantities to be produced, and when production will occur. The master schedule considers factors such as production capacity, inventory levels, and customer demand to ensure the production plan is realistic and achievable.

On the other hand, a production schedule is a more detailed plan that breaks down the master schedule into specific production units, typically a day or a week. It specifies the quantity of each product to be produced, the start and end dates of production, and the resources required to produce each item. The production schedule considers factors such as machine and labor availability, setup time, and lead time to ensure that the production plan is executed efficiently.

In summary, a master schedule is a high-level plan that provides an overview of the production plan for a specified period. In contrast, a production schedule is a detailed plan that breaks down the master schedule into specific production units, typically a day or a week.

James Humphreys

Senior Content Manager

James Humphreys has a background in creative writing and has been writing about the manufacturing industry for 3+ years.

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What is production scheduling, and why is it important?

Georgina Guthrie

September 17, 2021

Remember the great toilet paper panic of 2020 ? Hundreds of thousands of people rushed out and stockpiled what became, for a few months, one of America’s most sought-after commodities.

There’s absolutely no way manufacturers could’ve predicted this once-in-a-lifetime combination of events, and the result was… we ran out.

We’re so used to going to the store and seeing the stuff we need in abundance because, over time, manufacturers have gotten very good at getting the right materials in, manufacturing on time, anticipating demand, and shipping it off to the store. When you do see empty shelves, it’s usually because someone has struggled with procuring materials, work orders — or there’s been a natural disaster or pandemic.

It’s nearly impossible to predict an event like COVID-19, but for everything else, there’s production scheduling. It’s a handy process that helps your business meet customer demand more efficiently. Read on to find out more!

What is production scheduling?

A production schedule lists every single product that’ll be manufactured, including where and when they’ll be made.

It includes every detail, from raw materials to logistics. It also incorporates various processes designed to make production run smoothly while helping managers spot potential issues — like bottlenecks — and stop them before they explode into something bigger. For this reason, it’s a flexible, changeable document that you’ll need to update and check regularly.

As well as helping managers plan ahead, the production schedule works as a line of communication between production and sales teams. Sales inform the manufacturing team about the levels of demand. Manufacturers then tell sales when the product is ready.

What is a production schedule used for?

The production schedule is a versatile and important document for planning, forecasting, predicting, and meeting demand. It helps keep your operations working on time and under budget, which helps you keep your commitment to your customers. Let’s get into its main functions in a little more detail.

Planning : Predicting demand and matching that to labor, materials, and equipment capacity

Scheduling : Assigning workers and detailing contingency plans for when unexpected delays happen

Stockout prevention : Planning to maintain output, even if materials are delayed, or a swell in orders increases demand

Improved efficiency : Spotting bottlenecks and looking for areas of improvement. This results in improved lead times and smoother demand flows

Improved communication : With one master document detailing every element of the production workflow, communication is standard across the entire business

How to create a production scheduling process

Your production schedule is a big, evolving thing — and without a formalized process in place, it could end up getting a bit unruly. Here are five key steps to follow.

What to include in your production scheduling

Your production schedule will include these elements:

The benefits of using a production schedule

Your production scheduling will help with demand planning, supply, and the changing needs of your customers. It should help you better anticipate the ebb and flow of work, not to mention give you a framework to use when things don’t go quite as planned.

Here’s a summary of what your production schedule does:

How to optimize your production schedule

Your production schedule will be a big document that you will regularly update. Not only that, but multiple people will need to be told about that change as soon as it happens. Here are some tips on how best to manage that:

Create a dynamic schedule

Flexibility is the name of the game, so make sure you create your schedule on something that’s easy to edit in real-time. Project management software is the gold standard here.

Prioritize tasks according to delivery dates:

Your schedule might prioritize an order that’s due in two days’ time, but if you know there’s an order due in 10 days, and it won’t make its deadline if you don’t see to it now, then focus on that first. Having a dynamic schedule makes it easier to reprioritize those orders.

Use project management tools

With a project management tool, you can create your schedule using a Gantt chart . This is essentially a virtual diagram that helps you schedule tasks and resources across a timeline. As the project evolves, individuals can enter their data, and the chart automatically updates in real-time — meaning everyone’s on the same page at once. If there are delays in raw materials or staff are off, the team can edit it, and the new data turned into an updated schedule with recalculated times, costs, and other metrics. No more manual adjustments, no more update emails — just the entire team working like a well-oiled machine.

Final thoughts

Production scheduling is a big job with a cocktail of people and tasks all happening at once. Then there’s the largely unpredictable nature of supply and demand, the movement of materials, and the complex manufacturing process — all of which can send your carefully constructed plan out the window.

If one of those things goes off-track, then the whole lot could grind to a halt. This is why dynamic production schedules are so important.

If you’re looking for a tool that offers so much more than a typical APS, that automatically updates schedules and recalculates resources, that can send out notifications and operate in real-time, then Backlog — our own project management software — may just be what you’re looking for. Give it a try today.

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A Format for Production Planning

Operations Planning & Scheduling

What is the principle behind the critical path method & how does this affect project management, costing for the fashion industry.

Manufacturing businesses use production planning to determine the number of items they can produce during a specific period, balanced against the orders or demand for their products. The planning process includes ensuring that you procure enough raw materials, labor resources and items such as packaging to achieve the required production.

Several formats exist for production planning and some are more suited to small business than others. One reliable format is the Gantt chart, which is an adaptable method of tracking complex projects. Create a Gantt chart using planning software, or manually using a board or large sheet of paper and sticky notes.

A Gannt chart provides a reliable format for production planning. It can be done manually on a large sheet of paper or with software.

List the Activities

Compile a list of all the activities or steps in the production process, showing the length of time each activity takes and the earliest possible start date. State whether each task runs parallel to other tasks or is sequential to the successful completion of a former activity.

For example, activities in the production of t-shirts could include the cutting and sewing of the various components, such as the sleeves and body sections. These are parallel activities, which workers can perform at the same time; however, the assembly of the final product depends on the completed production of all the components. This makes the final assembly a sequential task that occurs after the manufacture of the individual items.

Chart Setup

Use a large sheet of blank paper or a whiteboard, on which to plot the rough draft of the chart. Create columns to represent time intervals, such as hours, days or weeks, depending on the time it takes to make your products. For example, items of clothing may require hourly intervals, while building furniture may need daily or weekly intervals.

Draw a bar or use sticky notes to represent each task, which begins at the starting time and ends after the length of time it takes. Schedule activities that depend on the completion of others in sequential order. Tasks that occur at the same time as others are scheduled in parallel, one below the other.

Analyze the Schedule

Use different colors to highlight tasks allocated to specific teams or individuals. Draw dotted lines in red to denote the critical path of the production process, which highlights the main activities the production team must complete to produce the goods.

For example, if two different products must be manufactured to produce the finished item, the critical path runs from the start date of the first item, through the production process, and ends with production of the last item or final product assembly. This shows the planner the minimum time in which production can take place, and enables him to identify the effect delays have on the critical path.

Monitor the Process

Monitor the time each task in the production schedule takes against the Gantt chart. Amend the chart when necessary, by changing the timeline according to actual performance. If you are using a manual chart, move the sticky notes on to a later interval in the case of a delay, or move them back for early completion.

Change sequential tasks accordingly, to ensure the completion date remains accurate. If changes affecting the final date are unacceptable, identify tasks to fast track to make up for delays to conform to the completion date. If you are using planning software, close each task as it is completed and record the date and time. The program will identify risks of delayed completion and enable you to revise the plan if necessary.

Tracey Sandilands has written professionally since 1990, covering business, home ownership and pets. She holds a professional business management qualification, a bachelor's degree in communications and a diploma in public relations and journalism. Sandilands is the former editor of an international property news portal and an experienced dog breeder and trainer.

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PRODUCTION PLANNING AND SCHEDULING

Production planning is the function of establishing an overall level of output, called the production plan. The process also includes any other activities needed to satisfy current planned levels of sales, while meeting the firm's general objectives regarding profit, productivity, lead times, and customer satisfaction, as expressed in the overall business plan. The managerial objective of production planning is to develop an integrated game plan where the operations portion is the production plan. This production plan, then, should link the firm's strategic goals to operations (the production function) as well as coordinating operations with sales objectives, resource availability, and financial budgets.

The production-planning process requires the comparison of sales requirements and production capabilities and the inclusion of budgets, pro forma financial statements, and supporting plans for materials and workforce requirements, as well as the production plan itself. A primary purpose of the production plan is to establish production rates that will achieve management's objective of satisfying customer demand. Demand satisfaction could be accomplished through the maintaining, raising, or lowering of inventories or backlogs, while keeping the workforce relatively stable. If the firm has implemented a just-in-time philosophy, the firm would utilize a chase strategy, which would mean satisfying customer demand while keeping inventories at a minimum level.

The term production planning is really too limiting since the intent is not to purely produce a plan for the operations function. Because the plan affects many firm functions, it is normally prepared with information from marketing and coordinated with the functions of manufacturing, engineering, finance, materials, and so on. Another term, sales and operations planning, has recently come into use, more accurately representing the concern with coordinating several critical activities within the firm.

Production planning establishes the basic objectives for work in each of the major functions. It should be based on the best tradeoffs for the firm as a whole, weighing sales and marketing objectives, manufacturing's cost, scheduling and inventory objectives, and the firm's financial objectives. All these must be integrated with the strategic view of where the company wants to go.

The production-planning process typically begins with an updated sales forecast covering the next 6 to 18 months. Any desired increase or decrease in inventory or backlog levels can be added or subtracted, resulting in the production plan. However, the production plan is not a forecast of demand. It is planned production, stated on an aggregate basis. An effective production-planning process will typically utilize explicit time fences for when the aggregate plan can be changed (increased or decreased). Also, there may be constraints on the degree of change (amount of increase or decrease).

The production plan also provides direct communication and consistent dialogue between the operations function and upper management, as well as between operations and the firm's other functions. As such, the production plan must necessarily be stated in terms that are meaningful to all within the firm, not just the operations executive. Some firms state the production plan as the dollar value of total input (monthly, quarterly, etc.). Other firms may break the total output down by individual factories or major product lines. Still other firms state the plan in terms of total units for each product line. The key here is that the plan be stated in some homogeneous unit, commonly understood by all, that is also consistent with that used in other plans.

PRODUCTION SCHEDULING

The production schedule is derived from the production plan; it is a plan that authorized the operations function to produce a certain quantity of an item within a specified time frame. In a large firm, the production schedule is drawn in the production planning department, whereas, within a small firm, a production schedule could originate with a lone production scheduler or even a line supervisor.

Production scheduling has three primary goals or objectives. The first involves due dates and avoiding late completion of jobs. The second goal involves throughput times; the firm wants to minimize the time a job spends in the system, from the opening of a shop order until it is closed or completed. The third goal concerns the utilization of work centers. Firms usually want to fully utilize costly equipment and personnel.

Often, there is conflict among the three objectives. Excess capacity makes for better due-date performance and reduces throughput time but wreaks havoc on utilization. Releasing extra jobs to the shop can increase the utilization rate and perhaps improve due-date performance but tends to increase throughput time.

Quite a few sequencing rules (for determining the sequence in which production orders are to be run in the production schedule) have appeared in research and in practice. Some well-known ones adapted from Vollmann, Berry, Whybark and Jacobs (2005) are presented in Operations Scheduling.

THE PRODUCTION PLANNING AND PRODUCTION SCHEDULING INTERFACE

There are fundamental differences in production planning and production scheduling. Planning models often utilize aggregate data, cover multiple stages in a medium-range time frame, in an effort to minimize total costs. Scheduling models use detailed information, usually for a single stage or facility over a short term horizon, in an effort to complete jobs in a timely manner. Despite these differences, planning and scheduling often have to be incorporated into a single framework, share information, and interact extensively with one another. They also may interact with other models such as forecasting models or facility location models.

It should be noted that a major shift in direction has occurred in recent research on scheduling methods. Much of what was discussed was developed for job shops. As a result of innovations such as computer-integrated manufacturing (CIM) and just-in-time (JIT), new processes being established in today's firms are designed to capture the benefits of repetitive manufacturing and continuous flow manufacturing. Therefore, much of the new scheduling research concerns new concepts and techniques for repetitive manufacturing-type operations. In addition, many of today's firms cannot plan and schedule only within the walls of their own factory as most are an entity with an overall supply chain. Supply chain management requires the coordination and integration of operations in all stages of the chain. If successive stages in a supply belong to the same firm, then these successive stages can be incorporated into a single planning and scheduling model. If not, constant interaction and information sharing are required to optimize the overall supply chain.

R. Anthony Inman

Run Full Planning, MPS, or MRP

5 contributors

The terms "running the planning worksheet" or "running MRP" refer to the calculation of the master production schedule and material requirements based on actual and forecasted demand. The planning system can calculate either Master Production Schedule (MPS) or Material Requirements Planning (MRP) on request, or it can calculate both at the same time.

The planning algorithms used for both MPS and MRP are identical. The planning algorithms pertain to netting, reuse of existing replenishment orders, and action messages. The planning system process examines what is needed or will be needed (demand) and what is on-hand or expected (supply). When these quantities are netted against each other, Business Central provides action messages. Action messages are suggestions to create a new order, change an order (quantity or date), or cancel an order already on order. The term "order" includes purchase orders, assembly orders, production orders, and transfer orders.

Links created by the planning engine between demand and its related supply can be tracked on the Order Tracking page. For more information, see Track Relations Between Demand and Supply .

Proper planning results depend on the set up done on item cards, assembly BOMs, production BOMs, and routings.

Methods for Generating a Plan

With each planned method, Business Central generates worksheet entries assuming infinite capacity. Work center and machine center capacity is not considered when you develop schedules.

The Calculate Regenerative Plan function is the most common process. The Calculate Plan and Carry out Action Messages functions, however, can be used to run the Calculate Net Change Plan process.

The Get Action Messages Plan function can be run between regenerative and net change planning runs to obtain an immediate view of the effect of schedule changes, but it is not intended as a replacement of full regenerative or net change planning processes.

To calculate the planning worksheet

Lightbulb that opens the Tell Me feature.

Choose the Calculate Regenerative Plan action to open the Calculate Plan page.

On the Options FastTab, fill in the fields as described in the following table.

On the Item FastTab, set filters to run the planning based on item, item description, or location.

Choose the OK button. The batch job runs and then the planning worksheet is populated with the planning lines.

To perform action messages

On the Planning Worksheet page, choose the Carry Out Action Message action.

On the Options FastTab, specify how to create the supplies. Fill in the fields as described in the following table.

On the Planning Line FastTab, you can set filters to limit the perform action messages.

Choose the OK button.

The batch job deletes the lines in the planning worksheet after it has performed the action message. The other lines remain in the planning worksheet until they are either accepted at a later date or else deleted. You can also delete the lines manually.

Action Messages

Action messages are issued by the order tracking system when balance is unattainable in the existing order network. They can be viewed as a suggestion for you to process changes that reestablish equilibrium between supply and demand.

The generation of action messages occurs one level at a time, for each item's low-level code. This makes sure that all items that experience or will experience changes in supply or demand are considered.

To avoid small, superfluous, or unimportant action messages, the user can establish dampeners, which serve to restrict the generation of action messages to only those changes that exceed the defined quantity or number of days.

After you have reviewed the action messages and determined whether to accept some or all of the suggested changes, select the Accept Action Message field, and then you are ready to update the schedules accordingly.

An action message is a suggestion to create a new order, cancel an order, or change the quantity or date of an order. An order is a purchase order, transfer order, or production order.

In response to any supply/demand imbalances, the following action messages are generated.

Planning Setting Up Manufacturing Manufacturing Inventory Purchasing Design Details: Supply Planning Setup Best Practices: Supply Planning Work with Business Central

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China is kicking America's ass in the EV battery race and it's going to define the 21st century

In recent years, the relationship between the US and China — the world's economic superpowers — has devolved into an unwieldy tug-of-war between economic interdependence and deep-seated distrust. On one hand, diplomats are trying furiously to maintain a stable world and keep money flowing between the two countries. But at the same time, one of the relationship's most salient features is that it is a contest for control over the technology that will define the 21st century.

In the latter battle there is one area where the US has fallen woefully behind: batteries. China's state-supported enterprises — let's call them China Inc. — dominate in every aspect of the development of batteries for electric vehicles, from the mining and refining of raw materials to the manufacture of the batteries themselves.

"The danger is that we won't have a domestic battery sector and we will totally in perpetuity rely on China to build cells for us," Tu Le, the founder of the consultancy Sino Auto Insights, told me. And without cheap batteries to power fleets of cheap electric vehicles, he argued, companies like GM and Ford "run the risk of becoming regional players and losing their international status."

Until US automakers can source batteries domestically, or from friendly nations, they will depend on maintaining good relations with Beijing. It is an increasingly fraught partnership, even setting geopolitics aside. For the past 40 years China needed foreign automakers to help develop its own car industry through joint ventures. But as China's domestic electric-vehicle market takes off, the tables have turned. Beijing is boosting its homegrown products, and foreign automakers — which already need China Inc.'s batteries to build more EVs — are losing market share.

The winner of the battery war will not only control the electric-vehicle market but also produce thousands of jobs, control the future of mobility, and dictate the West's ability to transition to greener forms of energy.

Beijing's battery plan

China has been working to dominate the battery space since at least 2015, when the leadership of the Chinese Communist Party crafted the National Key Research and Development Program New Energy Vehicle Key Special Implementation Plan. Despite its long, formal-sounding name, the document sets out a clear goal: to corner the market for key materials like lithium, cobalt, and nickel; invest in their extraction; and build factories for battery manufacturing.

The plan starts at the most basic level of battery production: raw materials like cobalt, lithium, manganese, and nickel. Most of these minerals lie outside China — in countries such as Chile, Australia, Bolivia, and the Democratic Republic of Congo. But China Inc. has negotiated ownership stakes and partnerships with mines all over the world. From 2018 to the first half of 2021, China Inc. invested about $4.3 billion in lithium mines internationally, according to the research firm S&P Capital IQ. And once these minerals are pulled out of the ground, they are shipped to Chinese-owned refineries that transform the metals for use in the final product. By 2019, Chinese companies made up 80% of the world's output for battery materials. This would not have been possible without Beijing's willingness to pay whatever price and withstand whatever losses it took to build the industry.

"At the end of the day even if DC or Brussels or Tokyo manages to support competing suppliers of minerals and companies that can turn minerals and metals into components, the mineral commodity markets are hard to predict," Jane Nakano, a senior fellow in the Energy Security and Climate Change Program at the Center for Strategic and International Studies, told me. "It's very difficult for private-sector non-state-supported entities to plan ahead."

In the past, this is where the Chinese value chain would end. The refined materials would get shipped out to the US or Europe where they would then be transformed into batteries. Not anymore: Beijing is trying to do that work in-house.

"In the 1970s and '80s China was exporting minerals to us to make higher-value goods," Nakano explained. "That's precisely the situation the Chinese wanted to get out of. That's why they came up with their tech strategy."

Nowadays when Beijing wants to develop technology, it sprays money at any companies that want to give it a shot and watches them duke it out until a few come out on top. Once the dominant parties have revealed themselves, everyone else is cut off and left to wither.

The undisputed champion of the Chinese battery-manufacturing battle is Contemporary Amperex Technology Co. Limited. The company, first called Amperex Technology Limited, was founded in Hong Kong in 1999. Using patented technology licensed from the US's Bell Labs it became a battery supplier for companies including Apple and Samsung. But by 2008 it wanted to manufacture in China for easier access to its market and to take advantage of government incentives. To do that, though, it had to move its headquarters from Hong Kong, which was (and technically still is) politically separate from Beijing. Eventually the company set up shop in a county in northeastern China that was once governed by a young Communist Party secretary named Xi Jinping. And so ATL became CATL. By 2022 it controlled about 32% of the world's market share for electric-vehicle batteries, and about half of China's domestic market. As of now, CATL has 13 factories worldwide that supply batteries for Tesla, Toyota, and Daimler. Earlier this month, Ford announced plans to build a $3.5 billion battery plant in Michigan with technology licensed from CATL.

Coming in a not-so-close second is China's BYD. Within China, it's a top-selling car company that makes its own batteries. Thanks to that inherent demand, it has taken just over 13% of global market share for EV batteries. And thanks to its ownership of its battery supply chain, it's able to make cars cheaply. Its BYD Song Plus — the best-selling car in China in the first quarter of this year — comes in both electric and combustion-engine versions and sells for under $30,000.

Role reversal

As Chinese companies have started to dominate the battery space, the US is trying to avoid a role reversal of past decades in which it would depend on China for higher-value batteries.

To prevent this outcome, the US needs to start investing in every part of the value chain for batteries. And it starts with the country's vast resources of " white gold ," the name for lithium used among those who believe its large deposits can be exploited to create the country's next great source of energy. As of now, the US has only one open lithium mine in Nevada. Lithium extraction and refining are messy, and environmental concerns have kept US output limited to about 1% of the world's supply.

"We really haven't gotten our heads in the game in terms of resource extraction," Nakano said.

To boost this output, companies are rushing to extract lithium deposits from California's Salton Sea, a dry region east of San Diego. Geologists estimate that the region could supply enough lithium to support the manufacturing of 7.5 million car batteries a year. US companies like BHE Renewables, backed by Warren Buffett's conglomerate Berkshire Hathaway, and EnergySource Minerals are looking to advance technology that will extract lithium using clean energy and while doing as little environmental damage as possible. President Joe Biden's 2022 Inflation Reduction Act legislation set aside $200 million, through the Department of Defense, to establish an end-to-end American supply chain of rare-earth metals, lithium, and nickel that can be used in domestic battery efforts.

America is also lacking capacity further down the manufacturing chain. The US is home to only two processing plants that produce lithium hydroxide , a more lightweight, concentrated version of the metal used for batteries. This month, Tesla broke ground on a third facility in Texas. The Inflation Reduction Act set a goal of refining enough lithium domestically to supply 2 million electric vehicles annually. The Biden administration hopes to accomplish this in two ways — one carrot and one stick. To try to lure companies, the law provides subsidies for companies that invest in that refining process, but it also sets stringent requirements for how much of an EV battery's components must be sourced in the US — or from countries with which we have free-trade agreements — to be considered domestically produced and avoid tariffs. But all of this planning and incentivizing this will take time to kick into gear. For example, EnergySource Minerals has said its mine could be operational by 2025.

A time to squeeze

While the US has a long way to go to catch up to China, there are some analysts who see Beijing's hand in the market as more clumsy than capitalist, and who say the CCP's ambitions will actually make it easier for American firms to catch up. Anne Stevenson-Yang, the research director of J Capital Research, predicted in a recent note to clients that Beijing's push to increase the supply of materials required for battery manufacturing will ultimately make it dramatically cheaper to enter the battery market over the next few years. Yang's research indicates the price of lithium carbonate — another critical chemical for batteries — has been sliced in half since November and will drop by another two-thirds this year.

"That is because of massive new Chinese capacity," she wrote. "If all goes as planned, lithium will be in global surplus as 2024 rolls around."

We've seen this dynamic when China enters a market before. Beijing throws a staggering amount of cash at an industrial product or late-stage technology until there's so much domestic supply that a capacity glut ensues. China then dumps that excess capacity into foreign markets, depressing prices globally. Stevenson-Yang sees parts of China's battery supply chain as the next glut it will need to dump.

"There are certain issues around security and having a manufacturing base in the US that makes sense, but we don't have to worry about the tech war," she said by phone. "China is like the Russian army in the 18th century. Everyone feared the 'Great Bear to the North,' but they eventually found out that size doesn't mean quality — size means size."

But the potential of a battery supply glut tomorrow doesn't help carmakers meet their needs today. Until the US and its friends can offer them another supply of electric batteries, auto manufacturers all need China Inc., especially as they ramp up their EV ambitions.

"We don't have a major player in the battery cell space, full stop. US battery makers will not likely be able to make a profitable battery until at least 2030," Sino Auto Insights' Le said. "The reality is GM and Ford can't build a $40,000 EV that will help their bottom line for the foreseeable future without BYD and CATL batteries."

And then there's Tesla. Elon Musk has said the company's goal is to manufacture 20 million cars annually by 2030 . To put that in perspective, Toyota — the world's biggest carmaker — sold just over 10 million cars last year, while Tesla sold just over 1 million. If Musk wants to reach his goal, Tesla not only needs Chinese consumers to keep buying his cars, but he also needs China's cheap batteries and manufacturing infrastructure to make a car cheap enough to sell to markets like Latin America, Southeast Asia and India.

"Musk can continue to be very effusive of the Chinese government and their support of the EV sector in China," Le said. "But if the US-China relationship continues to deteriorate, it's inevitable that it's going to be much tougher for any US company to do business in China."

And of course, Le pointed out, wherever Tesla goes in the world BYD will be there to compete on price.

"The IRA will create opportunities in the mobility space," Le said of the Inflation Reduction Act. "But if we're looking at evolutionary improvements, China Battery Inc. will still dominate. If we're looking at revolutionary developments over the next five to seven years, though, they'll be over here in the US. Of course, this is in the backdrop of BYD and CATL continuing to lower prices on current tech making transitioning to new technology a tougher decision for OEMs."

It's a complicated race, one of sometimes conflicting incentives and allegiances. The Inflation Reduction Act has upset the US's European allies while at the same time establishing protocols for cooperation to wrest the battery supply chain from China. US car manufacturers can't make cheap electric vehicles for the US market without China Inc., while at the same time the US government is creating policy to push back against China's ambition to dominate the EV market entirely, not just domestically. We cannot make clean energy without making a mess environmentally and geopolitically. For now China is winning the battery contest, but that doesn't mean the US or its allies should give in. There's always time to catch up in a race with no end.

Linette Lopez is a senior correspondent at Insider.

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‘Leap of faith:’ Alaska pursues carbon offset market while embracing oil

JUNEAU, Alaska (AP) — Alaska’s push to become a bigger player in the clean energy market is in the spotlight this week at a conference convened by its Republican governor, even as the state continues to embrace new fossil fuel production, including the controversial Willow oil project on the petroleum-rich North Slope.

At the Alaska Sustainable Energy Conference in Anchorage on Tuesday, Gov. Mike Dunleavy signed a measure he successfully pushed through the legislature that would allow the oil-reliant state to cash in on the sale of so-called carbon credits to companies looking to offset their carbon emissions. Projects could include credits for improving a forest’s health through thinning or by allowing trees to grow bigger, thereby increasing a forest’s potential to hold carbon.

“This bill is going to allow us now to have conversations worldwide with individuals involved in the carbon market. Just like oil, just like gas, just like our timber, this is a commodity that can be monetized now,” he said.

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Lawmakers cast the bill as allowing Alaska to have the best of both worlds — continuing to permit oil drilling, mining and timber activities while also stepping into the potentially lucrative market for sequestering carbon dioxide. But some watching Alaska’s foray into this sector wonder if the program will gain traction as Dunleavy and lawmakers have said the aim isn’t restricting emissions but generating a new revenue stream.

“There’s kind of a field of dreams quality to this issue. ‘If you plant the trees and create credits, will anyone buy them?’” said Barry Rabe, a political scientist who studies environmental and climate politics at the University of Michigan’s Gerald Ford School of Public Policy.

“What’s just not clear is what that market would look like and whether or not purchasers ... will find that an attractive investment,” he said. “That’s the leap of faith.”

Alaska has no carbon emissions reductions goals or overarching climate plan and relies heavily on oil production. It is also experiencing firsthand the impacts of the changing climate, such as coastal erosion threatening Indigenous villages, unusual wildfires and thinning sea ice.

The Willow project being developed by ConocoPhillips Alaska is the latest to draw international attention to the state’s oil reserves. The project approved by the Biden administration earlier this year could produce up to 180,000 barrels of oil a day. It faces legal challenges from environmentalists who argue the U.S. should be moving away from new drilling in the face of climate change.

Republican state Sen. Shelley Hughes said she was not fond of the carbon credit concept but was concerned that without embracing it, the state could face backlash from groups over its support for oil and gas projects, including its backing of Willow.

“I think that in order to get capital investment into our state, we are going to have to be perceived in a way that is trying to work through all of this,” she said during the recent legislative debate.

The bill that passed last week was one of two proposed by Dunleavy as a way to generate a new form of income for the state, which has struggled with deficits for much of the last decade. It would allow the state to set up carbon sequestration projects on forestland and sell credits to companies seeking to offset their emissions, with 20% of the revenue from such sales going to a state fund that supports renewable energy projects.

The bill also would let the state lease lands to third parties that want to manage sequestration projects of their own, such as reforesting areas burned by wildfire or growing kelp.

It could be several years before the first credit sales occur because of the time it will take to set up a program and develop or vet projects.

Another Dunleavy proposal that would have set up a regulatory system allowing for underground storage of carbon dioxide did not advance this session but remains in play for next year’s legislative session.

Dunleavy said Alaska would continue to be known as an “oil and gas giant” but also noted the potential for further development of renewables and other alternative energy in the state. To those who think Alaska is taking a risk with its new carbon plan, “I think it’s a great risk,” he said.

During the legislative debate on the carbon plan, some Republican lawmakers said the measure would allow Alaska to capitalize on the demand for carbon emissions offsets from companies already doing business in Alaska that might otherwise purchase carbon credits elsewhere.

“So if they’re going to do it anyways and they’re going to operate (on) Alaskan lands, then why shouldn’t we provide the service of carbon offsets to these companies?” Republican Rep. Kevin McCabe said. “At least then it stays in Alaska and we get some benefit to our state treasury for it.”

These are some of the people who'll be impacted if the U.S. defaults on its debts

Scott Horsley

Cole Lyle (left), a Marine Corps veteran and executive director of the veterans advocacy group Mission Roll Call, says a U.S. default would have devastating consequences for former military members who stand to see their benefits suspended. Courtesy of Cole Lyle hide caption

Veterans, seniors and government employees: These are just some of the people who stand to be impacted if Congress fails to raise the debt ceiling.

Treasury Secretary Janet Yellen warns that without additional borrowing authority, the U.S. could run short of cash to pay its bills as early as June 1.

Here's what could happen in markets if the U.S. defaults. Hint: It won't be pretty

A default would send shock waves through the global economy and financial markets.

It would also be felt very directly by ordinary people.

One of the first big bills coming due on June 1 — according to an analysis by the Bipartisan Policy Center — is $12 billion in veterans benefits. If there's not enough money on hand to pay those benefits, people who've already sacrificed a lot for their country will be forced to sacrifice even more.

"These are people on very low, sometimes fixed incomes that rely on these payments as a lifeline to pay for housing, to pay for food, to pay for expenses for children and other family members," says Cole Lyle, a Marine Corps veteran and executive director of the veterans advocacy group, Mission Roll Call. "So it could be potentially very crippling."

The government is also scheduled to pay $12 billion in military and civilian retirement benefits on June 1.

If those payments are delayed for any length of time, people with little or no savings might have to turn to credit cards, which carry increasingly costly interest rates.

"There is no good that comes from a default," Lyle says. "Either to veterans, to active-duty service members or other Americans that rely on benefits from the United States government."

Veteran Cole Lyle poses with his late service dog, Kaya, at Kyle Field, the Texas A&M football stadium. Courtesy of Cole Lyle hide caption

Veteran Cole Lyle poses with his late service dog, Kaya, at Kyle Field, the Texas A&M football stadium.

The government is scheduled to pay $25 billion in Social Security benefits on June 2 — one of several big payments the program will make over the course of the month.

Marilyn Ayers is one of the millions who gets these benefits, and she worries about what will happen if the government doesn't have enough money to cover those obligations.

"That will really be a catastrophe," says Ayers, a retired chemist who lives in Douglas County, Colo.

"We'd be in trouble," her husband Keith, a retired machinist, chimes in. "We have too many bills."

Marilyn and Keith Ayers who are Social Security recipients pose for a picture during a vacation last year. Courtesy of Marilyn and Keith Ayers hide caption

Marilyn and Keith Ayers who are Social Security recipients pose for a picture during a vacation last year.

The couple, who are in their 80s, don't have pensions to fall back on. They count on Social Security to help pay their mortgage and buy groceries.

"We're ordinary American families and I feel anger because we're being held hostage to a type of blackmail that's going on right now," Marilyn says. "We're not the ones that are out on the street with the signs or anything like that. But we vote."

The Ayers also worry about how a government default might affect the already fragile housing market. The couple plans to sell their home in about nine months and move to a new, senior housing complex.

"It's being built as we speak," says Marilyn Ayers.

Would-be homebuyers

The real estate website Zillow estimates that a prolonged government default could send mortgage rates soaring as high as 8.4%, from about 6.4% today.

That would put homes out of reach for hundreds of thousands of would-be buyers.

"This scenario would be like a one-two punch hitting homebuyers who are already reeling from the affordability challenges this year in the market," says Jeff Tucker, a senior economist at Zillow. "That would discourage a lot of sales."

The fight over the debt ceiling could sink the economy. This is how we got here

U.S. government debt has long been considered the bedrock of the financial system. If lenders start to worry about cracks in that foundation, it would make all kinds of other borrowing more expensive.

"If that gets shaky, that sends earthquakes out through the whole credit system," Tucker says.

A default that was remedied in a day or two might have muted effects. But if government bills go unpaid for weeks or months, it could have a lasting effect on interest rates.

"Would that cause a permanent increase in borrowing costs?" Tucker asks. "We don't really know for sure. And I think, frankly, that's all the more reason not to find out."

A sign is posted in front of a home for sale in San Francisco on May 11, 2023. A default could lead to a surge in already-high mortgage rates, putting homes out of reach for hundreds of thousands of would-be buyers. Justin Sullivan/Getty Images hide caption

Everyone else

Other payments would also be in jeopardy if the government's borrowing limit is not increased soon, including:

-- $47 billion for Medicare providers, due on June 1.

-- $1 billion in tax refunds, set to go out June 7.

-- $4 billion in federal salaries, payable on June 9.

What you need to know about the debt ceiling as the deadline looms

And the list goes on. Food stamp recipients, education programs and defense contractors could all be left empty-handed.

Veterans advocate Lyle says this is what ordinary people find so frustrating about the gamesmanship playing out in Washington.

"What I'm hearing from veterans is just be the adults, get into a room, and do your jobs that we elected you to do," Lyle says.

"We can debate spending levels all day long, and personally I think the federal government does spend too much money," he says. "But the deadline is coming and it threatens to affect personal lives in a very real, real way."

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Latest Market News

Japan’s long-suffering stock market is back. This boom may have ‘staying power’

April 2023, Mazda museum, Hiroshima, Japan (Marketplace Asia ep.23)

Japan’s stock market has waited more than three decades for its moment in the sun.

The country’s major stock indexes are trading at highs not seen since 1990, when its infamous asset bubble of the late 1980s was just deflating.

So far this year, the benchmark Topix has jumped almost 14%, and the Nikkei 225 (N225) , which tracks Japan’s blue-chip companies, has leapt nearly 17%. The indexes have outpaced the United States’ S&P 500 and Europe’s Stoxx 600 benchmark indexes, which have both risen 8% in that time.

“In my 33 years in the market, things do seem probably more positive now than they’ve seemed at any time in that whole period,” said Jeffrey Atherton, an investment manager at Man GLG, a subsidiary of hedge fund giant Man Group. “It’s not based on hype.”

Investors say Japanese stocks have benefited from relatively cheap valuations, a long-awaited return of inflation , and a weakening currency.

An endorsement by Warren Buffett probably didn’t hurt either — the legendary investor told Japanese publication Nikkei in April that his flagship investment firm, Berkshire Hathaway, planned to increase its holdings in five Japanese companies.

Foreign investors bought $15.6 billion worth of Japanese stocks last month, the highest monthly amount since October 2017, according to the Japan Exchange Group.

For years, investors have hoped modest rallies in Japanese stocks would translate into a sustained market revival for the world’s third-largest economy, which is also home to a raft of household-name electronics companies and carmakers, like Sony (SNE) and Toyota (TM) . But they never did.

But this time, investors tell CNN, really is different.

Change from the top

Japanese stocks have received their biggest bump from an overhaul of corporate governance rules that has compelled company executives to improve shareholder returns. JPMorgan analysts said last week that the “structural change” taking root in Japan could give the current market rally “staying power.”

Earlier this year, the Tokyo Stock Exchange began telling companies to pay more attention to their stock price. It urged them to come up with plans to boost their price-to-book (PTB) ratios — that is, the firm’s share price relative to its net assets.

Half of companies listed on the Tokyo Stock Exchange trade at a PTB ratio of less than one, according to Man Group data from February, compared with just 3% of firms on the S&P 500.

A low ratio means the stock is a bargain. The problem is that at least half of Japan’s companies have been stuck trading at a ratio of below one for most of the past 20 years. As a result, there has been little incentive for investors to buy the stocks if they don’t believe they can sell them at a higher price later on.

An electronic board showing the closing numbers on the Tokyo Stock Exchange

“There’s long been a lot of undervalued companies in Japan,” Atherton noted. “We take it for granted in the US and Europe that corporate management is trying to maximize the share price, but that’s by no means been the case in Japan for the last 30-odd years.”

That may now be changing.

Companies tracked by the Nikkei index paid out record dividends in 2022. At the same time, a spate of share buybacks has helped swell stock prices.

Japanese firms bought back 9.7 trillion Japanese yen ($7 billion) worth of their own stock in the fiscal year ending March 2022, according to Frank Benzimra, head of Asia equity strategy at Societe Generale. That’s the most since he started tracking the data 24 years ago.

For the 2023 fiscal year, share buybacks have totaled around 8.6 trillion Japanese yen ($6.2 billion). That number could rise because a few companies are still to report their earnings.

Inflation is back

A recent spate of encouraging economic data in Japan has lifted investors’ spirits, while a weakening currency has made the country’s exports more competitive.

What central banks in other major economies have been fighting over the past year — soaring inflation — has been welcomed by Japan’s policymakers.

Following decades of deflation, the country’s consumer prices rose in January at the fastest annual pace in 41 years . Inflation has since slowed down a little, but remains well above the Bank of Japan’s 2% target.

Still, the central bank has kept its main interest rate below zero while its counterparts in the United States, United Kingdom and the European Union have jacked up borrowing costs at a record clip to keep prices in check.

“[Japan] is an economy where policymakers have been beating on the inflation beehive for decades, hoping the bees would come out,” Jack Ablin, chief investment officer and founding partner of Chicago-based Cresset Capital Management, told CNN. “And now it appears, finally, they’re getting the inflation.”

That difference in monetary policies has driven down the value of the Japanese yen against most other major currencies. The currency has fallen almost 9% from a year ago to trade at 139 to the US dollar — “table-poundingly cheap,” according to Ablin. A weaker currency makes the country’s exports relatively cheaper on the world market, a particular boon for a major exporting nation like Japan.

Japan’s improving economic fortunes have also made its companies more attractive.

Gross domestic product grew 0.4% in the first quarter this year compared with the last three months of 2022, beating analysts’ expectations of a 0.1% bump.

Activity in Japan’s private sector also grew in May at the fastest pace since late 2013, according to preliminary PMI data from au Jibun Bank, a Japanese lender, compiled by S&P Global Market Intelligence.

Challenges ahead

Japan’s economy still faces some enormous hurdles. It has a rapidly aging population — almost one-third of its people are over the age of 65 — and a shrinking labor force, not helped by the government’s restrictive stance on immigration.

More immediately, the country’s market rally could stall if the US Federal Reserve decides to put a brake on its rate hike cycle, says Eddie Cheng, head of international portfolio management at Allspring Global Investments.

“We have already seen US kind of getting into the peak of their hiking cycle,” he said, adding that if central banks began to cut rates, the value of their currencies would fall, meaning the Japanese yen would be “no longer cheap” by comparison.

— Laura He contributed reporting.

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