Production Planning Processes EGN 5620 Enterprise Systems Configuration Spring, 2012

Production PlanningProduction PlanningProcessesProcesses

EGN 5620 Enterprise Systems ConfigurationEGN 5620 Enterprise Systems ConfigurationSpring, 2012Spring, 2012


Theories & ConceptsTheories & Concepts

January 2008January 2008

© SAP AG - University Alliances and © SAP AG - University Alliances and The Rushmore Group, LLC 2007. All The Rushmore Group, LLC 2007. All rights reserved.rights reserved. 33

Production Planning Process

Execution

Execution

Detailed Planning

High Level Planning

ForecastingSales and Operations

Planning

Demand

ManagementMPS MRP

Sales Information

System

CO/PA

Manufacturing

Execution

Order

Settlement

Procurement

Process



Production Planning ProcessesProduction Planning ProcessesHigh Level Planning

Control and profit analysis (CO/PA)ForecastingSales and operations planning (SOP)

Demand managementDetailed planning

MPSMRP

ExecutionProcurement Manufacturing ExecutionOrder settlement



Manufacturing ExecutionManufacturing Execution

• Request Production • Create Production Order• Release Production Order• Issue Goods for Production Order • Confirm Completion of Production Order • Receive Goods for Production Order• Settle Production Order


SAP Implementation SAP Implementation

Business Process IntegrationBusiness Process Integration


© SAP AG - University Alliances and © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All The Rushmore Group, LLC 2008. All rights reserved. rights reserved. 77

MM

PP

SD

Org

Dat

a

Rules

MM

PP

SD

Master D

ata

MM

PP

SD

FI SDMM

FI

FI

FI

PP



Business Process IntegrationBusiness Process Integration

PP



Transaction Data (Review)Transaction Data (Review)Unlike master data, transactional data is

dynamic - it constantly changes, usually many times per day

Transactions data include ◦organizational structure, ◦master data, ◦rules, as well as ◦business activities



Production Order Release

Goods Receipt

Order Settlement

GoodsIssue

ProductionOrder Request

Confirmation ofProduction Order

Completion

Production order creation (Capacity Planning)

Production Order Process (Make-to-Stock)



Production Request Production Request • A request for production is triggered by a need to

produce materials (finished goods or semi-finished goods).

• With a make-to-order strategy, the receipt of a customer order will trigger the need to produce the products in the customer’s order.

• With a make-to-stock strategy, production is triggered by the material planning process, which is concerned with ensuring that sufficient quantities of planned products are available.

• Other processes may also trigger production. For example, demand for parts from project management

Production Planning StrategiesProduction Planning Strategies

Production Planning StrategiesProduction Planning Strategies



Production Request Production Request • Regardless of the source of the trigger, the

outcome of this step is a planned order.• Planned order is a formal request for production.• Planned order is a transaction document. • In a planned order, the following information is

defined:• What products are needed• How many units of the products are needed• When they are needed

• In this step, no FI or CO documents are created, so there is no financial impact.

• There is no movement of materials.



Planned Order HeaderPlanned Order Header



Planned Order (Components review)Planned Order (Components review)



Production OrderProduction Order

Production orders are created in an authorization step of the production planning process

Production order is an actual commitment to produce a specific quantity of goods by a certain date.

Various resources, including materials and work centers are committed to produce the goods in a production order.




A production order defines:◦Goods to be processed◦Quantity◦At what location (work center)◦At what time◦Resources to be used◦Amount of resources required◦Order costs settlement

Creation of Production Order Creation of Production Order

• Results in several outcomes, including• schedule, • availability checks, • materials reservation, • preliminary costing, and • necessary purchase requisitions.

• But it creates no FI or CO documents; there is no any financial impact.

• There is no movement of materials.




A production order is typically created by converting a planned order, but it can also be generated directly without using a planned order.

Planned orders can be converted individually, collectively, or partially.

A production order includes reference to PP master data, such as a BOM, routing, and work centers. ◦ BOM identifies materials to be used in production.◦ Routing identifies operations needed for the order.◦ Work centers are the working locations where operations are

to be performed and work centers define the capacity requirement for the order.



Production Order (Creation)Production Order (Creation)While creating a production order, the following

actions are carried out:◦Select a routing: operations and sequences.◦Transfer the bill of materials from database for

master data.◦Reserve items in stock, according to the bill of

materials◦Generate the planned costs◦Generate the capacity requirements for the work

centers◦Generate purchase requisitions for non-stock items

and externally-processed operations



Production Order (Creation)Production Order (Creation)



Production Order (structure)Production Order (structure)Production Order Structure

• Header• Operations• Capacity• Components• Costs• Scheduling• Settlement Rules• Document Link• Confirmation



Production Order (data elements)Production Order (data elements)

Order header◦Order number◦Material to be produced◦Plant◦Quantity◦Scheduler (Dates)◦Status

PRT (Production Resource Tool)◦Tooling◦Equipment

Operations◦Tasks ◦Work centers◦Times, Dates◦Standard value◦Control keys

Components◦Material components◦Quantity◦Required date

Production Order (Header) Production Order (Header)

Time Line

Components

How

What

How many



Production Order (Operations) Production Order (Operations)



Production Order - (Components) Production Order - (Components)



Production Order (Master Data) Production Order (Master Data)

Production Order– Preliminary CostProduction Order– Preliminary Cost

A production order includes preliminary estimates for various cost components, such as material and overhead.

Material costs are based on the costs of the components assigned to the production order. These costs are maintained in master data of each component.

Production costs are based on data in work center, such as activity types and formulas that identify which activities (e. g. lab and setup) are required and in what quantity.

Production Order– Preliminary CostProduction Order– Preliminary CostThe costs are associated with appropriate accounts in

general ledger, such as material consumption accounts.

As production is executed, actual costs are assigned in the production order along with the preliminary cost estimates.

After a production order has been completed, the cost accumulated in the production order must be settled.

During settlement, the actual costs incurred are allocated to cost objects based on specified settlement rules.



Production Order (Preliminary Cost)Production Order (Preliminary Cost)

Production Order– ScheduleProduction Order– ScheduleSAP calculates the production dates and

capacity requirements for all operations within an order

Scheduling function uses data from production order (quantity and dates) and work centers. ◦Determines a Routing

Operation specific time lines Material Consumption Points

◦Links to Material Master Scheduling Margin Key (Floats)

◦Links to Work Center Formulas Standard Inter-operation Times



Production Order (Scheduling)Production Order (Scheduling)Work Center Formulas Work Center Formulas



Production Order (Scheduling) Production Order (Scheduling)



Production Order (Settlement Rules)Production Order (Settlement Rules)

Production Order (Document Link ) Production Order (Document Link )

• A production order may contain reference to various documents.

• A BOM for example, may include a document item.

• Production order often includes links to documents in the document management system (DMS).

• DMS is used to ensure the most current version of documents is employed during production.

Production Order (Availability Check)Production Order (Availability Check)

Automatic check to determine whether the components, production resources tools, and capacities in an order are available◦ It can be automatic or manually executed◦ It determines availability on the required date◦ Unlike scheduling, availability checks are not repeated

automatically if the production order is changed. It generates an availability log which displays:

◦ Results of the check◦ Missing parts list◦ Reservations that could not be verified

Production Order Release Production Order Release

The time between scheduling and releasing an order is used for preparation needed for the processing of the order

Once an order is released, it is ready for execution. At this time, the user can:◦print shop floor documents◦execute goods movements◦accept confirmations against the order

Goods Issue for production Order Goods Issue for production Order Note:

◦ That when a production order is being created, it references a BOM that determines the necessary components to produce the goods, it also places a reservation on each of the components

Upon release of the order (or operation) the reserved materials can be issued from inventory; and the system (SAP):◦ Updates the reservation◦ Updates the inventory◦ Assigns costs to the order as actual costs

Goods Issue for production Order Goods Issue for production Order

Effects of the Goods Issue◦updates stock quantity◦updates stock value◦Updates production order status

Three documents are created:◦material document◦accounting document◦controlling document

Goods Issue for Production Order Goods Issue for Production Order

Good Issue for Production Order Good Issue for Production Order

Goods Issue (Cost Itemization)Goods Issue (Cost Itemization)

Confirmation of Production Order Confirmation of Production Order Completion Completion Confirmations are used to monitor and

track the progression of an order through its production cycle◦confirmation can be done at the operation or

order levelExact confirmation shortly after

completion of an operation is essential for realistic production planning and control



Confirmation of Production Order Confirmation of Production Order CompletionCompletion

Completion confirmation ◦Quantities of material used◦Operations completed◦Time◦Personnel

Costs ◦Planned costs and actual costs

Settlement rule for the order for accounts/cost centers◦Settlement profile

Settlement receiver



Confirmation of Production Order Confirmation of Production Order CompletionCompletionCompletion confirmation:

◦Confirms both the yield and scrap quantities◦Can do product receipt if automatic Goods

Receipt (G/R) set◦Generates labor cost based on activity costs



Confirmation of Production Order Confirmation of Production Order Completion (Cost updated)Completion (Cost updated)Planned costs

◦Primary Costs Material Costs (BOM)

◦Based on material master price for each component◦Updated when goods are issued to order, or when

purchased materials are received Cost for External Processing

◦Secondary Cost Production Costs (Routing)

◦Time cards from operations Material Overhead Costs Production Overhead Costs

Gets updated at completion confirmation

Confirmation of Production Order Confirmation of Production Order CompletionCompletion

Confirmation of Production Order Confirmation of Production Order Completion (Labor cost is added)Completion (Labor cost is added)

Goods Receipt for Production OrderGoods Receipt for Production Order

Acceptance of the confirmed quantity of output from the production order into stock◦Effects of the Goods Receipt

update stock quantity update stock value update production order (status) store price for future valuation changes

◦Three documents are created material document accounting document controlling document

Goods Receipt for Production OrderGoods Receipt for Production Order

Goods Receipt for Production Order Goods Receipt for Production Order (Cost Target/Actual Comparison)(Cost Target/Actual Comparison)

Goods Receipt for Production Order Goods Receipt for Production Order (Updated cost Itemization)(Updated cost Itemization)



Production Order Settlement Production Order Settlement Settlement Rule

◦Automatically assigned to order according to settlement rules defined in production order

◦Distribution rule (cost receiver, settlement share and type)



Production Order Settlement Production Order Settlement (Production Order Status)(Production Order Status)

REL: Released CRTD: Created PRT: Printed PCNF: Partially

Confirmed CNF: Confirmed PDLV: Partially

Confirmed DLV: Delivered PRC: Pre-costed

GMPS: Goods movement posted MACM:Material Committed MANC: Mat. Availability

not checked NTUP: Dates are not updated SETC: Settlement rule created

Production Order SettlementProduction Order Settlement

Settling a Production Order to Stock◦postings are made to the materials & labor and

production order accounts with the value of the material and labor and received finished goods.

◦difference between the debt posting and credit posting is posted to a price difference account

Material & Labor Prod. Order Price Diff.

120 35.7784.23

**Material Price determined by the quantity produced times the Standard Price in the Material Master.

Production Order SettlementProduction Order SettlementCosts analyzed

◦Primary Materials External Processing

◦Secondary Production, Administrative Overhead, and Labor

Cost Analysis Reporting Calculate and analyze planned costs, target costs,

and actual costs of the production order. Calculate and analyze variances

Production Order SettlementProduction Order Settlement

PEN, Inc. PEN, Inc.

Production Planning Processes

Actual Material Cost Line Items for OrderActual Material Cost Line Items for Order

Actual Labor Cost Line Items for OrderActual Labor Cost Line Items for Order

Good Issue Material Document for OrderGood Issue Material Document for Order

Goods Issue G/L Document for OrderGoods Issue G/L Document for Order

Confirmation Document for OrderConfirmation Document for Order

Goods Receipt Material Document for Goods Receipt Material Document for OrderOrder

Goods Receipt G/L Document for OrderGoods Receipt G/L Document for Order

Exercises:Exercises:259. Create purchase order260. Create goods receipt262. Post invoice receipt from vendor263. Display vendors invoice (gross) document264. Post payment to vendor 276. Create a production plan277. Display stock/requirements list278. Transfer planning data to demand management279. Review demand management280. Display stock/requirements list281. Run master production schedule282. Display stock/requirement list283. Convert planned order to production order284. Issue goods to production order285. Confirm production completion

Exercises:Exercises:286. Receipt of goods from production order287. Settle costs of production order287A. Display stock/requirements list

Documents

Production Planning Processes EGN 5620 Enterprise Systems Configuration Spring, 2012