1. Case Study 4: Operate a Manufacturing Company (Extension) EGN 5621 Enterprise Systems Collaboration Fall, 2015

2. Rules of the Game  Each round will last for 30 steps  End-of-round inventory is carried over to the next round  You can sell a product only if you have it in stock  You compete against the other teams and importers  Your objective is to maximize profit

3. What’s New in Mfg Extension? 1. Company can design own products based on specified rules, but the total number of products keeps six. 2. Besides 10, and 12, the distribution channel 14 is available. 3. Company can make investment to improve production capacity: 1)Reduce set-up time 2)Increase production capacity 4. No starting inventory. Each company needs to do planning, run MRP, and convert purchase requisitions to POs before starting game.

4. What’s New in Mfg Extension? 5. Depreciation of fixed assets is assessed 6. Fixed overheads are assessed 7. Inventory storage cost for excess stock is assessed

5. Corporate Roles Designation CEO ◦Check Financial Statement ◦Make investment decisions for production ◦Check summary sales report ◦Check price market report Market & Sales Manager ◦Check sales order report ◦Check summary sales report ◦Check price market report ◦Maintain and change market expenditure ◦Change selling prices for finished goods 5

6. Corporate Roles Designation Production and Planning Manager ◦Create planned independent requirement ◦Run MRP ◦Release production orders ◦Modify BOM ◦Monitor production schedule ◦Check product costs, including overhead costs ◦Check raw materials cost per production order MM Manager ◦Convert purchase requisitions to purchase orders ◦Track PO report ◦Check MRP results ◦Check individual stock level ◦Check inventory report 6

7. Tasks for the Manufacturing Case Study NoRolesFunctionsTransaction Code 1CEOWatch financial statementF.01 Create GL Post (Investment)FB50 Check Price market reportZMarket Check Summary sales reportZVC2 Sales & Marketing Manager Check Sales order reportZVA05 Check Summary sales reportZVC2 Check Price market reportZMarket Maintain marketing expenseZADS Maintain selling price for FGVK32 3Production & Planning Manager Create planned independent RequirementsMD61 Run MRPMD01 Convert planned orders to production ordersCO41 Modify BOMZCS02 Check production scheduleZCOOIS Watch finished product cost analysisZCK11 Check raw materials cost per Prod. orderZKSB1 4MM Manager Automatically generate POs from purchase requisitionsME59N Track Purchase order reportZME2N Check MRP resultsMD07 Check individual stock levelMD04 Check Inventory reportZMB52 2

8. What’s New in Mfg Extension?

9. Muesli Manufacturing

12. 1. Develop New Products 12 1) At beginning of the game, each company has six finished products with a preset recipe for each product. 2) You can change the recipe of a product from 1kg to 0.5 kg during the simulation by changing its bill of materials with T- code ZCS02. During simulation, your company always has six BOMs of finished products. 3) If your company still has inventory of the finished product, the system doesn’t allow you to change its BOM. 4) Your new product must meet the guideline for recipes. 5) When the system accepts your changes in BOM, it will change the description in the material master to match the new content and weight.

13. Muesli Manufacturing Association Label Regulation

14. List of Master Data Created for the Simulation Master DataAlphanumeric codes 6 Finished products$$-F01$$-F02$$-F03$$-F04$$-F05$$-F06 6 Raw materials$$-R01$$-R02$$-R03$$-R04$$-R05$$-R06 4 Packaging materials$$-P01$$-P02$$-P03$$-P04 2 VendorsV01V02 6 Bill of materials$$-F01$$-F02$$-F03$$-F04$$-F05$$-F06 1 Work center$$ 6 Routings$$-F01$$-F02$$-F03$$-F04$$-F05$$-F06 3 x 6 price lists (DC 10, 12, and 14)$$-F01$$-F02$$-F03$$-F04$$-F05$$-F06 6 info-records and 6 source lists for raw materialsV01-$$-R01V01-$$-R02V01-$$-R03V01-$$-R04V01-$$-R05V01-$$-R06 4 info-records and 4 source lists for packaging materialsV02-$$-P01V02-$$-P02V02-$$-P03V04-$$-P04 1 profit center$$ 1 coster center$$

15. New Product Development (1/2)

16. New product development (2/2)

17. Change BOM for New Product (T-code ZCS02) 17

18. Change BOM for New Product (Before change) 18

19. Change BOM for New Product (After Change) 19

20. 2. Distribution Channels 20

21. DC10: Hypermarkets (Review) Buy only large boxes (1 kg) Payment delay of 20 steps More sensitive to price Less sensitive to advertising Will have a stronger preference for 3 particular products during the simulation DC12: Grocery Chains (Review) Buy both large boxes (1 kg) and small boxes (0.5 kg) Payment delay of 10 to 15 steps Will have a stronger preference for 4 particular products during the simulation

22. Distribution Channel 14 22 Only buy small boxes (0.5 kg) Less price sensitive Sensitive to advertising Payment delay of 5 to 15 steps Stronger preference for 2 particular products during the simulation

23. Number of Stores by Geographical Area

24. 3. Investment for Production Capacity Improvement 24

25. 3. Investment for Production Capacity Improvement 25 1)Reduce set-up time The default set-up time is 12 hours for changing product in your production line. If you want to keep product variety and wish to run small production batches, you can make investment to reduce the set-up time. The table below shows the set-up time as a function of your investment. If your investment is zero, the set-up time is 12 hours. If you invest 44,117.65, then the set-up time reduces to 10.5 hours.

26. Investment for Reducing Set-up Time 26

27. Investment for Reducing Set-up Time

28. Special Investment for Reducing Set-up Time in the First Quarter Special Investment for Reducing Set-up Time in the First Quarter 28 In the first quarter, every company must invest 5,000 euros to reduce set-up time. After the first investment, it is up to your company to decide whether to make further investment.

29. Investment in SAP to Reduce Set-up Time 29 Use T-code: FB50 G/L Account: 113300 (Weizen bank) D/C: credit Amount: 5,000 (first investment) G/L Account: 478000 (Lean manufacturing expense) D/C: debit Amount: 5,000 (first investment) Cost center: $$

30. Investment for Reducing Set-up Time in SAP 30

31. Investment for Increasing Production Capacity Investment for Increasing Production Capacity 31 Your company can make investment on equipment to increase your production capacity. This is a strategic decision for your operation. At the start of simulation, your production equipment is worth of 5 million euros with the production capacity of producing 24,000 boxes per day.

32. Increase Production Capacity 32 For an additional machinery investment of 1,000,000 euros you can increase production capacity by 1,000 boxes per day. In order to obtain a daily capacity of 25,000 boxes, you need to invest 1 million euros. Formula for capacity improvement: Total daily capacity = 24,000 + (0.001 x additional machinery investment).

33. Production Improvement Decision

34. Investment for Improving Production Capacity in SAP 34 Use T-code: FB50 G/L Account: 113300 (Weizen bank) D/C: credit Amount: Your investment G/L Account: 11000 (Machinery & equipment) D/C: debit Amount:Your investment

35. Investment to Improve Production Capacity in SAP 35

36. Difference between Investment for Reducing Set-up Time & Improving Production Capacity 36 Investment for reducing set-up time is a one shot investment as manufacturing expense. Investment for improving production capacity is an investment to increase machinery assets. The annual depreciation of machinery assets is calculated as 10% of machinery value.

38. Initial Financial Statement

39. Pricing decision

40. Marketing decision

41. 4. No Inventory at Beginning Each company needs to plan and complete the following steps before simulation: 1)- Planning for finished products (T-code: MD61), 2)- Run MRP (T-code, MD01), and 3)- Convert purchase requisitions to Purchase orders (T-code:ME59N) 4)- Convert planned orders to production order after raw and packing materials are available (T-code CO41)

42. Create Planned Independent Requirement for 6 Finished Products (MD61)

44. Execute MRP

45. Create Purchase Orders from Purchase Requisitions (ME59N)

46. Convert Purchase Requisitions into Purchase Orders

47. Convert Planned Orders to Production Orders After simulation is started and when required raw and packaging materials are received, the planning manager needs to convert planned orders to production orders (T-code: CO41). You can release only those planned orders into production orders with which the required raw materials are available in your inventory.

48. Conversion of Planned Order (CO41)

49. Release Production Order(s)

50. Release Production Orders (CO41)

51. 5. Depreciation of fixed assets Depreciation of fixed assets is assessed (ZCK11) Annual depreciation is calculated as 5% of building value and 10% of machinery value at 5 million Euros.

52. 5. Depreciation of fixed assets Depreciation of fixed assets is assessed (ZCK11)

53. 6. Fixed Mfg Overhead Fixed mfg overhead is assessed (T-code: ZCK11)

54. 7. Inventory Storage Cost

55. Each team has 2 warehouse storage areas: ◦Finished product (02) - space for 250,000 boxes ◦Raw materials (88) - space for 250,000 kg of raw materials and space for 1,000,000 of boxes and bags Additional warehouse space can be rented for: ◦25,000 boxes of finished products (or part thereof), @ € 250/day (€0.01 per box per day) ◦25,000 kg (or part thereof), @ € 500/step (more expensive because they are raw materials) ◦25,000 boxes AND/OR bags (or part thereof), @ € 100/day. ◦The cost of additional storage will be automatically billed, and paid immediately.

56. Raw Material Cost per PO

57. Game Layout 30 steps 15 min 30 steps 15 min 30 steps 15 min

58. Login Information: Client : 320 Login : $ # $ = Team Letter, A, B, C, D, E, F, G for pilot run I, J, K, L, M, N, O, P for real run # = User 1 to User 5 Password: ERPSIM Server: MERIDA

59. User Menu for Mfg Extension