High-Level OP Planning and Demand Management EGS 5622 Enterprise Systems Integration Spring, 2018

Enterprise Operations Overview

SAP Module View Integrated Solution Client / Server Open Systems Financial Accounting Sales & Distribution Materials Mgmt. Controlling Production Planning Fixed Assets Mgmt. Integrated Solution Human Resources Project System Client / Server Quality Maintenance Open Systems Workflow Plant Maintenance Industry Solutions Warehouse Management

Enterprise Structure Credit Control Fiscal Year Area (GL00) Plants (DL##/MI## /SD##) Client (615) Chart of Accounts (GL##) Company Code (US##) Fiscal Year Variant (K1) Credit Control Area (GL00) Purchasing Org. (US##) Group (N##) Shipping Point (DL##/MI##/SD##) Distribution Channel (IN/WH) Division (BI/AS) Sales Area Controlling Area (NA ##) FG## SF## Sales Org. (UE##/UW##) Cost centers RM## MI## Work center (ASSY1000/INSP1000/PACK1000) TG##

SAP GBI Client, Userid, Password SAP ERP Exercises Server: CALCUTTA Client: 615 Application server: warsaw.cob.csuchico.edu System number: 37 System ID: CAL Userid: gbi-002 to gbi-010 Initial password: FLORIDA

Check Company Code/Chart Account: Company code is a central organizational unit used to structure an enterprise from a financial accounting perspective. It is a legally independent entity and the smallest organizational unit for which accounting can be carried out. Chart of accounts contains the account number, account name, and the information that controls how an account functions and how a General ledger (G/L) account is created in a company code

Check company code/Fiscal Year Variant Fiscal year variant contains the number of posting periods in the fiscal year and the number of special periods

Check Control Area Controlling area is an organizational unit within a company, used for cost account purposes. A controlling area may include single or multiple company codes that may use different currencies.

Check Credit Control Area Credit control area is an organizational unit for specifying and controlling customer credit limits. A credit control area can include one or more company codes. It is not possible to divide a company code into several credit control areas.

Check Plant Plant is an organizational unit in a company code. Generally, plant is used to describe a production site, a distribution center or centralized warehouse

Check Storage Locations Storage location is an organizational unit allowing the differentiation of material stocks within a plant. It may be a physical or logical unit

Check Purchasing Organization Purchasing organization is an organizational unit within Logistics. A purchasing organization procures materials and services, negotiates conditions of purchase with vendors, and bears responsibility for such transaction.

Check Purchasing Group A purchasing group corresponds to a buyer or group of buyers who perform the following purchasing activities: 1) Procuring certain articles or merchandise categories, and 2) Acting as the contact for vendors.

Check Sales Organization Sales organization is an organizational unit within Logistics. It represents the selling unit in the legal sense and is used to define the basic sales and distribution structure

Check Financial Accounts Financial accounts are used to collect and store business transactions in a way that satisfies external reporting requirements.

Check Vendor List Vendor master database contains information about the vendors that supply an enterprise.

Check Customer List Customer master record is created when a company starts a business relationship with a new customer partner.

Material List at Plant DL## Material master database contains descriptions of all materials that an enterprise procures, produces, and may keep in stock.

Check Standard Hierarchy of Cost Center Standard hierarchy of cost centers is an organizational unit that serves to refine and focus a managerial accounting and reporting sub-system. Each standard hierarchy is attached to the appropriate Controlling Area

Check Sales prices Sales price is a very sensitive element in business. It determined based on cost, margin (gross, net), distribution channels and so on. .

Check Bill of Materials (BOM) Bill of Materials is a list of all materials required in a process together with the quantities required

Check Work Centers Work center is a location where operations are carried out. It can be machines or machine groups, production lines, assembly work centers, employees or groups of employees.

Check Routing A routing lists all operations (process steps) have to be carried out and in which order to produce. A routing also contains required materials and details about the work centers and the required production resources and tools (includes jigs and fixtures).

Lab 10-A: Overview (Due date: 3-7-2018) List your enterprise structure and components in assigned SAP server and client: such as - company code, chart account, credit control area, - plants, storage locations, - purchasing organization, purchasing group, vendors, - general ledger accounts, - sales organizations, distribution channels, sales areas, shipping points, customers, - stock status at three plants, - material sales prices, - bill of materials, work centers, and routings.

High-Level OP Planning and Demand Management

High-Level OP Planning ECC 6.0 January 2008 Enterprise Operation Planning OP Execution High-Level OP Planning Procurement Process CO/PA CO/PA – Control Module/Profitability analysis Detailed OP Planning Forecasting Sales and Operations Planning (SOP) Demand Management MPS MRP MPS – Master production Scheduling MRP – Material Requirement Planning Execution Sales Information System Manufacturing Execution Warehouse Management Strategy Planning Vision Goals & Objectives Strategy Product Portfolio and Roadmap Sales Process © SAP AG and The Rushmore Group, LLC 2008

Version 1.0 Planning Strategies January 2007 Planning strategies represent the business procedures for Planning of production quantities, and Time periods Multiple types of planning strategies based upon environment Make-To-Stock Make-To-order Driven by sales orders Configurable materials Mass customization Assembly orders Planning strategies represent the business procedures for the planning of production quantities and dates. A wide range of production planning strategies are available in the SAP R/3 System, offering a large number of different options ranging from pure make-to-order production to make-to-stock production. Depending on the strategy you choose, you can: Use sales orders and/or sales forecast values to create the demand program Move the stocking level down to the assembly level so that final assembly is triggered by the incoming sales order Carry out Demand Management specifically for the assembly The Rushmore Group, LLC

Operations Planning & Execution Version 1.0 January 2007 Operations Planning & Execution Major Players: Tactical Planning (at corporate level) COO, CFO, Controller, Sales & Marketing, Product Line mangers, Production Planner Detailed Planning (at plant level) Production Planner/Scheduler, MRP Controller, Capacity Planners Execution (at shop floor level) Production Line Workers, Shop Floor Supervisors, Buyers CO – Controlling Module PA - Profitability analysis Sales Info Forecasting CO/PA Sales OP Planning (SOP) Tactical Planning Demand Management (DM) Detailed Planning MPS MRP/CRP Manufacturing Execution/SFC Procurement Process Order Settlement Execution MPS – Master Production Scheduling MRP – Material Requirement Planning CRP – Capacity Requirement Planning SFC – Shop Floor Control The Rushmore Group, LLC

Costing-Based CO-PA CO-PA is profitability analysis, based on cost- of-sales accounting. CO-PA can be multiple dimensions, such as product, country, distribution channel, and customer) CO-PA data are collected from various areas, such as sales orders or billing data from SD, production costs and variance from PP, and values of overhead cost controlling from controlling.

Costing-Based CO-PA CM: profit margin CM: Profit margin

Pricing and Costing for mfg. goods Cost components of mfg cost: Materials Costs Direct and indirect labor costs Equipment costs Strategies to reduce costs Lean manufacturing Systems approach

Sales and Operations Planning (SOP) Version 1.0 January 2007 Sales and Operations Planning (SOP) Information Origination Sales Marketing Manufacturing Accounting Human Resources Purchasing Intra-firm Collaboration Institutional Common Sense ERP systems ensure that there is only one forecast, based upon the principles of a single data repository used by all areas of the enterprise. A more recent proposal to fix forecast errors is to use collaboration. The idea is that if different parts of the supply chain collaborate on a common forecast and everyone plans based on that single forecast; then there is little need for one part of the chain to hedge based on the uncertainty of what is done in other parts of the chain. Intra-firm collaboration, you would think, would be common place – seems that a little common sense would dictate that everyone in a firm come together with a common set of forecast figures. But this is rarely the case. Marketing has a set of forecasts, so too does operations. Sales has their forecast and it’s possible that for budgeting purposes Finance uses still another. The advancement of enterprise resource planning (ERP) systems is helping ensure that there is only one forecast, based upon the principles of a single data repository used by all areas of the enterprise. Forecasts affect most functional areas of the firm and are the starting point for resource allocation decisions. For example, manufacturing must plan production on a day to day basis to meet customer orders, while purchasing needs to know how to align supplier deliveries with the production schedules. Finance needs to understand the forecasts so that the proper levels of investment can be made in plant, equipment, and inventory and so that budgets can be constructed to better manage the business. The marketing function needs to know how to allocate resources for various product groups and marketing campaigns. Forecasts also determine the labor requirements required by the firm so that the human resources function can make proper hiring and training decisions when demand is expected to grow. The Rushmore Group, LLC

Master Data - Product Groups Version 1.0 January 2007 Master Data - Product Groups Aggregate planning that group together materials or other product groups (Product Families) Multi- or Single- Level Product Groups the lowest level must be materials Bikes Touring Mountain 24 Speed 18 Speed Red 24T Blue 24T Red 24M Blue 24M Aggregate forecasts of a group of similar products are generally more accurate than individual forecasts of the individual products that make up the group. The Rushmore Group, LLC

Planning Levels Bikes Touring 24 Speed 18 Speed Red 24T Blue 24T Version 1.0 Planning Levels January 2007 Bikes 50% Touring 50% Mountain 70% 24 Speed 30% 18 Speed Red 24T Blue 24T 40% Red 24M 60% Blue 24M Planning at Product Group Level Planning at Material Level The Rushmore Group, LLC

Version 1.0 Demand Management January 2007 Link between Strategic Planning (SOP) & Detailed Planning (MPS/MRP) The results of Demand Mgmt is called the Demand Program, it is generated from our independent requirements – PIR (Planned IR) and CIR (Customer IR) Product Groups Bikes 50% Mountain 50% Touring Disaggregation Aggregating forecasts across multiple items reduces forecasting errors. A clothing store, for instance, might be able to estimate within a pretty narrow range what the demand will be for men’s dress shirts. But when that store tries to estimate the demand for individual styles, colors, and sizes of shirts, the accuracy of their forecasts will be considerably worse. Firms handle this kind of forecasting problem usually in one of three ways; they either forecast from the bottom up, from the top down, or they start in the middle and work both up and down. The “top down” forecast essentially estimates total sales demand and then divides those sales dollars level by level until the stock keeping unit (SKU) is reached. The “bottom up” method, as one might expect, starts with forecasts at the SKU level and then aggregates those demand estimates level by level to reach a company–level forecast. Another method, one might call the “in-between” method, starts forecasts at the category level (like men’s dress shirts), and then works up to determine store sales and works down to divide up the forecast into styles, colors and SKUs. 30% 18 Speed 70% 24 Speed 50% 18 Speed 50% 24 Speed 40% Red 24M 60% Blue 24M 50% Red 24T 50% Blue 24T Material What is the planned quantity for Bike group if you want to plant 100 of Blue 24T? The Rushmore Group, LLC

Demand Management Forecast Sales Planned Independent Requirements Version 1.0 Demand Management January 2007 Forecast Sales Planned Independent Requirements Customer Independent Requirements Demand Program MPS / MRP The Rushmore Group, LLC

Transfer from High Level to Detailed Planning Version 1.0 January 2007 Transfer from High Level to Detailed Planning Bikes 50% Touring 50% Mountain 70% 24 Speed 30% 18 Speed Red 24T Blue 24T 40% Red 24M 60% Blue 24M Demand Planning Data Planning at Material Level Disaggregation Planned Independent Requirements At Material and Plant Level Transfer Operative Planning Data Planning at Group Level The Rushmore Group, LLC

Enterprise Strategic Planning SAP Implementation

Product Group (T-code: MC85)

Work Center (T-code: CR03)

Work Center Costing

Labor rate: $50/hour

Create Finished Material

Forecast : Parameters Set up Version 1.0 January 2007 Forecast : Parameters Set up January 2007 (v1.0) © 2007 by SAP AG. All rights reserved. SAP University Alliance. The Rushmore Group, LLC The Rushmore Group, LLC

Forecast : Historical Data Version 1.0 January 2007 Forecast : Historical Data The Rushmore Group, LLC

Sales and Operations Planning (SOP) Version 1.0 January 2007 Sales and Operations Planning (SOP) Flexible forecasting and planning tool Usually consists of three steps: Generate SOP from forecast, CO/PA plan, SIS plan, … Generate Production Plan Generate Rough Cut Capacity Plan Planned at an aggregate level in time buckets (Days, Weeks, Months) The Rushmore Group, LLC

Generate SOP (T – MC82) Version 1.0 January 2007 The Rushmore Group, LLC

Selecting a Model: -Auto. Model selection

MAD: median absolute deviation

Forecast Example: Trend-Seasonal Forecast

An Example of SOP

Transfer SOP to Demand Management Version 1.0 January 2007 Transfer SOP to Demand Management (T – MC82) The Rushmore Group, LLC

An Example of Demand Management Version 1.0 January 2007 An Example of Demand Management The Rushmore Group, LLC

Run MPS with MRP (T-code: MD40) Version 1.0 January 2007 Run MPS with MRP (T-code: MD40) The Rushmore Group, LLC

Review Stock/Requirement List (T-code: MD04)

Transfer from High Level to Detailed Planning

Lab 10-B: (Due date: 3-7-2018) Display Product group Review work center and assigned capacity Create consumption values (forecast) for finished products Create sales and operations plan (SOP) Check stock/requirements list Transfer SOP to demand management Review demand management Run MPS with MRP Review stock/requirement list