Production Planning Process Theories & Concepts EGN 5620 Enterprise Systems Configuration Spring, 2011.

Production Planning Process EGN 5620 Enterprise Systems Configuration Spring, 2011

Production Planning Process Theories & Concepts EGN Enterprise Systems Configuration Spring, 2011

Enterprise Operations Planning
ECC 6.0 January 2008 Enterprise Operations Planning Execution High Level Planning Procurement Process CO/PA Production Planning Forecasting Sales and Operations Planning Demand Management MPS MRP Execution Sales Information System Manufacturing Execution Order Settlement January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved. © SAP AG and The Rushmore Group, LLC 2008

Enterprise Operations Planning
ECC 6.0 January 2008 Enterprise Operations Planning High Level Planning Control and profit analysis (CO/PA) Forecasting Sales and operations planning (SOP) Demand management Production planning MPS MRP Execution Procurement Manufacturing (production order) Execution Order settlement January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved. © SAP AG and The Rushmore Group, LLC 2008

Production Planning Aggregate Planning Production Planning
Master Production Scheduling (MPS) Resource Requirements Planning Material Requirements Planning (MRP) Resources Planning Capacity Requirements Planning (CRP)

Master Production Scheduling (MPS)

Objectives of MPS Determine the quantity and timing of completion of end items over a short-range planning horizon. Schedule end items (finished goods and parts shipped as end items) to be completed promptly and when promised to the customer. Avoid overloading or under-loading the production facility so that production capacity is efficiently utilized and low production costs result.

Time Fences The rules for scheduling 6+ weeks 4-6 weeks 2-4 weeks 1-2
+/- 20% Change 1-2 weeks +/- 10% Change +/- 5% Change No Change Frozen Firm Full Open

Time Fences The rules for scheduling:
Do not change orders in the frozen zone Do not exceed the agreed on percentage changes when modifying orders in the other zones Try to level load as much as possible Do not exceed the capacity of the system when promising orders. If an order must be pulled into level load, pull it into the earliest possible week without missing the promise.

Developing an MPS Using input information
Customer orders (end items quantity, due dates) Forecasts (end items quantity, due dates) Inventory status (balances, planned receipts) Production capacity (output rates, planned downtime) Schedulers place orders in the earliest available open slot of the MPS . . . more

Developing an MPS Schedulers must:
estimate the total demand for products from all sources assign orders to production slots make delivery promises to customers, and make the detailed calculations for the MPS

Example: Master Production Scheduling
Arizona Instruments produces bar code scanners for consumers and other manufacturers on a produce-to-stock basis. The production planner is developing an MPS for scanners for the next 6 weeks. The minimum lot size is 1,500 scanners, and the safety stock level is 400 scanners. There are currently 1,120 scanners in inventory. The estimates of demand for scanners in the next 6 weeks are shown on the next slide.

Demand Estimates CUSTOMERS BRANCH WAREHOUSES MARKET RESEARCH PRODUCTION RESEARCH 500 200 10 1 50 300 1000 400 2 3 4 700 6 5 WEEK

Computations WEEK 1 2 3 4 5 6 CUSTOMERS 500 1000 500 200 700 1000 BRANCH WAREHOUSES 200 300 400 500 300 200 MARKET RESEARCH 50 10 PRODUCTION RESEARCH 10 TOTAL DEMAND 710 1350 900 700 1010 1200 BEGINNING INVENTORY 1120 410 560 1160 460 950 REQUIRED PRODUCTION 1500 1500 1500 1500 ENDING INVENTORY 410 560 1160 460 950 1250

MPS for Bar Code Scanners 1 2 3 4 6 5 WEEK SCANNER PRODUCTION 1500

Material Requirements Planning (MRP)

Materials Requirements Planning (MRP)
Only for dependent items Explodes Master Schedule (MPS) into required amounts of raw materials and subassemblies to support MPS Net requirements against current orders and inventories to develop production and purchased material ordering schedules Via use of a computer-based system

Objectives of MRP Improve customer service Reduce inventory investment
Improve plant operating efficiency

Elements of MRP Inputs Outputs Service-Parts Orders and Forecasts
Inventory Transaction Data Order Changes Order Inventory Status File Planned Order Schedule MRP System Master Production Schedule Planning Report Performance Exception Reports Bill of Materials File

MRP Computer Program Begins with number of end items needed
Add service parts not included in MPS Explode MPS into gross requirements by consulting bill of materials file Modify gross requirements to get net requirements: Net Requirements = Gross Requirements + Allocated Inventory + Safety Stock - Inventory On Hand Offset orders to allow for lead time

Outputs of MRP Planned order schedule - quantity of material to be ordered in each time period Changes to planned orders - modifications to previous planned orders Secondary outputs: Exception reports Performance reports Planning reports

Example: Product structure
LocoMopeds is a manufacturer of off- road mopeds. The following product structure diagram represents the bill of materials for its dual-carburetor Model 442 moped. MOPED Level 0 ENGINE ASSEMBLY GAS TANK WHEEL ASSEMBLY (2) FRAME Level 1 MOTOR CARBURETOR (2) HUB ASSEMBLY TIRE Level 2

Example: MRP BOM Bill of Materials Parent Component Level Compon.
Code Code Code Description Req’d 442 0 #442 Moped 442 EA 1 Engine Assem. 1 GT 1 Gas Tank 1 WA 1 Wheel Assem. 2 F 1 Frame 1 EA M 2 Motor 1 C 2 Carburetor 2 WA HA 2 Hub Assem. 1 T 2 Tire 1

Example: MRP Schedule Inventory Status Report Item Code On- Hand
Safety Stock Lot Size Lead Time Sched. Receipts Qnty Week 442 500 200 LFL 1 -- EA 300 100 1000 10 GT 600 2 900 WA 400 2000 F 3 M 250 C 150 2000+ HA 2400 11 T 3000,2000 11,12

Example: MPS Schedule The company is currently planning production for weeks 10 through 16. Based on existing orders and demand forecasts, the master production schedule is as follows: Master Production Schedule: #442 Moped Determine the MRP schedule required to support the master production schedule for the Model 442 moped in weeks 11 1300 800 1200 1400 10 16 15 14 13 12 1000 WEEK QUANTITY

Example: MRP Schedule MRP Schedule for #442 Mopeds for Weeks , considering that: Gross Requirements come from the moped MPS There is an On-Hand balance of 500 mopeds at the end of week 9 There are no Scheduled Receipts for mopeds A lot-for-lot rule is used for ordering mopeds Safety stock of 200 mopeds is desired Lead time for mopeds is one week

Example: MRP Schedule MRP Schedule for #442 Mopeds . . . Initially
GROSS REQUIREMENTS SCHEDULED RECEIPTS AVAILABLE (ON-HAND = 500) NET REQUIREMENTS PLANNED ORDER RECEIPTS PLANNED ORDER RELEASES ITEM: 442 MOPED LT: 1 LOT SIZE: LFL SS: 200 10 1000 11 12 13 1300 800 15 14 1400 1200 16 WEEK

Example: MRP Schedule MRP Schedule for #442 Mopeds . . . Completed
GROSS REQUIREMENTS SCHEDULED RECEIPTS AVAILABLE (ON-HAND = 500) NET REQUIREMENTS PLANNED ORDER RECEIPTS PLANNED ORDER RELEASES ITEM: 442 MOPED LT: 1 LOT SIZE: LFL SS: 200 300 1000 10 1300 11 12 13 1200 800 1400 15 14 16 WEEK

Example: MRP Schedule MRP Schedule for Gas Tanks for Weeks , considering that: Gross Requirements come from moped Planned-Order-Releases There is an On-Hand balance of 600 gas tanks at the end of week 9 There is a Scheduled Receipt for 900 tanks in week 10 A lot-for-lot rule is used for ordering gas tanks Safety stock of 200 gas tanks is desired Lead time for gas tanks is two weeks

Example: MRP Schedule MRP Schedule for Gas Tanks . . . Initially
GROSS REQUIREMENTS SCHEDULED RECEIPTS AVAILABLE (ON-HAND = 600) NET REQUIREMENTS PLANNED ORDER RECEIPTS PLANNED ORDER RELEASES ITEM: GAS TANK LT: 2 LOT SIZE: LFL SS: 200 1000 900 10 1300 11 12 13 800 1200 15 14 1400 16 WEEK

Example: MRP Schedule MRP Schedule for Gas Tanks . . . Completed
GROSS REQUIREMENTS SCHEDULED RECEIPTS AVAILABLE (ON-HAND = 600) NET REQUIREMENTS PLANNED ORDER RECEIPTS PLANNED ORDER RELEASES ITEM: GAS TANK LT: 2 LOT SIZE: LFL SS: 200 1000 900 1300 10 800 1200 300 11 12 13 1400 15 14 16 WEEK

Example: MRP Schedule MRP Schedule for Frames for Weeks , considering that: Gross Requirements come from moped Planned- Order-Releases There is an On-Hand balance of 600 frames at the end of week 9 There is a Scheduled Receipt for 2000 frames in week 10 The firm uses a Lot Size (multiple) of 2000 for ordering frames No safety stock of frames is desired Lead time for frames is 3 weeks

Example: MRP Schedule MRP Schedule for Frames . . . Initially
GROSS REQUIREMENTS SCHEDULED RECEIPTS AVAILABLE NET REQUIREMENTS PLANNED ORDER RECEIPTS PLANNED ORDER RELEASES ITEM: FRAME LT: 3 LOT SIZE: SS: 0 1000 2000 10 1300 11 12 13 800 1200 15 14 1400 16 WEEK 600

Example: MRP Schedule MRP Schedule for Frames . . . Completed
GROSS REQUIREMENTS SCHEDULED RECEIPTS AVAILABLE (ON-HAND = 600) NET REQUIREMENTS PLANNED ORDER RECEIPTS PLANNED ORDER RELEASES ITEM: FRAME LT: 3 LOT SIZE: SS: 0 1000 2000 2600 10 1600 1300 11 12 13 800 500 300 900 1200 15 14 1400 16 WEEK 1500 1100

Example: MRP Schedule MRP Schedule for Engine Assemblies for Weeks , considering that: Gross Requirements come from moped Planned-Order-Releases There is an On-Hand balance of 300 engine assemblies at the end of week 9 There is a Scheduled Receipt for 1000 engine assemblies in week 10 The firm uses a Lot Size (multiple) of 500 for ordering engine assemblies Safety Stock of 100 engine assemblies is desired Lead time for engine assemblies is 1 week

Example: MRP Schedule MRP Schedule for Engine Assemblies Initially GROSS REQUIREMENTS SCHEDULED RECEIPTS AVAILABLE (ON-HAND = 300) NET REQUIREMENTS PLANNED ORDER RECEIPTS PLANNED ORDER RELEASES ITEM: ENGINE ASSEM LT: 1 LOT SIZE: SS: 100 1000 10 1300 11 12 13 800 1200 15 14 1400 16 WEEK

Example: MRP Schedule MRP Schedule for Engine Assemblies Completed GROSS REQUIREMENTS SCHEDULED RECEIPTS AVAILABLE (ON-HAND = 300) NET REQUIREMENTS PLANNED ORDER RECEIPTS PLANNED ORDER RELEASES ITEM: ENGINE ASSEM LT: 1 LOT SIZE: SS: 100 1000 1200 10 1500 200 500 1100 1300 11 12 13 800 400 100 15 14 1400 16 WEEK

Example: MRP Schedule MRP Schedule for Motors for Weeks , considering that: Gross Requirements come from engine assembly Planned-Order-Releases There is an On-Hand balance of 250 motors at the end of week 9 There are no Scheduled Receipts for motors A lot-for-lot rule is used for ordering motors No Safety Stock of motors is desired Lead time for motors is 1 week

Example: MRP Schedule MRP Schedule for Motors . . . Initially
GROSS REQUIREMENTS SCHEDULED RECEIPTS AVAILABLE (ON-HAND = 250) NET REQUIREMENTS PLANNED ORDER RECEIPTS PLANNED ORDER RELEASES ITEM: MOTOR LT: 1 LOT SIZE: LFL SS: 0 10 1500 500 11 12 13 1000 15 14 16 WEEK

Example: MRP Schedule MRP Schedule for Motors . . . Completed
GROSS REQUIREMENTS SCHEDULED RECEIPTS AVAILABLE (ON-HAND = 250) NET REQUIREMENTS PLANNED ORDER RECEIPTS PLANNED ORDER RELEASES ITEM: MOTOR LT: 1 LOT SIZE: LFL SS: 0 250 1250 10 500 1500 11 12 13 1000 15 14 16 WEEK

Example: MRP Schedule MRP Schedule for Carburetors for Weeks , considering that: Gross Requirements come from engine assembly Planned-Order-Releases (times 2) There is an On-Hand balance of 150 carburetors at the end of week 9 There are no Scheduled Receipts for carburetors A Lot Size of 200+ is used for ordering carburetors Safety Stock of 100 carburetors is desired Lead time for carburetors is 2 weeks

Example: MRP Schedule MRP Schedule for Carburetors . . . Initially
GROSS REQUIREMENTS SCHEDULED RECEIPTS AVAILABLE (ON-HAND = 150) NET REQUIREMENTS PLANNED ORDER RECEIPTS PLANNED ORDER RELEASES ITEM: CARBURETOR LT: 2 LOT SIZE: SS: 100 10 3000 1000 11 12 13 2000 15 14 16 WEEK

Example: MRP Schedule MRP Schedule for Carburetors . . . Completed
GROSS REQUIREMENTS SCHEDULED RECEIPTS AVAILABLE (ON-HAND = 150) NET REQUIREMENTS PLANNED ORDER RECEIPTS PLANNED ORDER RELEASES ITEM: CARBURETOR LT: 2 LOT SIZE: SS: 100 50 2500 10 3050 3000 950 1000 11 12 13 1450 1550 1050 2000 15 14 16 WEEK

Example: MRP Schedule MRP Schedule for Wheel Assemblies for Weeks , considering that: Gross Requirements come from moped Planned-Order-Releases (times 2) There is an On-Hand balance of 500 wheel assemblies at the end of week 9 There is a Scheduled Receipt for 2000 wheel assemblies in week 10 A Lot Size (multiple) of 500 is used for ordering wheel assemblies Safety Stock of 400 wheel assemblies is desired Lead time for wheel assemblies is 1 week

Example: MRP Schedule MRP Schedule for Wheel Assemblies Initially GROSS REQUIREMENTS SCHEDULED RECEIPTS AVAILABLE (ON-HAND = 500) NET REQUIREMENTS PLANNED ORDER RECEIPTS PLANNED ORDER RELEASES ITEM: WHEEL ASSEM LT: 1 LOT SIZE: SS: 400 2000 10 2600 11 12 13 1600 2400 15 14 2800 16 WEEK

Example: MRP Schedule MRP Schedule for Wheel Assemblies Completed GROSS REQUIREMENTS SCHEDULED RECEIPTS AVAILABLE (ON-HAND = 500) NET REQUIREMENTS PLANNED ORDER RECEIPTS PLANNED ORDER RELEASES ITEM: WHEEL ASSEM LT: 1 LOT SIZE: SS: 400 2000 2100 10 2500 100 2600 11 12 13 1600 2800 3000 400 200 2400 15 14 16 WEEK

Example: MRP Schedule MRP Schedule for Hub Assemblies for Weeks , considering that: Gross Requirements come from wheel assembly Planned-Order-Releases There is an On-Hand balance of 100 hub assemblies at the end of week 9 There is a Scheduled Receipt of 2400 hub assemblies in week 11 A lot-for-lot rule is used for ordering hub assemblies No Safety Stock of hub assemblies is desired Lead time for hub assemblies is 1 week

Example: MRP Schedule MRP Schedule for Hub Assemblies . . . Initially
GROSS REQUIREMENTS SCHEDULED RECEIPTS AVAILABLE ON-HAND = 100) NET REQUIREMENTS PLANNED ORDER RECEIPTS PLANNED ORDER RELEASES ITEM: HUB ASSEM LT: 1 LOT SIZE: LFL SS: 0 10 2400 2500 2000 11 12 13 3000 15 14 16 WEEK

Example: MRP Schedule MRP Schedule for Hub Assemblies . . . Completed
GROSS REQUIREMENTS SCHEDULED RECEIPTS AVAILABLE (ON-HAND = 100) NET REQUIREMENTS PLANNED ORDER RECEIPTS PLANNED ORDER RELEASES ITEM: HUB ASSEM LT: 1 LOT SIZE: LFL SS: 0 100 10 2000 2500 2400 11 12 13 3000 15 14 16 WEEK

Example: MRP Schedule MRP Schedule for Tires for Weeks , considering that: Gross Requirements come from wheel assembly Planned-Order-Releases There is an On-Hand balance of 500 tires at the end of week 9 There are Scheduled Receipts for 3000 and tires weeks 11 and 12, respectively A Lot Size (multiple) of 1000 is used for ordering tires Safety Stock of 500 tires is desired Lead time for tires is 3 weeks

Example: MRP Schedule MRP Schedule for Tires . . . Initially
GROSS REQUIREMENTS SCHEDULED RECEIPTS AVAILABLE (ON-HAND = 500) NET REQUIREMENTS PLANNED ORDER RECEIPTS PLANNED ORDER RELEASES ITEM: TIRE LT: 3 LOT SIZE: SS: 500 10 3000 2500 2000 11 12 13 15 14 16 WEEK

Example: MRP Schedule MRP Schedule for Tires . . . Completed
GROSS REQUIREMENTS SCHEDULED RECEIPTS AVAILABLE (ON-HAND = 500) NET REQUIREMENTS PLANNED ORDER RECEIPTS PLANNED ORDER RELEASES ITEM: TIRE LT: 3 LOT SIZE: SS: 500 2000 10 3000 2500 11 12 13 1500 500 15 14 16 WEEK

Lot-Sizing in MRP Lot-size is the quantity ordered/produced at one time Large lots are preferred because: Changeovers cost less and capacity greater Annual cost of purchase orders less Price breaks and transportation breaks can be utilized Small lots are preferred because: Lower inventory carrying cost Reduced risk of obsolescence Shorter cycle time to produce customer order

Lot-Sizing Methods Typical MRP methods Comments Lot-for-Lot (LFL)
Economic Order Quantity (EOQ) Period Order Quantity (POQ) Comments LFL is the preferred MRP lot sizing method EOQ and POQ do not consider quantity discounts, and do not always provide the most economical approach with lumpy demand

Manufacturing Execution

Manufacturing Execution
ECC 6.0 Manufacturing Execution January 2008 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 January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved. © SAP AG and The Rushmore Group, LLC 2008

ECC 6.0 January 2008 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 January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved. © SAP AG and The Rushmore Group, LLC 2008

Production Planning Strategies

ECC 6.0 January 2008 Production 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. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved. 61 © SAP AG and The Rushmore Group, LLC 2008 61

Production Order A production order defines: Goods to be processed
ECC 6.0 Production Order January 2008 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 January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved. 62 © SAP AG and The Rushmore Group, LLC 2008 62

Creation of Production Order
The creation of a production order results in the following outcomes: availability checks, materials reservation, production schedule, 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.

Production Planning Process SAP Implementation EGN Enterprise Systems Configuration Spring, 2011

Business Process Integration
ECC 6.0 January 2008 Business Process Integration FI MM PP SD Transactions Master Data MM PP SD Org Data Rules MM PP SD FI FI FI MM In the Business Process Integration class we use the stool as a metaphor for the SAP structure. There are four basic components needed to run execute SAP. Three of these are the legs of the stool: org data, master data, and rules. These ‘hold up’ the transactions. Transactions cannot be run unless these are setup. The legs are typically configured during the implementation process. During BPI 1 we will setup the stool for Finance, Materials management and Sales and Distribution. PP SD January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved. © SAP AG and The Rushmore Group, LLC 2008

Business Process Integration
ECC 6.0 Business Process Integration January 2008 PP Transactions January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved. © SAP AG and The Rushmore Group, LLC 2008

Transaction Data (Review)
ECC 6.0 Transaction Data (Review) January 2008 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 January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved. © SAP AG and The Rushmore Group, LLC 2008

Production Order Process (Make-to-Stock)
ECC 6.0 January 2008 Production Order Process (Make-to-Stock) Production order creation (Capacity Planning) Production Order Request Production Order Release Order Settlement Goods Issue Goods Receipt Confirmation of Production Order Completion January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved. © SAP AG and The Rushmore Group, LLC 2008

ECC 6.0 Production Request January 2008 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. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved. © SAP AG and The Rushmore Group, LLC 2008

Production Request (Planned Order Header)
ECC 6.0 Production Request (Planned Order Header) January 2008 January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved. © SAP AG and The Rushmore Group, LLC 2008

Production Request - (Planned Order Assignment)
ECC 6.0 January 2008 Production Request - (Planned Order Assignment) January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved. © SAP AG and The Rushmore Group, LLC 2008

Production Request - (Planned Order Master Data)
ECC 6.0 Production Request - (Planned Order Master Data) January 2008 January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved. © SAP AG and The Rushmore Group, LLC 2008

Production Request - Planned Order (Components review)
ECC 6.0 Production Request - Planned Order (Components review) January 2008 January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved. © SAP AG and The Rushmore Group, LLC 2008

ECC 6.0 January 2008 Production Order 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. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved. © SAP AG and The Rushmore Group, LLC 2008

Production Order (Creation)
ECC 6.0 January 2008 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 January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved. © SAP AG and The Rushmore Group, LLC 2008

Production Order (Creation)
ECC 6.0 Production Order (Creation) January 2008 January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved. © SAP AG and The Rushmore Group, LLC 2008

Production Order (structure)
ECC 6.0 January 2008 Production Order (structure) Production Order Structure Header Operations Capacity Components Costs Scheduling Settlement Rules Document Link Confirmation January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved. © SAP AG and The Rushmore Group, LLC 2008

Production Order (data elements)
ECC 6.0 January 2008 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 January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved. © SAP AG and The Rushmore Group, LLC 2008

Production Order (Header)
How Components What How many Time Line

Production Order (Operations)
ECC 6.0 Production Order (Operations) January 2008 January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved. © SAP AG and The Rushmore Group, LLC 2008

Production Order - (Components)
ECC 6.0 January 2008 Production Order - (Components) January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved. © SAP AG and The Rushmore Group, LLC 2008

Production Order (Master Data)
ECC 6.0 Production Order (Master Data) January 2008 January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved. © SAP AG and The Rushmore Group, LLC 2008

Production 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 Cost
The 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)
ECC 6.0 January 2008 Production Order (Preliminary Cost) January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved. © SAP AG and The Rushmore Group, LLC 2008

Production Order– Schedule
SAP 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) Work Center Formulas
ECC 6.0 January 2008 Production Order (Scheduling) Work Center Formulas January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved. © SAP AG and The Rushmore Group, LLC 2008

Production Order (Scheduling)
ECC 6.0 Production Order (Scheduling) January 2008 January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved. © SAP AG and The Rushmore Group, LLC 2008

Production Order (Settlement Rules)
ECC 6.0 January 2008 Production Order (Settlement Rules) January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved. © SAP AG and The Rushmore Group, LLC 2008

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 (product/process design) document management system (DMS). DMS is used to ensure the most current version of documents is employed during production.

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
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
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 You can withdraw materials for an order that are not listed as components in the order. These "unplanned withdrawals" cause the actual costs of the production order to be updated.

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 You can withdraw materials for an order that are not listed as components in the order. These "unplanned withdrawals" cause the actual costs of the production order to be updated.

Goods Issue for Production Order

Good Issue for Production Order

Goods Issue (Cost Itemization)

Confirmation of Production Order 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 level Exact confirmation shortly after completion of an operation is essential for realistic production planning and control

ECC 6.0 January 2008 Confirmation of Production Order Completion 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 January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved. © SAP AG and The Rushmore Group, LLC 2008

ECC 6.0 January 2008 Confirmation of Production Order Completion Completion 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 January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved. © SAP AG and The Rushmore Group, LLC 2008

Confirmation of Production Order Completion (Target/Actual Comparison)

Confirmation of Production Order Completion (Cost itemization)

Confirmation of Production Order Completion (Cost updated)
ECC 6.0 Confirmation of Production Order Completion (Cost updated) January 2008 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 January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved. © SAP AG and The Rushmore Group, LLC 2008

Goods 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 Order

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

Goods Receipt for Production Order (Updated cost Itemization)

Production Order Settlement
ECC 6.0 Production Order Settlement January 2008 Settlement Rule Automatically assigned to order according to settlement rules defined in production order Distribution rule (cost receiver, settlement share and type) January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved. © SAP AG and The Rushmore Group, LLC 2008

Production Order Settlement (Production Order Status)
ECC 6.0 January 2008 Production Order Settlement (Production Order Status) GMPS: Goods movement posted MACM: Material Committed MANC: Mat. Availability not checked NTUP: Dates are not updated SETC: Settlement rule created REL: Released CRTD: Created PRT: Printed PCNF: Partially Confirmed CNF: Confirmed PDLV: Partially Confirmed DLV: Delivered PRC: Pre-costed January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved. © SAP AG and The Rushmore Group, LLC 2008

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. Since production costs were higher than planned, the additional expenditure negatively affects the operating profit. This means that the profit decreases by the amount by which the actual costs charged to the production order exceed the standard price. The actual costs charged to the production order affect net income just as the posting of the inventory change at the time of the goods receipt. Since the actual expense was 20 higher than expected, the operating profit is 200 lower than it would have been if production had been at standard cost. 84.23 120 35.77 **Material Price determined by the quantity produced times the Standard Price in the Material Master.

Costs 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 Calculate and analyze planned costs, target costs, and actual costs of production orders and process orders Calculate or update the work-in-process inventory and the finished goods inventory Calculate and analyze variances Transfer data to Financial Accounting (FI) Transfer data to Profitability Analysis (CO-PA) Transfer data to Profit Center Accounting (EC-PCA) Transfer data to Actual Costing / Material Ledger (CO-PC-ACT)

PEN, Inc. EGN 5620 Enterprise Systems Configuration Spring, 2011
Production Planning Processes

Actual Material Cost Line Items for Order

Actual Labor Cost Line Items for Order

Good Issue Material Document for Order

Goods Issue G/L Document for Order

Confirmation Document for Order

Goods Receipt Material Document for Order

Goods Receipt G/L Document for Order

Exercises: 259. Create purchase order 260. Create goods receipt
262. Post invoice receipt from vendor 263. Display vendors invoice (gross) document 264. Post payment to vendor 276. Create a production plan 277. Display stock/requirements list 278. Transfer planning data to demand management 279. Review demand management 280. Display stock/requirements list 281. Run master production schedule 282. Display stock/requirement list

Production Planning Process Theories & Concepts EGN 5620 Enterprise Systems Configuration Spring, 2011.

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Production Planning Process Theories & Concepts EGN 5620 Enterprise Systems Configuration Spring, 2011.

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Presentation on theme: "Production Planning Process Theories & Concepts EGN 5620 Enterprise Systems Configuration Spring, 2011."— Presentation transcript:

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About project

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