Production Planning and Execution (PP) Notes

Production Planning and Execution (PP)

Curriculum

• Introduction to S/4HANA using Global Bike
• University Alliances 440
• SAP UCC Magdeburg

Teaching Material Information

• Software Used
  • S/4HANA 2020
  • Fiori 3.0
• Prerequisites
  • No prerequisites needed
• Model
  • Global Bike (GBI 4.1 on S/4HANA 2020 / June 2022)

Module Information

• Authors
  • Bret Wagner
  • Stefan Weidner
  • Babett Ruß
• Target Audience
  • Beginner

Module Information

• Learning Objectives
  • Understand a manufacturing process cycle
  • Get familiar with the basics of a production plan

Functionality of SAP in Production

• SAP divides production into multiple processes: Production Planning, Manufacturing Execution, and Production for Process Industries.
• Production Planning
• Manufacturing Execution
  • Discrete Manufacturing
  • Repetitive Manufacturing
  • KANBAN
• Production – Process Industries
  • Integrated planning tool for batch-orientated process manufacturing.
  • Designed primarily for chemical, pharmaceutical, food and beverage industries along with batch-oriented electronics.

Unit Overview

• PP Organizational Structure
• PP Master Data
• PP Processes, including:
  • Material Planning
  • Production Planning
  • Manufacturing Execution Process

PP Organizational Structure

• Client
  • An independent environment in the system.
• Company Code
  • Smallest organizational unit for which you can maintain a legal set of books.
• Plant
  • Operating area or branch within a company, such as a manufacturing, distribution, purchasing, or maintenance facility.
• Storage Location
  • An organizational unit allowing differentiation between the various stocks of a material in a plant.
• Work Center Locations (master data in SAP system)
  • An organizational unit that defines where and when an operation is performed.
  • Has an available capacity.
  • Activities performed are valuated by charge rates, which are determined by cost centers and activity types.
  • Can be machines, people, production lines, or groups of tradespeople.

Global Bike Structure for Production Planning

• Illustrates the hierarchy: Client (Global Bike) → Company Code (Global Bike Inc., Global Bike Germany GmbH) → Plant (Dallas, Heidelberg) → Storage Location (Raw Materials, Semi-fin. Goods, Finished Goods, Miscellaneous) with work centers for Assembly, Packaging and Inspection within each plant.

GBI Enterprise Structure in SAP ERP (Logistics)

• Shows the relationships between Client, Company Code, Plant, Storage Location, Shipping Point, Purchasing Organization (Central/Global, US, DE, AU), and Purchasing Group (North America, Europe, Asia) within the GBI enterprise.

PP Master Data

• Material
• Bill of Materials (BOM)
• Routing
  • BOM and routing are like a cooking recipe.
  • BOM = ingredients.
  • Routing = steps in the recipe.
• Work Center
• Product Group

Material Master Record

• Details include material number (e.g., DXTR1000), description (e.g., Deluxe Touring Bike (black)), plant (e.g., DL00), base unit of measure (EA), MRP type, lot sizing procedure, etc.

Bill of Materials (BOM)

• List of components that make up a product or assembly
• Example: Wheel Assembly (Tire, Tube, Wheel, Hex Nut, Lock Washer, Socket Head Bolt), Frame, Derailleur Gear Assembly, Seat Kit, Handle Bar, Pedal Assembly, Chain, Brake Kit, Warranty Document, Packaging

Single-Level Bill of Materials (BOM)

• Finished Bike (Handle Bar, Wheel Assembly, Frame, Chain, Derailleur Gear Assembly, Warranty Doc., Seat Kit, Brake Kit, Pedal Assembly, Packaging)

Single-Level vs. Multi-Level Bill of Materials (BOM)

• Single-Level BOM: Shows only the components directly used in the finished product.
• Multi-Level BOM: Shows components of components (e.g., Wheel Assembly consisting of Tire, Tube, Wheel, Hex Nut, Lock Bolt).

Variant Bill of Materials (BOM)

• Used when several products have a large proportion of identical parts.
• Example: Deluxe Bike (red) vs. Professional Bike (black), sharing many components but differing in Frame color and Wheel type.

BOM – Item Categories

• An object that defines items in a BOM according to criteria, such as the object type of the component (e.g., material master record or document info record).
• The item category controls screen sequence, field selection, default values, material entry, inventory management, and subitems.
• Item Categories: Stock item, Non-stock item, Variable material (e.g., Sheet of steel), Document item, Text item

Routing

• Enable the planning of the production of materials (products).
• Used as a template for production orders and run schedules.
• Used as a basis for product costing.
• Series of sequential steps (operations) that must be carried out to produce a given product.
• Contain: What, Where, When, How

Routing Details

• Routing – Operation: Attach seat to frame
• Work Center: ASSY1000 (Assembly Work Center)
• Time: 1 minute

Routing Components

• Routing for Finished Bike: Includes Operation, Work Center, Plant, Control Key (specifies how an operation is processed), Description, Time and Unit of Measure, and Activity Type (classifies activities in a cost center like machine hours or finished units).

Work Center

• A location within a plant where value-added work (operations or activities) is performed.
• Can represent people, groups of people, machines, groups of machines, or assembly lines.
• Used to define capacities: Labor, Machine, Output, Emissions
• Capacities are used in Capacity Requirements Planning (CRP), Detailed Scheduling, and Costing.

Work Center Data

• Work Centers capture and use resource-related data:
  • Basic Data: Person Responsible, Location of Work Center
  • Scheduling Information: Queues and Move Times (interoperation), Formula Keys
  • Costing Data: Cost Center, Activity Types
  • Personnel Data: People, Positions, Qualifications
  • Capacity Planning: Available Capacity, Formulas, Operating Time
  • Default Data: Control Key, Standard Text Key

Product Group

• Aggregate planning that groups together materials or other product groups (Product Families).
• Multi- or Single-Level Product Groups, with the lowest level always consisting of materials.

PP Processes

• Production Planning & Execution includes:
  • Forecasting
  • Sales and Operations Planning (SOP)
  • Demand Management
  • Master Production Scheduling (MPS)
  • Material Requirement Planning (MRP)
• Production Order

Production Planning & Execution (Detailed)

• Illustrates the flow from Strategic Planning to Detailed Planning to Manufacturing Execution, including Forecasting, Sales & Operations Planning (SOP), Demand Management, MPS, MRP, Manufacturing Execution, Order Settlement, and Procurement Process. Links to SIS (Sales Information System) and CO/PA (Controlling/Profitability Analysis).

Players in the Game

• Strategic Planning: CEO, COO, CIO, CFO, Controller, Marketing Director
• Detailed Planning: Line Managers, Production Scheduler, MRP Controller, Capacity Planners
• Execution: Line Workers, Shop Floor Supervisors

Forecasting

• Forecasting is the foundation of a reliable SOP.
• Accurate forecasts are essential in the manufacturing sector.
• Overstocked & understocked warehouses result in the same issue: A loss in profits.
• Forecasts are ALWAYS WRONG.

Forecasting Models

• Trend
• Seasonal
• Trend and Seasonal
• Constant
• Selecting a Model: Automatically or Manually

Sales and Operations Planning (SOP)

• Information Origination: Sales, Marketing, Manufacturing, Accounting, Human Resources, Purchasing
• Intra-firm Collaboration: Institutional Common Sense

Sales and Operations Planning (SOP) Details

• Flexible forecasting and planning tool.
• Consists of three layers: Sales Plan, Production Plan, Rough Cut Capacity Plan
• Planned at an aggregate level in time buckets.

Demand Management

• The planning of requirement quantities and requirement dates for finished products and important assemblies.
• Definition of the strategy for planning and producing or procuring a finished product.
• Link between Strategic Planning (SOP) & Detailed Planning (MPS/MRP).
• Demand management can be done manually or based on previous planning results such as sales planning, SOP, and forecast.
• The results of Demand Management is called the Demand Program, it is generated from our independent requirements - PIR - Planned Independent Requirements and CIR - Customer Independent Requirements.

Demand Management Flow

• Flow: Sales Forecast, Planned Independent Requirements, Customer Independent Requirements lead to Demand Program, which feeds into MPS / MRP.

Planning Strategies

• Planning strategies represent the business procedures for the planning of production quantities and dates.
• Wide range of strategies.
• Multiple types of planning strategies based upon environment.
  • Make-To-Stock (MTS)
  • Make-To-order (MTO) - Driven by sales orders
  • Configurable materials - Mass customization of one
  • Assembly orders

Planning Strategy for Make-to-Stock

• Planning takes place using Independent Requirements.
• Sales are covered by make-to-stock inventory.
• Strategies: 10 – Net Requirements Planning, 11 – Gross Requirements Planning, 30 – Production by Lot Size, 40 – Planning with Final Assembly

Planning Strategy for Make-to-Order

• Planning takes place using Customer Orders.
• Sales are covered by make-to-order production.
• Strategies: 20 – Make to Order Production, 50 – Planning without Final Assembly, 60 – Planning with Planning Material

Master Production Scheduling (MPS)

• MPS allows a company to distinguish planning methods between materials that have a strong influence on profit or use critical resources and those that do not.

Material Requirement Planning (MRP)

• In MRP, the system calculates the net requirements while considering available warehouse stock and scheduled receipts from purchasing and production.
• During MRP, all levels of the bill of material are planned.
• The output of MRP is a detailed production and/or purchasing plan.
• Detailed planning level:
  • Execute primary functions
  • Monitor inventory stocks
  • Determine material needs (Quantity & Timing)
  • Generate purchase or production orders

Demand-Independent vs. Dependent

• Independent Demand: Original source of the demand. Demand for a finished product, such as a computer, bicycle, or pizza.
• Dependent Demand: Source of demand resides at another level. Demand for component parts or subassemblies. For example, this would be the microchips in the computer, wheels on the bicycle, or cheese on the pizza.

Material Requirement Planning (MRP) - Details

• MRP is used to ensure the availability of materials based on the need generated by MPS or the Demand Program.
• 5 Logical Steps:
  • Net Requirements Calculation
  • Lot Size Calculation
  • Procurement Type
  • Scheduling
  • BOM Explosion

Net Requirements Calculation

• Net Requirements are determined by considering Requirements (Planned Ind. Req., Reservations, Sales Orders, etc.), Stock, Safety Stock, Firmed Receipts, and Firmed Orders or Purchase Requisitions, leading to a Shortage and resulting in a Procurement Proposal.

Lot Sizing

• Static: Based on fixed values in the Material Master.
• Periodic: Groups net requirements together from multiple periods.
• Optimized: Calculates the optimum lot size for several periods of net requirements.

Procurement Type

• External Procurement:
  • Purchase Requisition
  • Purchase Order
  • Schedule Line
• Internal Procurement:
  • Planned Order
  • Production Order
  • Process Order

Multi-Level Scheduling Time

• Illustrates the timeline and dependencies: Finished Product requiring Assembly 1 composed of Semi-Finished Good requiring Raw Material. Component Requirements Date triggers Planned Order or Purchase Requisition.

MRP vs. Consumption-Based

• Whether or not a material is planned using MRP or Consumption Based is determined by the MRP Type on the MRP1 screen of the Material Master.
• MRP: PD (MRP), VSD (Seasonal MRP)
• Consumption-Based: VB (Reorder-Point), VV (Forecast Based), RP (Replenishment)

Consumption-Based Planning

• Key elements: Lot Size, Replenishment Lead Time, Safety Stock, and Reorder Point.

Output of MRP

• MRP generates a Planned Order, which can be converted to In-House Production (Production Orders, Process Orders) or External Procurement (Purchase Requisitions, Purchase Orders, Schedule Lines).

Orders, orders, orders

• Planned Order (planning): A request created in the planning run for a material in the future (converts to either a production or purchase order).
• Production Order (execution): A request or instruction internally to produce a specific product at a specific time.
• Purchase Order (execution): A request or instruction to a vendor for a material or service at a specific time.

Manufacturing Execution Process

• Involves Schedule and Release, Shop Floor Documents, Goods Issue, Production Proposal (Planning/Other), Completion Confirmation, Capacity Planning, Goods Receipt, and Order Settlement.

Production Order

• Production orders are used to control production operations and associated costs.
• Production orders define the following:
  • Material produced
  • Quantity
  • Location
  • Timeline
  • Work involved
  • Resources used
  • Cost settlement

Production Order Components

• The key questions answered are How many, What, Timeline, How, and Components.

Schedule (Production Order)

• Calculates the production dates and capacity requirements for all operations within an order.
• Determines a Routing (Operation specific timelines, Material Consumption Points), considers the Material Master (Scheduling Margin Key - Floats), and utilizes the Work Center (Formulas, Standard Inter-operation Times).

Release (Production Order)

• Two release processes:
  • Header Level: Entire order and all operations are released for processing; order is given a REL status.
  • Operation Level: Individual operations within an order are released; order is given a PREL status; the order obtains a REL status only when the last operation is released.
• Automatic vs. manual Release

Availability Check (Production Order)

• Automatic check to determine whether the component, production resource tools, or capacities in an order are available.
• Can be automatic or manually executed.
• Determines availability on the required date.
• Generates an availability log (Displays results of the check, Missing parts list, Reservations that could not be verified).

Schedule & Release (Production Order)

• The time between scheduling and releasing an order is used for company checks and any preparation needed for the processing of the order.
• Once an order has been released it is ready for execution, at which time we can print shop floor documents, execute goods movements, and accept confirmations against the order.

Shop Floor Documents (Production Order)

• Shop Floor Documents are printed upon release of the Production Order; examples include:
  • Operation-based Lists: Time Tickets, Confirmation Slips
  • Component-based Lists: Material Withdrawal Slips, Pull List (consumption list)
  • PRT Lists: Overview of PRT's used with their respective operations
  • Multi-Purpose Lists: Operation Control Ticket, Object Overview

Material Withdrawal (Production Order)

• When a production order is created it references a BOM to determine the necessary components to produce the material.
• It then places a reservation on each of the components.
• Upon release of the order (or operation) you can withdraw the reserved materials from inventory.
  • Reservation is updated
  • Inventory is updated
  • Costs are assigned to the order as actual costs

Confirmations (Production Order)

• 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.
• Data that needs confirmation include quantities (yield, scrap, rework), activity data (setup time, machine time), dates (setup, processing, teardown started or finished), personnel data (employee who carried out the operation, number of employees involved in the operation), work center, goods movements (planned and unplanned), variance reasons, and PRT usage.

Goods Receipt (Production Order)

• Acceptance of the confirmed quantity of output from the production order into stock.
• Effects of the Goods Receipt:
  • Updates stock quantity
  • Updates stock value
  • Changes price stored for future valuation
  • Updates production order
• Three documents are created: Material document, Accounting document, and Controlling document.

Order Settlement (Production Order)

• Consists of settling the actual costs incurred in the order to one or more receiver cost objects.
• Receivers could include: a material, a cost center, an internal order, a sales order, a project, a network, a fixed asset.
• Parameters for Order Settlement:
  • Settlement Profile: Specifies the receivers, distributions rules and method.
  • Settlement Structure: Determines how the debit cost elements are assigned to the settlement cost elements.
• Settlement Rule: Automatically assigned on creation of order; the parameters are used to define this rule; has one or more distribution rules assigned to it; distribution rules define cost receiver, settlement share, settlement type.

Settling a Production Order to Stock

• Debit posting is made to the Production Order with the value of the material. The difference between the debt posting and credit posting is posted to a price difference account.
• Material Price is determined by the quantity produced times the Standard Price in the Material Master.
  $Material \ Prod. Order \ Price Diff.$
  $100 \ 20 \ 80$

Order Settlement - Cost Analysis

• Costs analyzed:
  • Primary: Materials, External Processing
  • Secondary: Production, Material, and Administrative Overhead, Labor
• Cost Analysis Reporting:
  • Calculate and analyze planned costs, target costs, and actual costs of the production order.
  • Calculate and analyze variances.