Production Planning
Processes
EGN 5620
Enterprise Systems Configuration
Spring, 2012
Production Planning
Processes
Theories & Concepts
Production Planning Process
Execution
High Level Planning
Procurement
Process
CO/PA
Detailed Planning
Forecasting
Sales and Operations
Demand
Planning
Management
Sales Information
MPS
MRP
Manufacturing
System
Execution
Order
Settlement
Execution
January 2008
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Production Planning Processes
High Level Planning
 Control and profit analysis (CO/PA)
 Forecasting
 Sales and operations planning (SOP)
 Demand management
 Detailed planning
 MPS
 MRP
 Execution
 Procurement
 Manufacturing Execution
 Order settlement
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Manufacturing Execution
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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
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Production Planning
Processes
SAP Implementation
Business Process Integration
FI MM PP SD
Rules
FI
MM
PP
SD
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Business Process Integration
PP
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Transaction Data (Review)
Unlike master data, transactional data is
dynamic - it constantly changes, usually
many times per day
 Transactions data include
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organizational structure,
master data,
rules, as well as
business activities
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Production Order Process (Make-to-Stock)
Production
Order Request
Production order creation
(Capacity Planning)
Production Order Release
Order
Settlement
Goods
Issue
Goods
Receipt
Confirmation of
Production Order
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Completion
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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
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Production Planning Strategies
Production Planning Strategies
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. © SAP AG - University Alliances and
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Planned Order Header
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Planned Order (Components review)
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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.

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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
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Creation of Production Order
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Results in several outcomes, including
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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.
•
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.
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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
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Production Order (Creation)
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Production Order (structure)
Production Order Structure
Header
• Operations
• Capacity
• Components
• Costs
• Scheduling
• Settlement Rules
• Document Link
• Confirmation
•
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Production Order (data elements)
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Order header
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Order number
Material to be produced
Plant
Quantity
Scheduler (Dates)
Status
PRT (Production
Resource Tool)
◦ Tooling
◦ Equipment
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Operations
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Tasks
Work centers
Times, Dates
Standard value
Control keys
Components
◦ Material components
◦ Quantity
◦ Required date
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Production Order (Header)
How
What
Components
How many
Time Line
Production Order (Operations)
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Production Order - (Components)
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Production Order (Master Data)
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Production Order– Preliminary Cost
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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)
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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
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Production Order (Scheduling)
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Production Order (Settlement Rules)
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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)
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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
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The time between scheduling and releasing
an order is used for preparation needed for
the processing of the order
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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
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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
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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
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
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Good Issue for Production Order
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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
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Exact confirmation shortly after
completion of an operation is essential for
realistic production planning and control
Confirmation of Production Order
Completion
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Completion confirmation
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Quantities of material used
Operations completed
Time
Personnel
Costs
◦ Planned costs and actual costs
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Settlement rule for the order for
accounts/cost centers
◦ Settlement profile
 Settlement receiver
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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
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Confirmation of Production Order
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
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Confirmation of Production Order
Completion
Confirmation of Production Order
Completion (Labor cost is added)
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
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Settlement Rule
◦ Automatically assigned to order according to
settlement rules defined in production order
◦ Distribution rule (cost receiver, settlement
share and type)
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Production Order Settlement
(Production Order Status)
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REL:
CRTD:
PRT:
PCNF:
CNF:
PDLV:
DLV:
PRC:
Released
Created
Printed
Partially
Confirmed
Confirmed
Partially
Confirmed
Delivered
Pre-costed
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GMPS:
MACM:
MANC:
NTUP:
SETC:
Goods movement posted
Material Committed
Mat. Availability
not checked
Dates are not updated
Settlement rule created
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Production 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
84.23
Prod. Order
120
Price Diff.
35.77
**Material Price determined by the quantity produced times the Standard Price in the Material
Master.
Production Order Settlement

Costs analyzed
◦ Primary
 Materials
 External Processing
◦ Secondary
 Production, Administrative Overhead, and
 Labor
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Cost Analysis Reporting
 Calculate and analyze planned costs, target costs,
and actual costs of the production order.
 Calculate and analyze variances
Production Order Settlement
Production Planning
Processes
PEN, Inc.
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.
260.
262.
263.
264.
276.
277.
278.
279.
280.
281.
282.
283.
284.
285.
Create purchase order
Create goods receipt
Post invoice receipt from vendor
Display vendors invoice (gross) document
Post payment to vendor
Create a production plan
Display stock/requirements list
Transfer planning data to demand management
Review demand management
Display stock/requirements list
Run master production schedule
Display stock/requirement list
Convert planned order to production order
Issue goods to production order
Confirm production completion
Exercises:
286. Receipt of goods from production order
287. Settle costs of production order
287A. Display stock/requirements list