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 © SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved. 3 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 © SAP AG - University Alliances and January 2008 The Rushmore Group, LLC 2007. All rights reserved. 4 Manufacturing Execution • • • • • • • 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 2007. All rights reserved. 5 Production Planning Processes SAP Implementation Business Process Integration FI MM PP SD Rules FI MM PP SD January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved. 7 Business Process Integration PP January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved. 8 Transaction Data (Review) 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 2007. All rights reserved. 9 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 © SAP AG - University Alliances and The Rushmore Group, LLC 2007. All Completion January 2008 rights reserved. 10 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 © SAP AG - University Alliances and January 2008 The Rushmore Group, LLC 2007. All rights reserved. 11 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 January 2008 The Rushmore Group, LLC 2007. All rights reserved. 14 Planned Order Header January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved. 15 Planned Order (Components review) January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved. 16 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 2007. All rights reserved. 17 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 January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved. 18 Creation of Production Order • Results in several outcomes, including • • • • • 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. January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved. 20 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 2007. All rights reserved. 21 Production Order (Creation) January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved. 22 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 2007. All rights reserved. 23 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 2007. All rights reserved. 24 Production Order (Header) How What Components How many Time Line Production Order (Operations) January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved. 26 Production Order - (Components) January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved. 27 Production Order (Master Data) January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved. 28 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) January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved. 31 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 January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved. 33 Production Order (Scheduling) January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved. 34 Production Order (Settlement Rules) January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved. 35 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) 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 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 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 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 2007. All rights reserved. 45 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 2007. All rights reserved. 46 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 January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved. 47 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 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 2007. All rights reserved. 54 Production Order Settlement (Production Order Status) REL: CRTD: PRT: PCNF: CNF: PDLV: DLV: PRC: Released Created Printed Partially Confirmed Confirmed Partially Confirmed Delivered Pre-costed GMPS: MACM: MANC: NTUP: SETC: Goods movement posted Material Committed Mat. Availability not checked Dates are not updated Settlement rule created January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved. 55 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 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