The Production Process
Introduction
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Production is both a SCM function and an
accounting function
Simply put, the process involves turning raw
materials into finished goods
YOUR BOOK DOES A VERY GOOD JOB WITH
THIS TOPIC
Production Steps
Types of Production (1)
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Discrete manufacturing
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The result is an individual unit (or many of
them) such as a bicycle
The finished good “could” be decomposed back
into its raw materials
Production lines are set up and torn down to
make batches of different materials
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Hewlett Packard
Types of Production (2)
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Repetitive manufacturing
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Similar to discrete manufacturing
The same finished good is produced over time
on the same production line
The production line is not changed to make
different products
Used when production lines are very expensive
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Intel (Chips)
Seagate (Disks)
Types of Production (3)
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Process manufacturing
Products are made by means of a recipe
Categories
 Continuous (flow)
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Batch
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Gasoline
Soda and beer
We will not work with these
Means of Production
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Triggers cause production runs to be
executed
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Make to stock
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Make a batch resulting from MRP or other
production trigger
Make to order
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Make a unit(s) as a result of a customer order
Dell
Production Master Data
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Bill of materials (BOM) contains
components that make up a product or
assembly
Work centers are locations within a plant
where production operations are performed
Product routings list the activities involved
in producing the product defined by the BOM
Product groups are used in planning to
aggregate planning activities
Bill of Materials (Overview)
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In general, the components needed to
produce semi-finished goods or finished
goods
In the case of process manufacturing, we call
a BOM a formula or recipe
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We will focus on discrete manufacturing
Bill of Materials (SAP)
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SAP implements BOM as a flat structure
Hierarchical BOMs can be created using
“component” materials (assemblies)
The BOM structure should mimic the
manufacturing process
See the BOMs in Figure 6-4 on page 184
Bill of Materials (Organization)
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A BOM applies to a “plant”
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Different plants might make the same finished
good using a different BOM
A material can have “alternate” BOMs
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These might be used for different processes
having different lot sizes
This is more common in process manufacturing
We will not work with alternate BOMS
Bill of Materials (Organization)
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Header section
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Applicable to the finished good
List the plant and BOM number
The purpose of the BOM (production,
engineering, plant maintenance)
Base quantity
Minimum and maximum lot size
Bill of Materials (Organization)
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BOM Header
BOM Usage
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(+must, .can, -cannot)
Bill of Materials (Organization)
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Items section
The raw materials that go into making the
finished good
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Item type
Item
Item quantity
Bill of Materials (Organization)
Bill of Materials (Organization)
Bill of Material
(Item Categories)
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Inventory is maintained for stock items (L)
Inventory is not maintained for non-stock items
(N)
Variable sized items (R) are available in different
dimensions (quantities)
 Lumber, for example
Bill of Material
(Item Categories)
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Document items (D) represent applicable
documentation
 Manuals, for example
Class Items (K) are used in variant (configurable)
BOMs
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Different paint colors perhaps
BOM Complexity
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A 747-400 contains
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6.5 million parts
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Countless assemblies
The process requires that many parts are
inspected before, during, and after installation
Bill of Materials (Navigation)
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Logistics / Production / Master Data / Bills of
Material / Bill of Material / Material BOM
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CS01 – Create
CS02 – Change
CS03 – Display
Work Center (Introduction)
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“A resource used to produce a material”
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It can be a machine, a group of
machines, or an entire
production line
It can be a person
or group of people
(labor)
Work Center (Introduction)
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Work centers can be arranged hierarchically
Work centers have capacities
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They can produce finite outputs given a set of
constraints
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People work 8 hours
a day
Machines can perform
at some speed
Work Center (Global Bike)
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We have work centers for
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Bike Assembly
Inspection
Packaging
Work Center Hiererchy
Work Centers (SAP)
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A work center belongs to a plant
Work centers have a category that describes
the work center
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Machine / Labor / Production line / Etc..
A work center has a standard value key
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These are activities that consume time
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Setup
Processing
Teardown
Work
Center
Categories
Work Center
Standard Value Key
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Execution time and costs are calculated in
operations using formulas and standard
values
Work Centers (Control Keys)
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Control keys define how an operation is
processed based on a set of indicators
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Scheduling – Enables scheduling on the
operation in Quality Management and
Production Planning
Capacity – Enables capacity planning for the
work center
Indicators to print time tickets and shop papers
Work Centers (Control Keys)
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Control keys are managed in the IMG
Work Centers (SAP)
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Default values containing wage data
can be associated with a work center
Note that work centers are associated with
cost centers. This is how we allocate
production costs
See Figure 6-7 page 189
Work Center (Navigation)
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Logistics / Production / Master Data / Work
Centers
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CR01 – Create
CR02 – Change
CR03 – Display
Work Center (Basic Data)
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Every work center belongs to a work center
category (i.e. Labor)
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And has a standard value key for a dimension
(time in this case)
Work Center (Basic Data)
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The Assembly work center has execution time
for setup, machine, and labor
Work Center (Scheduling)
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A work center has a capacity category usually
to indicate machine or labor capacity
Formulas that calculate the setup, processing,
and teardown time for the work center
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Formulas are a subject in themselves
Work Center (Scheduling)
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Formula use “special” variables to calculate
the dimensional value (time)
Work Center (Costing)
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Here, we allocate the costs of the work
center to a cost center
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The cost center must exist and belong to the
plant’s controlling area
All costs from a work center must be applied
to the same cost center
Costs are allocated based on a formula key
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Same as scheduling
Work
Center
(Costing)
Work Center Costing
Routings (Introduction)
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These are the detailed operations performed
by (at) one or more work centers to produce
a finished good
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Routing Sequences Have
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Think of the detailed operations required for an
assembly line to run
Operations that get performed
Material(s) required
Routings apply to a material and plant
Routing (Header)
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Task / Usage
(production / plant maintenance / …)
Validity information
Inspection (QA / QC) information
Routing (Sequences)
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Routing sequences
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Using sequences, you can create standard and
parallel sequences
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Remember a parallel fork
Sequences are performed “in-order”
Alternate sequences might be performed in
place of standard sequences
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Different steps based on the number of workers
Routing (Sequences)
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We have only one routing sequence
Routing (Operations)
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The tasks we perform to manufacture
Data
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The time it takes to perform the task
How many items are processed per interval of
time
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Setup, labor, machine
Steps in a routing operation are performed in a
work center
Production Routing for
(DXTR1000) (Operations)
Production Routing (Materials)
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The materials needed to produce the good
This information comes from the BOM
Production Routing for
(DXTR1000)
(Materials)
Routing (Navigation Path)
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Logistics / Production / Master Data /
Routings / Routings / Standard Routings
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CA01 Create / CA02 Change / CA03 Display
Production Capacity
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Production has a capacity that relies on
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A factory calendar describing workdays and
holidays
A capacity for people and machines
Some number of shifts that workers work
Look at page 195 in your text.
Production Capacity
(Factory Calendar)
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Multiple calendars describe
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Public holidays and the current
The calendar used by the factory
The assignment of a calendar to a plant
Production Capacity
(Factory Calendar)
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Holiday calendar
Maintaining Capacities
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Each work center in a plant has a capacity
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A capacity name (SHIFT for example)
A capacity category (machine or person for
example)
Maintaining Capacities
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Capacity header describes available capacity
Maintaining Capacities
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Global Bike runs 1 shift with 1 hours of
breaks per shift
The Production Process
(Overview)
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Request production
Authorize production
Release production order
Goods issue to production order
Actual production
Production confirmation
Goods receipt into inventory
Request Production
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Production is typically requested because of a
trigger
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A customer order (make-to-order)
An MRP
Manual creation
In the end, a production order gets
generated
Authorize Production
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This is the actual commitment to produce
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Production (machine / people) time is allocated
for specific dates
Authorization might be created from planned
or unplanned orders
Authorize Production (SAP)
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Production might be authorized because of
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Planned production / a sales order / for a
material (finished good)
We get preliminary estimates of cost
Logistics / Production / Shop Floor Control /
Order / create
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C001
Production Order (Illustration)
Release Production Order
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This is where the authorized order is actually
released to production
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Production starts the manufacturing process at
a given date and time
RTP might happen manually or automatically
Shop papers are generated
Goods Issue
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Raw materials are removed from storage
triggered by the production order release
Material staging takes place
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Backflushing
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Goods Issue (2)
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Raw material inventory is updated
Inventory accounts are updated
Material costs are added to the production
order
See the GL transactions on page 208
Actual Production
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We make the material and record production
times
Production Confirmation
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Accounting finalizes the production run
Production costs are recorded
Here the produced goods are
transferred from production to
goods storage
Goods Receipt
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Here, the goods are released into inventory
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Inventory
Held for a particular customer
Held for QA or other reason
Introduction to Planning