Case Study 4:
Operate a Manufacturing
Company
(Extension)
EGN 5621
Enterprise Systems Collaboration
Fall, 2015
Rules of the Game





Each round will last for 30 steps
End-of-round inventory is carried
over to the next round
You can sell a product only if you have
it in stock
You compete against the other teams and
importers
Your objective is to maximize profit
What’s New in Mfg Extension?
Company can design own products
based on specified rules, but the total
number of products keeps six.
2. Besides 10, and 12, the distribution
channel 14 is available.
3. Company can make investment to
improve production capacity:
1.
1) Reduce set-up time
2) Increase production capacity
4.
No starting inventory. Each company
needs to do planning, run MRP, and
convert purchase requisitions to POs
before starting game.
What’s New in Mfg Extension?
Depreciation of fixed assets is
assessed
6. Fixed overheads are assessed
7. Inventory storage cost for excess
stock is assessed
5.
Corporate Roles Designation


CEO
◦ Check Financial Statement
◦ Make investment decisions for production
◦ Check summary sales report
◦ Check price market report
Market & Sales Manager
◦ Check sales order report
◦ Check summary sales report
◦ Check price market report
◦ Maintain and change market expenditure
◦ Change selling prices for finished goods
5
Corporate Roles Designation

Production and Planning Manager
◦
◦
◦
◦
◦
◦
◦

Create planned independent requirement
Run MRP
Release production orders
Modify BOM
Monitor production schedule
Check product costs, including overhead costs
Check raw materials cost per production order
MM Manager
◦
◦
◦
◦
◦
Convert purchase requisitions to purchase orders
Track PO report
Check MRP results
Check individual stock level
Check inventory report
6
Tasks for the Manufacturing Case Study
No
Roles
Functions
1
CEO
2
Sales &
Marketing
Manager
3
Production &
Planning
Manager
Watch financial statement
Create GL Post (Investment)
Check Price market report
Check Summary sales report
Check Sales order report
Check Summary sales report
Check Price market report
Maintain marketing expense
Maintain selling price for FG
Create planned independent Requirements
Transaction
Code
F.01
FB50
ZMarket
ZVC2
ZVA05
ZVC2
ZMarket
ZADS
VK32
MD61
Run MRP
Convert planned orders to production orders
Modify BOM
Check production schedule
Watch finished product cost analysis
Check raw materials cost per Prod. order
Automatically generate POs from purchase requisitions
Track Purchase order report
Check MRP results
Check individual stock level
Check Inventory report
MD01
CO41
ZCS02
ZCOOIS
ZCK11
ZKSB1
ME59N
ZME2N
MD07
MD04
ZMB52
4
MM Manager
What’s New in Mfg Extension?
Muesli Manufacturing
Muesli Manufacturing
Muesli Manufacturing
1. Develop New Products
1)
At beginning of the game, each company has six finished
products with a preset recipe for each product.
2)
You can change the recipe of a product from 1kg to 0.5 kg
during the simulation by changing its bill of materials with Tcode ZCS02. During simulation, your company always has
six BOMs of finished products.
3)
If your company still has inventory of the finished product,
the system doesn’t allow you to change its BOM.
4)
Your new product must meet the guideline for recipes.
5)
When the system accepts your changes in BOM, it will
change the description in the material master to match the
new content and weight.
12
Muesli Manufacturing
Association Label Regulation
List of Master Data Created for the
Simulation
Master Data
Alphanumeric codes
6 Finished products
$$-F01
$$-F02
$$-F03
$$-F04
$$-F05
$$-F06
6 Raw materials
$$-R01
$$-R02
$$-R03
$$-R04
$$-R05
$$-R06
4 Packaging materials
$$-P01
$$-P02
$$-P03
$$-P04
2 Vendors
V01
V02
6 Bill of materials
$$-F01
$$-F02
$$-F03
$$-F04
$$-F05
$$-F06
1 Work center
$$
6 Routings
$$-F01
$$-F02
$$-F03
$$-F04
$$-F05
$$-F06
3 x 6 price lists (DC 10,
12, and 14)
$$-F01
$$-F02
$$-F03
$$-F04
$$-F05
$$-F06
6 info-records and 6
source lists for raw
materials
V01-$$-R01
V01-$$-R02
V01-$$-R03
V01-$$-R04 V01-$$-R05 V01-$$-R06
4 info-records and 4
source lists for
packaging materials
V02-$$-P01
V02-$$-P02
V02-$$-P03
V04-$$-P04
1 profit center
$$
1 coster center
$$
New Product Development (1/2)
New product
development (2/2)
Change BOM for New Product
(T-code ZCS02)
17
Change BOM for New Product
(Before change)
18
Change BOM for New Product
(After Change)
19
2. Distribution Channels
20
DC10: Hypermarkets (Review)





Buy only large boxes (1 kg)
Payment delay of 20 steps
More sensitive to price
Less sensitive to advertising
Will have a stronger preference for 3 particular products
during the simulation
DC12: Grocery Chains (Review)



Buy both large boxes (1 kg) and small boxes (0.5 kg)
Payment delay of 10 to 15 steps
Will have a stronger preference for 4 particular products
during the simulation
Distribution Channel 14





Only buy small boxes (0.5 kg)
Less price sensitive
Sensitive to advertising
Payment delay of 5 to 15 steps
Stronger preference for 2 particular
products during the simulation
22
Number of Stores by Geographical Area
3. Investment for Production
Capacity Improvement
24
3. Investment for Production
Capacity Improvement
1) Reduce set-up time
The default set-up time is 12 hours for
changing product in your production line. If you
want to keep product variety and wish to run
small production batches, you can make
investment to reduce the set-up time.
The table below shows the set-up time as a
function of your investment. If your investment
is zero, the set-up time is 12 hours. If you
invest 44,117.65, then the set-up time reduces
to 10.5 hours.
25
Investment for Reducing Set-up
Time
26
Investment for Reducing Set-up
Time
Special Investment for Reducing
Set-up Time in the First Quarter
• In the first quarter, every company must
invest 5,000 euros to reduce set-up time.
• After the first investment, it is up to your
company to decide whether to make further
investment.
28
Investment in SAP to Reduce Set-up
Time
Use T-code: FB50
G/L Account: 113300 (Weizen bank)
D/C:
credit
Amount: 5,000 (first investment)
G/L Account: 478000 (Lean manufacturing
expense)
D/C:
debit
Amount:
5,000 (first investment)
Cost center: $$
29
Investment for Reducing Set-up
Time in SAP
30
Investment for Increasing
Production Capacity
• Your company can make investment on
equipment to increase your production
capacity.
• This is a strategic decision for your operation.
• At the start of simulation, your production
equipment is worth of 5 million euros with the
production capacity of producing 24,000
boxes per day.
31
Increase Production Capacity
For an additional machinery investment of
1,000,000 euros you can increase production
capacity by 1,000 boxes per day. In order to
obtain a daily capacity of 25,000 boxes, you
need to invest 1 million euros.
Formula for capacity improvement:
Total daily capacity = 24,000 + (0.001 x
additional machinery investment).
32
Production Improvement Decision
Investment for Improving
Production Capacity in SAP
Use T-code: FB50
G/L Account: 113300 (Weizen bank)
D/C:
credit
Amount:
Your investment
G/L Account: 11000 (Machinery & equipment)
D/C:
debit
Amount:
Your investment
34
Investment to Improve Production
Capacity in SAP
35
Difference between Investment for
Reducing Set-up Time & Improving
Production Capacity
• Investment for reducing set-up time is a one
shot investment as manufacturing expense.
•
Investment for improving production capacity is
an investment to increase machinery assets.
The annual depreciation of machinery assets is
calculated as 10% of machinery value.
36
Initial Financial Statement
Pricing decision
Marketing decision
4. No Inventory at Beginning
Each company needs to plan and complete the following
steps before simulation:
1) - Planning for finished products (T-code: MD61),
2) - Run MRP (T-code, MD01), and
3) - Convert purchase requisitions to Purchase orders
(T-code:ME59N)
4) - Convert planned orders to production order after
raw and packing materials are available (T-code
CO41)
Create Planned Independent Requirement
for 6 Finished Products (MD61)
Create Planned Independent
Requirement for 6 Finished
Products (MD61)
Execute MRP
Create Purchase Orders from
Purchase Requisitions (ME59N)
Convert Purchase Requisitions
into Purchase Orders
Convert Planned Orders to
Production Orders

After simulation is started and when
required raw and packaging materials are
received, the planning manager needs to
convert planned orders to production
orders (T-code: CO41).

You can release only those planned orders
into production orders with which the
required raw materials are available in
your inventory.
Conversion of Planned Order
(CO41)
Release Production Order(s)
Release Production Orders (CO41)
5. Depreciation of fixed assets

Depreciation of fixed assets is assessed
(ZCK11)

Annual depreciation is calculated as 5% of
building value and 10% of machinery
value at 5 million Euros.
5. Depreciation of fixed assets
Depreciation of fixed assets is assessed (ZCK11)
6. Fixed Mfg Overhead
Fixed mfg overhead is assessed (T-code: ZCK11)
7. Inventory Storage Cost
7. Inventory Storage Cost

Each team has 2 warehouse storage areas:
◦ Finished product (02) - space for 250,000 boxes
◦ Raw materials (88) - space for 250,000 kg of raw
materials and space for 1,000,000 of boxes and bags

Additional warehouse space can be rented for:
◦ 25,000 boxes of finished products (or part thereof), @ €
250/day (€0.01 per box per day)
◦ 25,000 kg (or part thereof), @ € 500/step (more
expensive because they are raw materials)
◦ 25,000 boxes AND/OR bags (or part thereof), @ €
100/day.
◦ The cost of additional storage will be automatically billed,
and paid immediately.
Raw Material Cost per PO
Game Layout
15 min
30 steps
15 min
30 steps
15 min
30 steps
Login Information:
Server: MERIDA
Client : 320
Login : $#
$ = Team Letter,
A, B, C, D, E, F, G for pilot run
I , J, K, L, M, N, O, P for real run
# = User 1 to User 5
Password: ERPSIM
User Menu for Mfg Extension