production planning and control with sap

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Bonn Boston

Jörg Thomas Dickersbach, Gerhard Keller, Klaus Weihrauch

Production Planning and Controlwith SAP ®



Contents at a Glance

Foreword to the Second Edition ............................. 13

1 Introduction ............................................................ 15

2 Tasks in Industrial Operations ................................ 19

3 Production Planning and Control in mySAP ERP ... 57

4 Organizational Structures ....................................... 77

5 Master Data ............................................................ 89

6 Sales and Operations Planning ............................... 139

7 Demand Management ............................................ 191

8 Material Requirements Planning ............................ 211

9 Long-Term Planning ................................................ 275

10 Production Order Creation ..................................... 287

11 Capacity Requirements Planning ............................ 337

12 Production Execution ............................................. 379

13 Supply Chain Management and Integrationwith SAP APO ......................................................... 403

A Glossary .................................................................. 415

B List of Transactions ................................................. 453

C List of Abbreviations ............................................... 463

D Literature ................................................................ 465

E The Authors ............................................................. 469

Index ....................................................................... 471



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Contents

Foreword to the Second Edition ................................................... 13

1 Introduction ............................................................. 15

1.1 Goal ........................................................................... 151.2 Target Audience ......................................................... 161.3 Structure and Content ................................................ 161.4 Restrictions ................................................................. 17

2 Tasks in Industrial Operations ................................. 19

2.1 Technical Tasks ........................................................... 192.1.1 Development and Design ............................... 192.1.2 Work Scheduling ............................................ 232.1.3 Programming ................................................. 262.1.4 Quality Management ..................................... 292.1.5 Production Execution ..................................... 33

2.2 Business Tasks ............................................................ 342.2.1 Sales and Distribution .................................... 342.2.2 Product Cost Planning .................................... 372.2.3 Materials Management .................................. 39

2.2.4 Purchasing ..................................................... 412.2.5 Production Planning ....................................... 43

2.3 The Production Area in Industrial Operations ............. 442.3.1 Production in Computer Integrated

Manufacturing ............................................... 442.3.2 Production as Part of Logistics ....................... 47

2.4 Characteristics of Production Type Creation ................ 512.4.1 Product Standardization ................................. 512.4.2 Product Structure ........................................... 522.4.3 Production Type ............................................ 532.4.4 Production Organization ................................ 55

3 Production Planning and Control in mySAP ERP ..... 57

3.1 SAP PP in the Context of mySAP ERP ......................... 573.2 Processes in Production Planning and Control ............ 603.3 Production Types ........................................................ 62

3.3.1 Overview of Production Types ....................... 62



Contents

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3.3.2 Discrete Manufacturing ................................. 623.3.3 Repetitive Manufacturing .............................. 633.3.4 Process Manufacturing .................................. 673.3.5 Kanban ......................................................... 703.3.6 Engineer-to-Order Production ....................... 73

4 Organizational Structures ........................................ 77

4.1 Meaning of Organizational Structures ........................ 774.2 Organizational Structure Overview in mySAP ERP ...... 794.3 Planners in Design and Work Scheduling ................... 844.4 MRP Controller, Capacity Planner, and Pro-

duction Scheduler ...................................................... 85

5 Master Data ............................................................. 89

5.1 Master Data Overview ............................................... 895.2 Material ..................................................................... 905.3 BOM .......................................................................... 97

5.3.1 Areas of Use and Types of BOMs ................... 975.3.2 Material BOM ............................................... 100

5.4 Work Center .............................................................. 1075.4.1 Role of the Work Center ................................ 1075.4.2 Basic Data for the Work Center ..................... 109

5.4.3 Capacity ........................................................ 1115.4.4 Formulas for Capacity Load and Scheduling ... 1165.4.5 Costing .......................................................... 1195.4.6 Work Center Hierarchy .................................. 120

5.5 Routing ...................................................................... 1235.5.1 Purpose and Structure of the Routing ............ 1235.5.2 Routing ......................................................... 129

6 Sales and Operations Planning ................................ 139

6.1 Process Overview ....................................................... 1396.2 Basic Technical Principles in Sales Planning ................ 145

6.2.1 Information Structures ................................... 1456.2.2 Planning Methods ......................................... 1496.2.3 Product Group .............................................. 1526.2.4 Planning Hierarchy ........................................ 1536.2.5 Proportional Factors and Disaggregation ....... 1566.2.6 Versioning ..................................................... 159



Contents

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6.3 Planning Table ............................................................ 1596.3.1 Planning Type ................................................ 1596.3.2 Macros .......................................................... 1626.3.3 Planning in the Planning Table ....................... 165

6.4 Forecast ...................................................................... 1736.5 Event .......................................................................... 1786.6 Resource Leveling Using a Rough-Cut Planning

Profile ........................................................................ 1816.7 Transfer to Demand Management .............................. 1846.8 Mass Processing ......................................................... 186

7 Demand Management .............................................. 191

7.1 Process Overview ....................................................... 1917.2 Time-Based Disaggregation ......................................... 1957.3 Planning Strategy ........................................................ 197

7.3.1 Selected Planning Strategies ........................... 1977.3.2 Consumption ................................................. 2007.3.3 Planning Segments ......................................... 2017.3.4 Planning Strategy and Requirements Class ..... 202

7.4 Editing Planned Independent Requirements ............... 2057.4.1 Interactive Planning with Planned

Independent Requirements ............................ 2057.4.2 Reducing the Planned Independent

Requirements ................................................. 2087.4.3 Reorganizing Planned Independent

Requirements ................................................. 208

8 Material Requirements Planning ............................. 211

8.1 Process Overview ....................................................... 2118.2 Influencing Factors in Material Requirements

Planning ..................................................................... 2168.2.1 Lot Size .......................................................... 2168.2.2 Scrap ............................................................. 2258.2.3 Safety Stock ................................................... 2288.2.4 Master Data Selection .................................... 229

8.3 MRP Procedures ......................................................... 2308.3.1 Overview ....................................................... 2308.3.2 Material Requirements Planning .................... 2338.3.3 Consumption-Based Planning ......................... 2358.3.4 Consumption Forecast ................................... 243



Contents

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8.4 Executing Material Requirements Planning ................ 2468.4.1 Net Requirements Calculation Logic .............. 2468.4.2 Parameters for Material Requirements

Planning ........................................................ 2508.4.3 Planning Scope .............................................. 254

8.5 Scheduling ................................................................. 2558.5.1 Forward and Backward Scheduling ................ 2558.5.2 Scheduling In-House Production

(Basic Date Determination) ........................... 2568.5.3 Scheduling External Procurement .................. 2598.5.4 Planning Time Fence ..................................... 261

8.6 Procurement Proposals .............................................. 2628.6.1 Planned Order and Purchase Requisition ....... 262

8.6.2 Interactive Planning ....................................... 2658.7 Analysis ..................................................................... 2678.7.1 Stock/Requirements List and MRP List .......... 2678.7.2 Exception Messages ...................................... 270

8.8 Plant Parameters and MRP Group .............................. 272

9 Long-Term Planning ................................................. 275

9.1 Process Overview ....................................................... 2759.2 Planning Scenario ...................................................... 2779.3 Executing Long-Term Planning ................................... 282

9.3.1 Release and Planning File Entries ................... 2829.3.2 Material Requirements Planning in

the Planning Scenario .................................... 2839.3.3 Evaluating the Planning Scenario ................... 2849.3.4 Transferring the Planning Scenario ................. 285

10 Production Order Creation ....................................... 287

10.1 Process Overview ....................................................... 28710.2 Production Order ....................................................... 289

10.2.1 Structure of the Production Order ................. 28910.2.2 Order Type .................................................... 29510.2.3 Master Data Selection ................................... 29810.2.4 Status and Trigger Point ................................ 302

10.3 Conversion from the Planned Order ........................... 30610.4 Interactive Production Order Creation ....................... 30810.5 Scheduling ................................................................. 309

10.5.1 Dates of the Production Order ...................... 309



Contents

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10.5.2 Finite Scheduling ........................................... 31210.5.3 Transition Times ............................................. 31710.5.4 Splitting and Overlapping .............................. 31910.5.5 Float Before Production and Safety Time ........ 32310.5.6 Reduction ...................................................... 324

10.6 Availability Check ....................................................... 32610.6.1 Types of Availability Checks ........................... 32610.6.2 Material Availability Check ............................. 32710.6.3 Parameters for the Material Availability

Check ............................................................ 330

11 Capacity Requirements Planning ............................. 337

11.1 Process Overview ....................................................... 33711.2 Capacity Requirements and Capacity Evaluation ......... 338

11.2.1 Capacity Requirements .................................. 33811.2.2 Standard Evaluations of Capacity Utilization ... 34011.2.3 Variable Evaluations of Capacity Utilization .... 34211.2.4 Cumulating the Capacity Requirements .......... 345

11.3 Checking Capacity Availability .................................... 34711.4 Finite Scheduling ........................................................ 35311.5 Dispatching ................................................................ 354

11.5.1 Overview of Dispatching ................................ 35411.5.2 Profiles for Dispatching .................................. 35611.5.3 Dispatching Sequence .................................... 36311.5.4 Sequence-Dependent Setup ........................... 36411.5.5 Midpoint Scheduling ...................................... 36811.5.6 Mass Processing ............................................. 370

11.6 Capacity Planning Table .............................................. 371

12 Production Execution ............................................... 379

12.1 Process Overview ....................................................... 37912.2 Releasing the Production Order .................................. 38012.3 Material Withdrawal ................................................... 384

12.3.1 Goods Issue Posting ....................................... 38412.3.2 Picking ........................................................... 38612.3.3 Backflush ....................................................... 389

12.4 Confirmation .............................................................. 39112.5 Goods Receipt ............................................................ 39712.6 Settlement .................................................................. 40012.7 Completion ................................................................ 402



Contents

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13 Supply Chain Management and Integrationwith SAP APO .......................................................... 403

13.1 Supply Chain Management with SAP APO ................. 40313.2 Integration Scenarios ................................................. 40613.3 Technical Integration ................................................. 408

Appendix .................................................................. 413

A Glossary ............................................................................... 415B List of Transactions ............................................................... 453

B.1 Organizational Structure and Master Data .................. 453B.2 Sales and Operations Planning ................................... 454B.3 Demand Management ............................................... 455B.4 Material Requirements Planning ................................ 456B.5 Long-Term Planning ................................................... 456B.6 Production Order Creation ......................................... 458B.7 Capacity Planning ...................................................... 458B.8 Production Execution ................................................. 460B.9 Integration with SAP APO .......................................... 461

C List of Abbreviations ............................................................. 463D Literature ............................................................................. 465E The Authors ......................................................................... 469

Index ........................................................................................... 471



13

Foreword to the Second Edition

Just over five years have passed since the first edition of this bookwas published. Far-reaching changes have taken place since then,both within SAP and in the markets. New technological develop-ments in the area of service-oriented architecture will continue toincrease the flexibility and, thus, the freedom that enterprises enjoy.

At the same time, the hype surrounding the “New Economy,” whichwas triggered by the rise of the Internet, has settled down to more

realistic levels; the main issue now is how enterprises can success-fully maintain their position in ever-changing global markets. Ger-many, in particular, is traditionally a production center and is stillintensively involved in this area. An increasingly important require-ment now is to use intelligent services to expand this strength andmaintain competitiveness.

Another challenge is to successfully manage the agility bred by today’s market and the potential flexibility enabled by technology,such as Web services. The many functions required and the para-meterization made possible by SAP systems do not make this man-agement task an easy one. The goal here is to structure businessadministration in a way that supports and enhances its function as astabilizing entity.

For this reason, we have re-designed the structure of this book in itssecond edition, orienting it to the processes of production planningand production control. In doing so, we hope to make it easier forthe reader to understand the progression from the business adminis-tration tasks to the processes in the SAP system and their configura-tion. The process modules are intended to help the reader analyzeand manage complex enterprise structures from top to bottom. It isto be hoped that future developments will also be geared towardsthese structures, and that enterprises will thus benefit from a stabi-lizing entity in an ever-changing environment.

There is no limit to the complexity of production planning andproduction control, especially when it comes to illustrating difficult



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Foreword to the Second Edition

production processes. Therefore, in this book, we have purposely restricted ourselves in our illustrations to a straightforward (hypo-thetical) example based on the production of air-conditioning sys-tems. Although this example of discrete manufacturing is a straight-forward one, this edition presents it in detail, including itscustomizing. We explain the functions of production planning andproduction control in mySAP ERP much more comprehensively andin greater detail than we did the first edition.

Dr. Jörg Thomas Dickersbach and Dr. Gerhard KellerDecember 2006



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The production planning and control functions of mySAP ERP are contained in the PP module. The most important PP processes are sales and operations planning, demand man-agement, material requirements planning, long-term plan-ning, production order creation, production order execution,and capacity requirements planning.

3 Production Planning and Control

in mySAP ERP3.1 SAP PP in the Context of mySAP ERP

The main features of mySAP ERP are as follows: an extensive rangeof business functions; a high level of modularity alongside close inte-gration of individual modules, support for international require-ments in the form of country-specific functions (such as Payroll,which is available in various country versions with the relevant stat-

utory conditions and tax requirements), multi-lingualism, and theability to run on a range of platforms.

mySAP ERP is based on a three-tier client-server architecture and canbe subdivided into two main work areas: the basis and the applica-tion. The purpose of the basis layer is to keep the business applica-tions separate from the system interfaces of the operating system andthe database and communications systems, and to ensure that busi-ness transactions are executed quickly and efficiently. The applica-tion layer contains the implemented solutions that support the enter-

prise’s business requirements.

mySAP ERP consists of business application modules that can beused both individually and in combination with each other. SAP’sdelivery strategy is to deliver the complete system to the customerand then to activate and customize the required functions and busi-ness processes on-site at the customer’s premises. The disadvantageof this strategy is that the individual customer requires an over-dimensioned computer configuration at the start of the implementa-



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Production Planning and Control in mySAP ERP3

tion process. The advantage is that it is easier to activate functional-ities in production operations from the existing range of solutionsthan it is to deliver them retroactively.

mySAP ERP can be roughly subdivided into three main areas: Accounting , Human Resources Management, and Logistics.

Accounting Accounting maps business transactions in accordance with theirfinancial value and is responsible for planning, controlling, and mon-itoring the value flow within the enterprise. It is subdivided intofinancial accounting and managerial accounting, in accordance withthe addressee group. Managerial accounting consists of cost account-ing and activity accounting, and its purpose is to provide the decisionmakers in the enterprise with quantitative information. Financial

accounting is structured in accordance with statutory regulations;enterprises use it to comply with requirements for disclosure withregard to external parties, in particular tax authorities and investors.The main components that support the tasks of accounting are:Financial Accounting (FI), Investment Management (IM), and Con-trolling (CO). These modules are further subdivided into correspond-ing sub-modules.

Human resourcesmanagement

Human Resources Management (HR) is divided into the areas of per-sonnel planning and development, and personnel administrationand payroll. Personnel planning and development supports the stra-tegic utilization of staff by providing functionality that enables theenterprise to systematically and qualitatively manage its staff. Per-sonnel administration and payroll comprises all administrative andoperational human resources activities.

Logistics Logistics in the business context structures the flow of materials,information, and production from the supplier through productionto the customer. The mySAP ERP logistics application modulesenable enterprises to plan, control, and coordinate their logisticalprocesses on the basis of existing integrated data and functionsacross department boundaries. The integration of the individualapplication modules in mySAP ERP prevents unnecessary and time-consuming multiple entries on the part of the staff who process busi-ness logistics transactions. Likewise, the integration of quantity-based processing steps includes the value-based side of the businesstransaction and thus fulfils the requirements of accounting. Logisticscontains the following individual application modules: Sales & Distri-



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SAP PP in the Context of mySAP ERP 3.1

bution (SD), Materials Management (MM), Production Planning andControl(PP),Quality Management(QM), Project System(PS), and Plant

Maintenance (PM).

The PP link in this chain deals with quantity-based and time-basedproduct planning and controls the production process. Besides itsmaster-data maintenance functions, the PP module supports allquantity-based and capacity-based production planning and controlsteps. Production planning and control comprises various planningconcepts, such as MRP II and kanban, and various production types,such as production by lot size, make-to-order production, variant production, repetitive manufacturing, and process manufacturing.

The various modules are closely interconnected due to integrated

data retention, the internal flow of documents, and the functionalintegration of the modules. This enables many possible scenarios: aproduction planning process can be triggered by Sales and Distribu-tion; Production Planning can create a purchase requisition; or a pro-duction confirmation within the plant data collection process cantrigger a value-based update in Controlling and Human Resources

Management in order to calculate salaries. Likewise, the high degreeof integration between the modules means that the recording of goods movements in the execution of a production order can be

based on quantity and values (see Keller, 1999, pp. 67–115).The several thousands of customers in the different industries andcountries have different requirements of production planning. Theserequirements are reflected in the customer’s system by parameteriz-ing the relevant functions in a process known as Customizing. In thisprocess, the required functions are set in accordance with therequirements of the industry, the product range, the production pro-cedure, the product structure, and organizational and legal require-ments. Chapters 6 to 12 use process modules to describe the most

important settings.It is absolutely essential for the proper functioning of the system that

you set and maintain the required basic data correctly. Chapter 5describes in detail the basic data required for production planning.The focus there is on describing the basic data for production plan-ning execution in companies with discrete manufacturing.



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3.2 Processes in Production Planning and Control

Processes in production planning and production control comprisethe following main areas:

Sales and operations planning for determining the quantities to beproduced

Material requirements planning to calculate net requirements andcomponent requirements, taking into account scrap and lot sizes

Capacity requirements planning for detailed production planning,taking into account available capacities

Production control to control and record the production process(create production documents, record confirmations)

These four areas represent the scope of the process only roughly. Fig-ure 3.1 shows a detailed overview that explicitly illustrates the pro-cess modules that we will deal with in detail in subsequent chapters,along with their most important input and output values.

Figure 3.1 Process Overview

Sales and OperationsPlanning

Demand Management

Material RequirementsPlanning

Production OrderCreation

ProductionExecution

Capacity RequirementsPlanning

Sales History

OperationsPlanning

Planned Ind.Requirements

Planned Orders

ProductionOrders

Goods ReceiptGoods IssueComponents

Sales & Distribution

Sales Order

Long-Term Planning



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Processes in Production Planning and Control 3.2

Sales andoperationsplanning

Sales planning plans future requirements without considering stocksand available capacities. The sales history often serves as a basis forsales planning. Operations planning uses the results of the sales plan-ning process to plan the production quantities, and takes initialstocks and capacities into account on a general level.

Demandmanagement

Demand management aligns sales planning with the customerrequirements in accordance with the planning strategy, and thus cal-culates the independent requirements for production.

Material require-ments planning

Material requirements planning is the central function of productionplanning. It calculates requirement coverage elements for all MRPlevels, based on the demand program, and taking into account leadtimes, lot sizes, and scrap quantities.

Long-termplanning

Long-term planning is basically a simulation of material requirementsplanning. It can examine how a change in planned independent requirements would affect capacity utilization, stocks, and externalprocurement. Long-term planning is also suitable for short-term sim-ulations.

Production ordercreation

The central factor in controlling and recording the production pro-cess is the production order. Production order creation describes how the production order is created—whether by converting a planned

order or by means of interactive order creation—and the functionsthat are executed in this process, such as master-data selection,scheduling, and availability checking.

Capacity require-ments planning

Capacity requirements planning schedules in detail the worklist,which usually consists of the processes for created or released pro-duction orders. The result of capacity requirements planning is a pro-duction sequence that is feasible from the capacity viewpoint.

Productionexecution

While the previous processes dealt with production planning, pro-duction execution is concerned with how the actual production asspecified in the production order is recorded and controlled, frommaterial withdrawal to order confirmation to storage and invoicing.

Chapters 6 to 12 deal with these processes in detail.



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3.3 Production Types

3.3.1 Overview of Production Types

The production type characterizes the frequency with which a product is produced in the production process. The frequency with whichproduction of identical or similar products is repeated and the pro-duction quantity of production orders are typical characteristics that determine the production type. Production organization is closely related to production type, as the production type often significantly affects the structure of the production process. Thus, the flow manu-

facturing production type, for example, implies the production of large quantities of identical product types or products. At the sametime, flow manufacturing ensures that the production equipment isarranged in accordance with the organizational form of flow manu-facturing. A typical example is the assembly of cars in the automobileindustry. The degree of product standardization and the depth of theproduct structure also often affect the actual production type used.Therefore, various forms of production types, implicitly includingproduction organization, have arisen from the basic theoretical types(mass production, repetitive manufacturing, small-lot production,make-to-order production). The following are important productiontypes (see Keller/Curran, 1999, pp. 137–154):

Discrete manufacturing

Repetitive manufacturing

Process manufacturing

Kanban

Engineer-to-order production

These types are briefly explained in the following sections. In thisbook, we restrict ourselves to discrete manufacturing, as this is the

most common type of production.

3.3.2 Discrete Manufacturing

Discrete manufacturing (also called shop floor production) describesthe production of a product on the basis of production orders. Dis-crete manufacturing is used if the products in question change fre-quently, if the pattern of demand is very irregular, and if productionis workshop-oriented in character. A range of master data is required



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Production Types 3.3

for discrete manufacturing; the most important of these are material,bill of material (BOM), work center, and routing (see Chapter 5).

Discrete manufacturing starts when a production order is created

and processed. A production order is created either manually orwhen a planned order that was created in the production and pro-curement planning process is converted. A production order is arequest to the production department to produce or provide prod-ucts or services at a specific time and in a specific quantity. It speci-fies the work center and material components that are to be used forproduction. The creation of a production order automatically createsreservations for the required material components. Purchase requisi-tions are created for externally procured material components and

services, and capacity requirements are created for the work centersat which the order will be executed.

Production orders are released on the release date, provided that therequired materials and capacity are available. The relevant docu-ments in the production order can be printed in order to prepare forthe execution of the production order. The capacity situation can beevaluated and any required capacity leveling can be carried out inany phase of production order processing, although this is usually done before production starts. The components required to produce

the products are read out from the production order, and the goodsissue is posted. The product is then produced on the basis of the pro-duction order. The finished quantity and the services provided arethen confirmed back to the production order. The product is put intostorage and the goods receipt is posted. Finally, the production orderis settled.

3.3.3 Repetitive Manufacturing

Repetitive manufacturing is characterized by the interval-based andquantity-based creation and processing of production plans (in con-trast to single-lot and order-based processing). With repetitive man-ufacturing, a certain quantity of a stable product is produced over acertain period of time. The product moves through the machines andwork centers in a continual flow, and intermediate products are not put into intermediate storage. Figure 3.2 illustrates this concept using the example of motherboard production.



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The work required for production control with repetitive manufac-turing is significantly reduced compared to single-lot and order-based production control, and the entry of actual data is simplified.

Repetitive manufacturing is suitable for a variety of industries, suchas branded items, electronics, semiconductors, and packaging.

Repetitive manufacturing also can be used for pure make-to-stockproduction. Production in this case has no direct connection to asales order. The requirements are created in the demand manage-ment process, and the sales orders are supplied from stocks. Salesorder-based production—for example, in the automobile industry (see Geiger/Kerle, 2001, pp. 69–95)—can also be implemented usingthe methods of repetitive manufacturing. In this case, production isdirectly related to the sales order or is triggered directly from thesales order.

The most important forms of master data in repetitive manufacturingare as follows:

Material

Production version

BOM

Production line

Rate routing

Figure 3.2 Producing a Motherboard on a Production Line

Production Line

Circuit Board

BIOS Memory Processor

Motherboard



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The main differences between this data and the master data for dis-crete manufacturing are briefly described later.

If a material is to be produced by means of repetitive manufacturing,

it has to be flagged accordingly in the material master. This is done inthe SAP system in the MRP 4 view by setting the Repetitive Manu-facturing flag.

Repetitivemanufacturingprofile

A repetitive manufacturing profile is also assigned to the material. Thisprofile determines the type of planning and confirmation. It speci-fies, among other things, whether reporting points will be used,whether production activities will be posted to the cost collector formaterial confirmations, whether a decoupled confirmation will beused, whether a backflush will be carried out for the entry of actual

data, and which transaction types will be used.Production versionBecause there are different BOMs and routings for a material,

depending on the production process, a production version is used tospecify which BOM and which routing are to be used to produce thematerial. The alternative BOM for the BOM explosion, the plan cate-gory, the task list group, and the group counter for assignment to theplans also are specified in the production version. The productionversion also specifies the lot size for which the production version isvalid. It is important to set the Repetitive manufacturing allowedflag. There can be one or many production versions for a material,and there has to be at least one production version in repetitive man-ufacturing. The MRP 4 view is used to create the production versionfor a material, as before.

Product costcollector

The costs that are incurred in repetitive manufacturing are posted toa product cost controller . In the process of entering actual data, thematerial costs and production costs are added to the product cost controller. Costs are subtracted from the product cost controllerwhen a goods receipt, for example, is posted. The product cost con-troller is created for a material within a plant in a specific productionversion.

BackflushThe BOM for the material to be produced specifies what quantities of which components are required for production. In repetitive manu-facturing, not every goods issue is recorded at the same time as thephysical withdrawal of the material from stock. Usually, component usage is automatically posted only when the finished product is



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received (backflush). To do this, a storage location is specified inevery BOM item, and the backflush is carried out from this location.

Production lines Work centers in repetitive manufacturing are called production lines

(see Section 5.4) because the product moves through the machines ina continuous flow, and the machines are usually spatially arranged ina line. These can be simple production lines, which often consist of

just one work center, or complex production lines, which consist of several work centers. The individual processing stations are set up asindividual production lines and are grouped into a line hierarchy. Aproduction line determines the available capacity of the processingstation and is assigned to a single cost center.

Rate routings In repetitive manufacturing, routings are known as rate routings. A

rate routing contains the processes that are required to produce thematerial. Because the same product is produced over a long period of time in repetitive manufacturing, very simple routings can be used,often containing just one process. This kind of process specifies theproduction rate, which in turn specifies the quantity per time unit that is produced on the line (for example, 100 items per hour).

In repetitive manufacturing, the planned orders for a material that result from the production and procurement planning process aremanaged in a planning table. In these tables, the planner can sched-ule the production quantities on the assembly lines. In repetitivemanufacturing, we use the term run schedule quantity instead of planned orders (see Figure 3.3).

Figure 3.3 Planning Table in Repetitive Manufacturing

Assignment Mode

This section allows you to monitor the capacity utilization on the

different production lines.

This section allows you toassign quantities to

the production lines.



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In repetitive manufacturing, the components are supplied anony-mously to the production line. This can be done very easily using thepull list. The components required on a production line for a specificperiod can be calculated in the pull list. The missing quantities that are detected can be replaced by means of direct stock transfers; forexample from the central warehouse to the production location.

The production of the product usually takes place in a continuousflow along the production line. Entry of actual data is carried out at regular intervals for each finished production quantity. Component use and production activities are automatically posted when the fin-ished product is received. In the case of longer production leadtimes, actual data can also be recorded along with reporting pointswithin the production line, in order to post consumption data morepromptly (see Figure 3.4).

3.3.4 Process Manufacturing Process manufacturing is characterized by batch-oriented and recipe-oriented production of products or co-products in the process indus-try. Process manufacturing is used mainly in the following indus-tries: chemicals, pharmaceuticals, food and luxury foods, and pro-cess-based electronics (see Datta, 2001, pp. 145–172). A number of processes can be used in process manufacturing. These are describedas follows:

Figure 3.4 Actual Data Recording in Repetitive Manufacturing

Production Line Motherboard

Production Storage Location PL03

BIOS Memory Processor

Goods Issue

Post Components

Goods Receipt

Post Assembly

PostMaterial Costs

PostProduction Activities

UpdateLIS Statistics



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Continuousproduction

Continuous production is the name given to a process in which pro-duction runs within a specific period in an ongoing procedure. Mate-rial components are continuously supplied to the production line,and the finished product is continuously produced. The plant andmachinery are continuously and fully in use, with the result that par-tial orders and partial allocations cannot be handled.

Discontinuousproduction

In discontinuous production, as the name suggests, the products arenot produced in a continuous process. Instead, the material compo-nents are provided and weighed out as required for each step of theprocedure. The same line can be used to produce multiple products.

Regulatedproduction

Regulated production is used if the product quality requirements arevery specific, or if legal regulations apply, such as the Good Manufac-

turing Practices (GMP) overseen by the U. S. Food and Drug Admin-istration (FDA). Examples of this process can be found in the phar-maceuticals industry, and certain parts of the food and cosmeticsindustries. In regulated production, orders can be created only withapproved recipes. If changes need to be made to master recipes,these are subject to change administration procedures. Filling pro-cesses that are separate from and take place after the actual produc-tion process can also be handled in process manufacturing. Loosegoods (bulk) are moved from production and held in intermediate

storage containers until they are filled. This production type sup-ports complex filling procedures and simple manual filling proce-dures. Process orders that are created on the basis of a filling recipeare a prerequisite for the filling process.

The central master data elements in process manufacturing are thematerial, the BOM, the resource, and the master recipe.

Process order Process manufacturing starts when a process order is created and pro-cessed in accordance with a master recipe. A production order is cre-ated either manually or when a planned order that was created in theproduction planning process is converted. A production order is arequest to the production department to produce or provide prod-ucts or services at a specific time and in a specific quantity. It speci-fies the resource and material components that are to be used forproduction. The creation of a production order automatically createsreservations for the required material components. Purchase requisi-tions are created for externally procured material components andservices, and capacity requirements are created for the resources at



69


which the order will be executed. Production orders are released onthe release date, provided that the required materials and capacity are available. At the time of release, an automatic batch-determina-tion process can be run for components that are subject to a batchmanagement requirement. The relevant documents in the produc-tion order can be printed in order to prepare for the execution of theproduction order.

The capacity situation can be evaluated and any required capacity leveling carried out in any phase of the production order-processingprocess, although this is usually done before production starts. Pro-duction can now begin, with or without the use of process manage-ment. If process management is used to execute a process order, this

serves as the interface between the SAP system and process control.The flexible structure of this interface makes it possible to connect automated, semi-automated, and manually controlled plant andequipment to the production process.

Control recipesand processinstruction sheets

Once the process order or the relevant phases of the process order isreleased for production, control recipes are generated from the pro-cess instructions in the process order. Control recipes contain all theinformation required for the process- control function to execute aprocess order. Next, either the control recipes for the process control

system themselves, or the control recipes in the form of processinstruction (PI) sheets, are sent to the relevant process operator. Inthe latter case, the process instructions are expressed in natural lan-guage, so that the process operator can display them on-screen andprocess them.

The process data that results from the execution of the process orderis sent back to the SAP system or is transferred to external functionmodules for further processing, or both. This data is transferred fromthe process control function to the various recipients by means of the

process-coordination interface with the help of process messages. Amaterial consumption message, for example, causes a goods issue tobe posted for a component.

If a process order is executed without process coordination, thematerial components required to produce the finished product arewithdrawn for the process order, and the goods issue is posted in theinventory management menu. The required finished product is thenproduced in accordance with the process order. The quantities cre-



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ated and the products produced are then confirmed to the processorder, the finished product is put into storage, and the goods receipt is posted.

In the invoicing process for a process order, the actual costs incurredfor the order are assigned to one or more recipient objects (such asthe finished material or a sales order). The process data documenta-tion process creates lists of production-relevant and quality-relevant data that can be optically archived. We draw a distinction herebetween order logs and batch logs. Order logs contain all the quality-relevant SAP data that is created for a process order, while batch logscontain all the quality-relevant data having to do with producing abatch. The structure, content, and processing of batch logs comply

with the international standards defined in the GMP guidelines forthe pharmaceuticals and food industries.

3.3.5 Kanban

Kanban is a procedure for production control and material flow con-trol that avoids any time-consuming requirements planning andimplements requirements-oriented production control. With kan-ban, a material is produced or procured only when it is actually required. A specific quantity of the components required to produce

a material are stored on-site in containers. Once a container isempty, this component is replenished in accordance with a pre-defined strategy (in-house production, external procurement, orstock transfer). In the interval between the request for replenish-ment and the delivery of the re-filled container, the other containerssimply do the work of the empty one. Figure 3.5 illustrates the basicprinciple of kanban.

Figure 3.5 Basic Principle of Kanban

Kanban

SourceConsumer

Material



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The replenishment process is largely automatic in the kanban pro-cess, which greatly reduces the amount of manual posting workrequired. Also, the kanban process reduces stock levels, as only com-ponents are produced that are genuinely required. The material isnot pushed through the production process in accordance with anoverall plan; rather, it is requested by one production level (con-sumer) from the previous production level (source) as needed.

Productionsupply areas

With kanban processing, the plant is divided into production supplyareas (PSAs). The components required for production are stored inthese PSAs and various work centers can take what they need fromthe PSAs. A kanban control cycle is defined in order to specify how amaterial should be obtained within a PSA. The control cycle defines

a replenishment strategy for the material that specifies whether therequired material is to be produced in-house or procured externally,for example. The control cycle also specifies the number of contain-ers in circulation between consumer and source and the quantity percontainer.

Replenishmentstrategies

Replenishment strategies specify how a material component should bereplenished and which of the following replenishment elements arecreated for this purpose:

In-house production

Manual kanban

Replenishment with run-schedule quantity

Replenishment with production order

External procurement

Replenishment by order

Replenishment with schedule agreement

Replenishment with summarized just-in-time (JIT) call

Stock transferReplenishment with reservation

Replenishment with direct transfer posting

Replenishment by transport requirements of warehouse-man-agement (WM) administered storage location

Replenishment with kanban is very simple. First, a material is pro-duced at a machine. The components required to produce it are avail-



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the goods receipt for the material is posted with reference to the pro-curement element.

The SAP system also supports other kinds of kanban procedures

besides the classic procedure described above. While in classic kan-ban the user sets the container to “empty” using a barcode or a kan-ban table, thus triggering the kanban signal, in kanban with a quan-tity signal the user or a plant data-collection system enters therelevant withdrawn quantities into the system. As soon as the quan-tity in the container equals zero or drops below a specific thresholdvalue, the system automatically changes the status.

Unlike classic kanban, where the number of containers and theirquantities are fixed in advance, in event-driven kanban a container is

created only when required. The required quantity is then entereddirectly. Once the replenishment has been made, the container isdeleted.

Kanban can also be used for production supply with the use of antic-ipatory material requirements planning. The replenishment ele-ments in this case are created by a material requirements planningrun. However, the replenishment elements function as a preview forthe source; they do not directly trigger production or procurement.Now, the setting of the kanban to full or empty controls only theflow of material itself and the actual production process. Confirma-tions and goods receipts are usually posted without reference to thekanban process.

3.3.6 Engineer-to-Order Production

Experience has shown that conventional production processes arenot particularly successful for complex make-to-order productionprocesses.

The production orders used for the MRP II system are scheduled andhandled separately without any coordination support between pro-cesses of different production orders. For example, process 25 of production order A-100 cannot start until process 10 of productionorder B-50 has started. Therefore, engineer-to-order production usesnetwork techniques for scheduling and coordinating processes andcost accounting.



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MRP II uses the BOM to split up the production of the finished prod-uct into smaller units, while engineer-to-order production dividesthe overall production process into work packages, which are speci-fied in a work breakdown structure (WBS). There is not always a one-to-one correspondence between these structures and the unitsdefined in the BOM.

MRP keeps technology, maintenance, and other customer-specificactivities from production. Engineer-to-order production, on theother hand, requires that production-specific and non-production-specific processes be handled together.

Another difference is that standard costs are used for MRP II, whileactual costs are used for engineer-to-order production.

Classic network systems are not very suitable for production man-agement. They do not support inventory management, materialrequirements planning, or scheduling and tracking tasks within thefactory. What engineer-to-order production needs is a system that combines the best of both procedures. You need a solution that canexecute production orders, inventory management, and materialrequirements planning, like MRP II, and also handle task coordina-tion, budget planning, and actual cost calculation.

You also need a system for processing complex production processesfor industry, such as those for aircraft, ships, and large machines. Asignificant part of the lead time and added value of these product types is not taken into account in production-based processes such asdesign, work scheduling, and order costing.

Work breakdownstructure

For these reasons, engineer-to-order production uses work break-down structures and networks. A WBS is a hierarchical model of thetasks that need to be carried out in a project and is the basis for theorganization and coordination of the project. It contains the work,

the time, and the costs that are associated with every task. A provi-sional WBS is created for the preparatory planning stage (that is, dur-ing the tender procedure). It then can be extended dynamically dur-ing the lifetime of the project.

Network Networks are use to model detailed processes, such as the staff, capac-ities, materials, production resources, tools, and services that arerequired for the project. Networks also can describe extensive rela-tionships between processes. They are connected to the WBS and



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thus provide an extra level of detail for representing the overallstructure of the work.

Project structureThe starting-point is to set up a project structure in order to create a

customer quotation. Once the project structure has been set up,detailed cost plans are developed and integrated into the budget.Based on the level of detail, plans are developed from bottom to top,while budgets are developed from top to bottom. Capacities are alsochecked, and the project details are combined to form a customerquotation. A sales order can be created as a special order type withproject reference (project order). The project is then released forproject structure plan-driven and network plan-driven processing.Down payments, invoice payments, and any other customer pay-

ments are assigned to the relevant WBS element. Costs and materialwithdrawals are posted directly to the network or WBS elements.The system monitors the availability of the budgeted funds. The costsare invoiced at regular intervals or at the close of the project, eitherto the general ledger, the cost center, or directly to the revenue cal-culation system.

The finished products are listed in the sales order and are managedusing the make-to-order production scenario. Production orders arecreated either manually or automatically by the system. These orders

are then linked to the relevant WBS element. Thus, production iscontrolled by conventional production orders, and the actual pro-duction costs and milestones are posted to the relevant assignedWBS element.



471

Index

A ABC indicator 245 Accounting 58 Activity 186 Activity category 187 Activity type 119, 120 Adaptive design 21 Adaptive planning 24 Adjust dates 315 Advanced Planner and Optimizer 404 Aggregation 150, 168 Aggregation level 189 Alpha factor 174 Alternative BOM selection 300 Alternative selection 299, 300 Alternative sequence 134 Assembly scrap 225 ATP logic 332 Automatic goods receipt 399 Automatic reorder point planning 236 Automatic scheduling 316 Automatic setup time adjustment 366 Availability check 326, 332, 382, 409 Availability check log 327 Availability operation 330, 331 Available capacity 111, 121, 347 Average plant stock 280

BBackflush 66, 389Backlog 347Backward scheduling 258, 312, 314Base quantity 103

Base unit of measure 146Basic date determination 251, 256, 257Basic dates 257Basic load 340, 342, 347Basis 57Batch 70Beta factor 174Blocked stock 247BOM 52, 84, 97, 282BOM category 97

BOM explosion 106BOM selection 230BOM status 104BOM usage 105, 282, 300Branch operation 135Break plan 114Buffer 323, 324Building-site principle 56

CCapacity 111, 112Capacity availability check 327, 338,

340, 347, 348, 351Capacity category 113, 119Capacity evaluation 338, 340Capacity increase 375Capacity leveling 356Capacity planner 86Capacity planning table 371Capacity requirements 111, 317, 338Capacity requirements planning 288,

337Capacity utilization 184Capacity version 282Change management 18Characteristic 145Characteristic values combination 153Check control 296, 297, 330, 331, 350,

351Check scope 330, 334Checking group 330, 334Checking rule 330, 333Client 81Close gaps 360

Collective availability check 329Collective conversion 307Collective release 382Company code 81Completion 402Component assignment 133Components 294Computer Aided Design (CAD) 19, 27,

45



473

Index

Goods transport 47Graphic profile 345Groff 222Groff lot-sizing procedure 222

Gross requirements planning 246, 281

HHighlighting objects that belong together

373Human resources management 58

IIndependent requirements 40Individual capacity 113, 319Individual conversion 307Industrial operations 19Industry sector 92Information structure 143, 147In-house production time 257, 258Initial setup state 366Inspection characteristic 137Inspection equipment monitoring 31Inspection equipment planning 31Inspection plan 123, 137Inspection plan creation 30

Integration models 408, 409Integration scenarios 406Interactive material requirements

planning 265Interval 315Intra material 103Item category 102Item detail 104Item number 384Item overview 100

KKanban 70Key figures 145

LLaboratory 85Last lot exact 222Latest date 311Layout key 363

Lead time 315Lead time scheduling 251Least unit cost procedure 220, 221Level-by-level planning 150, 156

Line hierarchy 66Line organization 78List profile 345, 352, 363Location groups 318Logistics 47, 48, 49, 58Long-term planning 275Long-term simulation 275Lot size 216Lot size with splitting 218Lot-size range 130Low-level code 249, 253

M Macro 160, 162, 169 Macro logistics 48 Make-to-order production 54, 192, 197 Make-to-order segment 202 Make-to-stock production 197 Make-to-stock segment 194, 201 Manual programming 26 Manual reorder point planning 236 Mass processing 186, 370

Mass processing job 190 Mass production 53 Master data 89 Master data selection 298 Master production scheduling 234 Material 90 Material availability check 326, 327 Material BOM 100 Material master 90 Material Requirements

Planning (MM-CBP) 39, 211, 213,233, 246, 275

Material stock 376 Material type 92 Material withdrawal 384 Materials Management (MM) 39 Matrix organization 79 Meta logistics 48 Micro logistics 48 Midpoint scheduling 359, 368 Milestone 393 Minimum overlapping time 321



474

Index

Minimum processing time 320 Minimum send-ahead quantity 321 Missing parts information system 328 Missing parts list 327, 328

Missing parts overview 328 Mixed MRP 246 Move time 126, 310, 318 Move time matrix 318 Movement type 384, 397 Moving average model 175 MRP area 18 MRP controller 85 MRP list 251, 267 MRP lot size 216, 222 MRP procedures 230 MRP type 231 Multilevel BOM 98 Multilevel BOM explosion 106 Multiple commitment 375

NNC programming 26, 28Net change planning 252, 253Net change planning in the planning hori-

zon 252Net identifier 227

Net requirements calculation 240, 247Net requirements planning 247Network 74No check 331Non-stock item 102Non-work periods 360Number of splits 320

OObject-oriented models 79Offline programming 28Online programming 28Opening period 258, 259, 260, 324Opening stock 152, 280Opening stock level 166Operating time 112Operation date check 360Operation details 133Operation durations 313Operation scrap 227Operation segment 311

Operations plan 140, 141, 167, 181Option profile 345Order of priority for BOM usages 282Order placement type 193

Order process 41Order processing 34, 36Order profile 263, 264Order report 269Order type 295, 296Order type-dependent parameter 296Ordering costs 219Organization modeling 77Organizational structure 77Organizational units 79Original design 21Overall capacity load 347Overall profile 343, 351, 357Overlapping 312, 319, 321

PParallel sequence 134Parameter 116Part period balancing 220, 221Partial confirmation 392Partial conversion 307Period indicator 243

Period pattern 239Period profile 352Period split 195, 196Phantom assembly 18Picking 386Picking list 387Planned delivery time 259, 260Planned independent requirement 185,

191, 205, 283Planned order 263, 306Planner group 85Planning 332Planning at assembly level 199Planning cycle 241Planning file 250, 253, 282Planning file entry 237, 250, 282, 306Planning group 129Planning hierarchy 143, 146, 153Planning independent requirements 40Planning level 145, 149, 175Planning log 356Planning material 198, 199



475

Index

Planning method 143, 146, 149Planning mode 251Planning parameter 146Planning run type 252

Planning scenario 275, 277, 284Planning scope 254Planning segment 194, 201Planning strategy 194, 197, 202, 204Planning table 143, 165Planning time fence 261, 267Planning type 143, 159, 161Planning with final assembly 198Planning with planning material 198Planning without final assembly 198Plant 82Plant distribution 185Plant parameters 272Plant stock 246Play-back procedure 28PM structure element 102Pool of orders/operations 354, 371Pooled capacity 115Preliminary costing 38Preliminary costing for quotes 38Price 220Price control 401Process control system 379

Process manufacturing 67Process order 68Process organization 77Processing key 251, 252Procurement 25, 41Procurement logistics 50Procurement type 262Product cost controller 65Product cost planning 37Product creation 53Product design 20Product group 144, 152, 165, 168Product specification 20Product standardization 51Product structure 52Production execution 33, 379Production in another plant 17Production lines 66Production logistics 50Production order 287, 289, 306, 379Production order creation 308Production order planning 43, 44

Production organization 55Production planning 43Production Planning & Detailed Schedu-

ling (PP/DS) 45

Production resources/tools 136Production scheduler 86, 296, 314Production scheduling profile 296, 297,

350, 380, 381, 396, 399Production structure 53Production supply area (PSA) 71Production type 51, 53, 62Production version 65, 137, 299, 409Programming 26Progress confirmation 393Project structure 75Proportional factor 152, 155, 156, 168,

185PRT 136PRT check 327Purchase requisitions 265Purchasing (MM-PUR) 41Purchasing department processing time

260

QQuality assurance 18

Quality Inspection (QM-IM) 29Quality management 29Queue time 126, 310, 311, 317Quote processing 35Quote selection 42

RRate of capacity utilization 113, 313Rate routing 66, 128Read master data 301Recipe 68, 97Reduce lead time 312Reduction 128, 312, 318, 320, 323, 324Reduction level 324, 326Reduction of capacity requirements 340Reduction of the planned independent

requirements 208Reduction strategies 324, 325Reference operation set 127Reference rate routing 128Regenerative planning 24, 252



476

Index

Regulated production 68Release 331, 348, 379Release period 324Releasing the planning scenario 282

Reorder point 235Reorder point planning 235Reorganization 208Repeat planning 24Repetitive manufacturing 54, 63, 193Repetitive manufacturing profile 65Replenishment strategy 71Required splitting 320Requirement record confirmed 353Requirements class 202Requirements planning 40Requirements type 202, 203Reservation 384Resource leveling 141, 181Resources planning 24Return operation 135Robot 27Rough-cut planning profile 181Rounding 223Rounding profile 224Routing 23, 84, 123, 127, 129Routing management 125Routing selection 299

Routing type 127Row totals 166

SSafety stock 228, 235, 267Safety time 229, 310, 323Safety times 310Sales and Distribution (SD) 34Sales and Operations Planning (SOP) 139Sales logistics 49Sales market 35Sales order planning 249Sales plan 166Scheduling 251, 316, 381Scheduling basis 119Scheduling formula 313Scheduling margin key 259Scheduling profile 296, 297, 314, 325Scheduling type 255, 314Scrap 225Search function 372

Selection ID 282, 299, 300Selection key 374Selection profile 343, 351, 360Sequence 134, 337

Sequence category 134Sequence overview 134Sequence-dependent setup 364Set combinations 344Settlement rule 400Setup 310Setup group category 364Setup group key 364Setup groups 364Setup matrix 364Setup time optimization 359Shift 114Shift sequence 114Shop floor information system 18Shop paper printing 381, 383Short-term simulation 275Simulation 277Simulative planned order 283Single-level BOM 98Small-lot production 54Sorting 363, 372Special forms of procurement 17Splitting 319

Standard available capacity 112, 114Standard evaluations 340Standard sequence 134Standard trigger point 304Standard value 116, 133Standard value key 109, 117, 133Start in the past 315Statistical work center 121Statistics currency 146Status 302, 316, 327, 381Status check 333Stock 246Stock determination 387, 388, 391Stock determination group 388Stock determination rule 388Stock in quality inspection 246Stock in transfer 247Stock item 102Stock overview 246Stock/requirements list 267Storage 310Storage costs indicator 219



Index

Storage location 84, 387Strategy 194, 197, 202, 204Strategy group 194Strategy profile 352, 353, 355, 357, 366,

375Structural organization 77Suitability test 32Summarized BOM 98Supply chain management 403

TTabular capacity planning table 376Task list usage 110Teach-in procedure 28Team organization 78Teardown 310, 318Technical completion 402Text item 103Time event 392Time profile 352, 362Time-based disaggregation 195Time-based scaling 372Time-phased materials planning 241Today scheduling 314Tolerances 398Total creation 146

Transfer of planned independentrequirements 285Transfer profile 187Transfer to demand management 184Transferring the sales and operations

planning 205Transition time 310, 317Transport 310

Trigger point 302, 382Type of component check 332

UUnrestricted valuated stock 246

VVariable costs 219Variable evaluations 342Variable-size item 102Variant BOM 98Variant configuration 18Variant design 22Variant planning 24Version 159, 206, 278View 92

WWait time 126, 310, 318Waiting 310Warehouse management 18Where-used BOM 106Withdrawal from another plant 18Withdrawn quantity 385

Work breakdown structures 74Work center 84, 107Work center category 110Work center hierarchy 120, 345, 346Work center supervisor 85Work scheduling 23, 84Workshop principle 55

production planning and control with sap

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