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Production Planning

with SAP and QM Integration


ii

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iii

Production Planning

with SAP and QM

Integration

Nitishkumar Sinha

SAP PP Certified Application Associate

EDUCREATION PUBLISHING (Since 2011)

www.educreation.in


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v

Legal Notes

© 2017 Nitishkumar Sinha. All rights reserved.

First Edition 2017

Mumbai, India

This book is protected by copyright. By purchasing this book, you

are entitled to use it for personal purposes only. You may print the

book as well but only for personal use or copy and store it on a

personal device which you solely use. However sharing this book

in electronic or printed form with others is not permitted, neither as

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tables). You are not entitled for any kind of exploitation or other

usage of the book. Any kind of public exhibition, other

publication, reproduction of the book in any form or transmission

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method – without prior written permission of the author are

prohibited except as those provided by Government of India

copyright law. This applies not only to the book as a whole but

also to the parts of the book.

To contact for any kind of support, contribution, questions or to

report an error, please communicate over mail address

[email protected]


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Disclaimer

The content within the book is strictly for educational and

informational purposes. While the author has made every effort to

keep all the information up-to-date and accurate at the time of

publication, the author of the book does not hold any responsibility

for any mistake and does not express any kind of warranty about

the completeness, suitability, reliability or availability with respect

to the information, services or graphical representations contained

in the book for any purpose. If you wish to apply the information

or ideas in this book for any use, you are taking full responsibility

for your actions. The author hereby disclaims any liability to any

party for any loss, damage or disruption of any nature arising from

or related to the content.


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About The Author

Nitishkumar Sinha is a SAP Certified

Application Associate - Production

Planning & Manufacturing with SAP ERP

6.0, Certificate ID: 0017575322. He has

also passed certification exam in Variant

Configuration conducted by TATA

Consultancy Services (TCS). He works as

Production Planning consultant and also

has practical knowledge of other SAP

modules such as Quality Management,

Plant Maintenance and Document Management System (DMS). He

has also worked on integrations such as Idocs and Product Data

Replication (PDR). He completed his Bachelor of Engineering in

Electronics with distinction from Fr. Conceicao Rodrigues College

of Engineering, University of Mumbai in 2014.

You can view his profile on LinkedIn at

http://www.linkedin.com/in/nitishsinha17. You can also contact

Nitish via email at [email protected] or get in touch with him

on Twitter or Facebook @nitishsinha6041.

*****


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ix

Dedicated to

All SAP Consultants

and

Students Aspiring

To Be Future Consultants


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Preface

Production Planning (PP) is used in manufacturing companies

which can be divided into different types of industry – discrete,

process or repetitive manufacturing. These companies manufacture

products in stock or on demand from customer and sell products to

them. The logistics component Production Planning is vital in

organizing the manufacturing plan, and helps in sales and

distribution of products. SAP PP is closely integrated with ECC

components such as Material Master (MM), Sales & Distribution

(SD), Quality Management (QM) and more components.

The book begins with explaining organizational structure, not

only the elements important from PP point of view, but also those

important from MM and SD point of view. The initial chapter

discusses various organization levels along with their assignment

and integration with other levels. To carry out the shop floor

activities, production planning master data first needs to be

configured. There are plenty of processes carried out with respect

to production order such as scheduling, confirmation, availability

check, printing, and various other activities. After organizational

structure, an entire chapter has been dedicated to configurations

required to setup master data, order type and processes for

production planning in discrete industry. Subsequent chapters 3 &

4 provide guidance to creating production planning master data

and executing various production order related processes.

Consultants often face some specific issues while creating certain

master data or executing certain processes, this book also discusses

solution to such issues. Material requirement planning (MRP) is a

very important tool which helps in maintaining best possible

balance between optimizing the service level and minimizing costs

& capital investment. Chapter 5 introduces you with the concept of

MRP and essential configuration required for setting up MRP in

SAP system. The next two chapters walk you through two

important production strategies – Make-to-stock and Make-to-


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order – showing you both end-to-end scenarios in discrete

manufacturing with the help of screenshots. Quality management

is vastly used in manufacturing companies for handling defects in

products and is a very close integration to PP. Two important types

of quality inspection scenarios – Inprocess Inspection and Final

Inspection – have been shown in chapter 8 and 9 along with quality

management master data setup. Working in SAP implementation

project gives you a deep insight about various activities which

need to be taken care during each phase of implementation project,

makes you fluent with SAP configurations and equips you with a

good understanding of the business processes and requirements.

The last chapter 10 is a very important chapter providing you the

guidance through each phase of implementation.

This book is written keeping in mind the students of SAP

production planning, Engineering undergraduates, Management

graduates and working professionals. I have kept this book

succinct with words yet comprehensive and have made extensive

use of screenshots for lucid understanding of concepts to readers.

Having begun my career in SAP Production Planning and gaining

expertise from scratch, I realized that there should be a book which

is apt for someone who wants to master their basics about

Production Planning as well as gain knowledge on variety of other

topics relevant and useful from a Production Planning consultant

point of view. Thus I bring you a book covering diverse topics

from configurations and production processes to quality

management integration to implementation project.

If any of the readers would like to contribute to this book in

any way possible for further value addition, then they can get in

touch with me over my mail address [email protected], I

would be humbly grateful to receive such a support.

- Nitishkumar Sinha


mailto:[email protected]

xiii

Acknowledgements

Thanks to SAP AG for providing a great website -

www.help.sap.com - which has tons of information on Production

Planning explained in detail.

I am grateful to Jawad Akhtar and his book on Production

Planning and Control with SAP ERP. I had referred Jawad

Akhtar's book for understanding the concepts of Production

Planning. I had also communicated with him for consent regarding

my book. He gave a highly motivating reply in mail which I have

attached below. I have attached this mail for serving as motivation

to whoever reads it. This world is full of highly-talented people

and everybody has something good to give back to the society, but

often we stop ourselves from taking such initiatives because we

lack motivation and guidance. Everyone seeks guidance and

motivation in journey towards achieving his goal. That is the

reason, I am sharing Jawad Akhtar's mail so as to boost the

confidence of all the folks and encourage them to take initiatives

by turning their ideas into reality so as to contribute to the society

in the best possible way.


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Dear Nitish,

Thank you for your message and also for connecting on LinkedIn

earlier today. I hope you are doing well.

Let me begin by appreciating every single aspect of your below

email:

1. I think your parents/guardians has done an excellent job in

raising you with very high moral and ethical standards of

distinguishing 'the sense of right from wrong' and adopting what's

right! I can assure you that by always following your what

conscience says will take you far and high in life (although you'll

face relative more challenges when 'everyone' around is going for

shortcuts and 'jugaad'! I hope you do understand some Hindi.)

2. You really don't have to seek my permission or consent on

creating your own asset, as long as it’s unique and reflect your

point of views (and experience). That you sought my

permission/consent speaks highly of you and your ethics! I am glad

that you have decided to share your expertise with the SAP world

and found my PP book to assist and inspire you in some ways. To

share a little 'secret' with you, I too read a lot of books/articles to

get ideas for my articles/columns/Ask-the-Expert and then mold

them with my views to present my experience/expertise.

3. Thank you (once again) for offering to pay a share of your

earning that you expect from your efforts. I think I earn (very)

handsome income from multiple sources already! Hence, I'll pass

this. But if you do insist, please try to help with the less fortunate

folks of your country and it will do a world of good to all of us.

Our countries need us, and we are blessed to have a life and a

career that others can only dream of!

Nitish, you have a very bright and wonderful SAP career and

future ahead. Please continue on this path, be always very strong,

and my very best wishes will always be with you! In fact, I will

look forward to the day when you author a complete book for a


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global publisher, so I can be proud of knowing a bestselling

author, like you.

Keep smiling and do ensure to spread it around too! I know, I am!

I also hope that we meet someday, somewhere!

Sending you some cool and kind winds from your neighboring

country!

Best regards,

Jawad

Finally, I am also thankful to the Educreation publishing

house – www.educreation.in – for all their support and efforts in

producing and distributing this book worldwide.

- Nitishkumar Sinha


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xvii

Contents

S. No. Content Page

Preface xi

Acknowledgements xiii

1. Organizational Structure 1

2. Configurations In Discrete Industry 21

3. Master Data In Discrete Manufacturing 80

4. Production Order Processes In Discrete

Manufacturing

115

5. Material Requirement Planning 166

6. Make To Stock Production – Discrete

Manufacturing

185

7. Make To Order Production – Discrete

Manufacturing

209

8. In Process Inspection – Quality Management 231

9. Final Inspection – Quality Management 244

10. SAP Implementation – ASAP Methodology 262


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Production Planning with SAP and QM Integration

1

________________________________________________________________

Every organization has a structure which is a simulation of

physical structures of manufacturing unit. It can be divided into

various segments like manufacturing, finance and logistics and

these segments are integrated with each other to function together

as an organization. Organization structures can be formed in

various ways but top down structure is mostly used.

Organizational structure generally consists of the following:

1. Client

2. Controlling Area

3. Company Code

4. Valuation Area

5. Plant

6. Sales Area

7. Storage Location

8. Warehouse

9. Shipping Point

10. Loading Point

11. Purchasing Organization

12. Purchasing Group

From Production Planning point of view, plant and storage location

are important. A plant can be a producing plant or a planning plant.

Storage location helps you identify between different types of

stocks, for example, raw material can be stored at storage location

1 Organizational Structure


Nitishkumar Sinha

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0001, semi-finished goods at storage location 0002 while finished

goods can be stored at different storage location 0003.

The diagram representing the organizational structure is shown

in Figure 1.

Figure 1



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1.1 Client

A client is the highest element of the organizational structure. A

client is a self-contained organizational and technical unit within

SAP system which means that each client’s customer data is the

exclusive property of the client and is protected from other clients.

A SAP ERP system can have several clients and each client can

constitute of a company or a group of companies.

Client contains Application data (stored in database tables),

Customizing data (data created by customer during customizing

the systems) and User Master Record (authorizations assigned to a

user). Client helps in creating SAP landscape. You normally

maintain a development client (for development), a quality

assurance client (for testing) and a production client (for

customer’s business process). Clients 000-999 can be created in

SAP system.

1.2 Controlling Area and Company Code

The Controlling Area is the central organizational unit of

the Controlling component. Company Code is the organizational

unit of Financial Accounting and the creation of legal financial

statements like balance sheet, income statements, profit and loss

statement are done at this level. The assignment of company code

to controlling area can be done in following ways:

i. One Company Code can be assigned to One Controlling Area

ii. Multiple Company Codes can be assigned to One Controlling

Area

Controlling Area can be maintained at following SPRO path see

Figure 2:

IMG > Controlling > General Controlling > Organization >

Maintain Controlling Area

For assignment of Company Code to Controlling Area, select an

existing controlling area and press on ASSIGNMENT OF

COMPANY CODE on left side of the screen and choose NEW

ENTRIES. Maintain the Company Code for the selected

Controlling Area see Figure 3.


Nitishkumar Sinha

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Each client must have at least one company code. Since the

business transactions applicable to Financial Accounting are

maintained at company code level, there must be at least one

company code defined before the implementation of Financial

Accounting component is done.

Figure 2

Figure 3



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You can maintain different company codes for different business

lines like automobiles, smartphones, and computers if they are

separate legal entities.

Company code can defined at the following SPRO path:

IMG > Enterprise Structure > Definition > Financial Accounting >

Edit, Copy, Delete, Check Company Code see Figure 4.

Figure 4

1.3 Valuation Area

Valuation areas is the organizational level at which material

valuation is carried out. Two levels of valuation are allowed in

SAP:

a. Valuation at plant level: If the company has two plants at

different locations like one at Haryana and other at Jamshedpur

then the materials can be valuated at plant level since the materials

at each plant will have different taxes and costs of transportation,

inventory holding and labour costs incurred on them due to

difference in locations. The stocks of a material in one plant will

be valuated together while the stocks in other plant will be

valuated in different valuation area.


Nitishkumar Sinha

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b. Valuation at company code level: All the stocks of a particular

material will be valuated together at company code level.

Once the valuation areas are set at plant or company code level,

this setting cannot be changed.

Valuation level can be maintained at following SPRO path:

IMG > Enterprise Structure > Definition > Logistics General >

Define Valuation Level see Figure 5.

Tcode: OXI4

Figure 5

1.4 Plant

A plant is an organizational unit in Logistics which can be used for

production, maintenance, procurement and planning purposes. It

can be a physical production location or logical grouping of several

production locations. A plant can be assigned to only one company

code but a company code can be assigned to multiple plants.

Plant can be created or changes can be done in an existing plant at

following SPRO path:

IMG > Enterprise Structure > Definition > Logistics – General >

Define, copy, delete, check Plant see Figure 6.



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Figure 6

Plant – Company code assignment can be done at the following

SPRO path:

IMG > Enterprise Structure > Assignment > Logistics – General >

Assign Plant to Company Code.

Tcode: OX18

As shown in Figure 7, plant 0001 is assigned to company code

0100.

Figure 7


Nitishkumar Sinha

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1.5 Storage location

Storage location are places or locations where stocks are physically

kept and stored within a plant. It’s an organizational unit which

allows the distinction between material stocks within a plant, for

example, it can used for storing raw materials, finished goods or

returned goods. Storage location can also be a virtual one where

semi-finished goods are stored for interim period. A plant can have

multiple storage locations but a storage location cannot be assigned

to more than one plant. Material master data can be maintained at

storage location level. If Warehouse Management System is not

used, then storage location is the lowest level at which inventory

can be managed in the system.

Storage location can be created or changes can be made in the

existing storage location at following SPRO path:

IMG > Enterprise Structure > Definition > Materials Management

> Maintain Storage Location.

Tcode: OX09.

As shown in Figure 8, storage location 0001 with description as

‘St. Loc. NSINHA’ is assigned to plant 0001.

Figure 8

1.6 Warehouse, Storage Type and Storage Bin

Individual warehouses can be grouped together under one

warehouse complex and can be given a common warehouse

number where individual warehouse is represented as storage type



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in Warehouse Management (WM). The warehouse number and

storage type are applicable only if company uses WM system. The

same warehouse number can be assigned to multiple storage

locations belonging to different plants. A goods receipt area, goods

issue area, picking area or a bulk storage area can be defined as

storage type. All material data related to WM and to a particular

storage type is maintained at storage type level. The data can

include fixed storage bin, maximum and minimum storage bin

quantities.

Each storage type is divided into storage sections where a storage

section usually includes all bins that have certain common

characteristics such as containing same kind of pallet for putaway

or bins used for fast moving items or slow moving items. Every

storage type and storage section has rows of storage spaces known

as storage bins and the bins point to exact location where goods

can be stored. A storage bin is the smallest physical unit present in

the SAP system.

Warehouse can be defined at the following SPRO path:

IMG > Enterprise Structure > Definition > Logistics Execution >

Define, copy, delete, check warehouse number see Figure 9.

Figure 9

Assignment of warehouse to plant/storage location can be done at

following SPRO path:

IMG > Enterprise Structure > Assignment > Logistics Execution >

Assign warehouse number to plant/storage location see Figure 10.


Nitishkumar Sinha

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Figure 10

Storage type can be defined at following SPRO path:

IMG > Logistics Execution > Warehouse Management > Master

Data > Define Storage Type see Figure 11.

Figure 11

Storage section can be defined at following SPRO path:

IMG > Logistics Execution > Warehouse Management > Master

Data > Define Storage Sections see Figure 12.



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