The Production Process

Introduction Production is both a SCM function and an accounting function Simply put, the process involves turning raw materials into finished goods

Types of Production (1) Discrete manufacturing The result is an individual unit (or many of them) such as a bicycle The finished good “could” be decomposed back into its raw materials Production lines are set up and torn down to make batches of different materials Hewlett Packard

Types of Production (2) Repetitive manufacturing Similar to discrete manufacturing The same finished good is produced over time on the same production line The production line is not changed to make different products Used when production lines are very expensive Intel (Chips) Seagate (Disks)

Types of Production (3) Process manufacturing Products are made by means of a recipe Categories Continuous (flow) Gasoline Batch Soda and beer We will not work with these

Means of Production Triggers cause production runs to be executed Make to stock Make a batch resulting from MRP or other production trigger Make to order Make a unit(s) as a result of a customer order Dell

Production Master Data Bill of materials (BOM) contains components that make up a product or assembly Work centers are locations within a plant where production operations are performed OFBiz does not use these Product routings list the activities involved in producing the product defined by the BOM Product groups are used in planning to aggregate planning activities

Bill of Materials (Overview) In general, the components needed to produce semi-finished goods or finished goods In the case of process manufacturing, we call a BOM a formula or recipe We will focus on discrete manufacturing

Bill of Materials SAP implements BOM as a flat structure Hierarchical BOMs can be created using “component” materials (assemblies) The BOM structure should mimic the manufacturing process

Bill of Materials (Organization) A BOM applies to a product in a facility Different facilities might make the same finished good using a different BOM A material can have “alternate” BOMs These might be used for different processes having different lot sizes This is more common in process manufacturing We will not work with alternate BOMS

Bill of Materials (Organization) Header section Applicable to the finished good List the plant and BOM number The purpose of the BOM (production, engineering, plant maintenance) Base quantity Minimum and maximum lot size

Bill of Materials (Organization) Items section The raw materials that go into making the finished good Item type Item Item quantity

Bill of Materials (Organization)

BOM (Items) A bill of material has items

BOM (Items) Here are the items in our BOM

BOM Complexity A 747-400 contains 6.5 million parts Countless assemblies The process requires that many parts are inspected before, during, and after installation

Work Center (Introduction) “A resource used to produce a material” It can be a machine, a group of machines, or an entire production line It can be a person or group of people (labor) OFBiz does not use these

Work Center Costing

Routings (Introduction) These are the detailed operations performed by (at) one or more work centers to produce a finished good Think of the detailed operations required for an assembly line to run Routing Sequences Have Operations that get performed Material(s) required Routings apply to a material and plant

Routing (Header) In OFBiz, Routings are made up of two parts Routing tasks are the individual steps we perform in a manufacturing task Routings are ordered sequences of routing tasks

Routing (Tasks) The tasks we perform to manufacture Data The time it takes to perform the task How many items are processed per interval of time Setup, labor, machine

Routing (Tasks) Each task has a time to perform

Routing (Sequences) Routing sequences Using sequences, you can create standard and parallel sequences Remember a parallel fork Sequences are performed “in-order” Alternate sequences might be performed in place of standard sequences Different steps based on the number of workers

Routing (Sequences)

Routing (Sequences)

Production Routing (Materials) The materials needed to produce the good This information comes from the BOM

Production Capacity Production has a capacity that relies on A factory calendar describing workdays and holidays A capacity for people and machines Some number of shifts that workers work OFBiz is not this sophisticated

Production Order (Example) Production header tells us status, dates, and production quantities

Production Order (Example) Routing tasks performed and quantities produced

Production Order (Example) BOM quantities

The Production Process (Overview) Request production Authorize production Release production order Goods issue to production order Actual production Production confirmation Goods receipt into inventory

Request Production Production is typically requested because of a trigger A customer order (make-to-order) An MRP Manual creation In the end, a production order gets generated

Authorize Production This is the actual commitment to produce Production (machine / people) time is allocated for specific dates Authorization might be created from planned or unplanned orders

Authorize Production (SAP) Production might be authorized because of Planned production / a sales order / for a material (finished good) We get preliminary estimates of cost

Release Production Order This is where the authorized order is actually released to production Production starts the manufacturing process at a given date and time RTP might happen manually or automatically Shop papers are generated

Goods Issue Raw materials are removed from storage triggered by the production order release Material staging takes place Backflushing

Goods Issue (2) Raw material inventory is updated Inventory accounts are updated Material costs are added to the production order See the GL transactions on page 208

Actual Production We make the material and record production times

Production Confirmation Accounting finalizes the production run Production costs are recorded Here the produced goods are transferred from production to goods storage

Goods Receipt Here, the goods are released into inventory Inventory Held for a particular customer Held for QA or other reason

MRP Introduction MRP gets complicated quickly OFBiz is pretty simple It looks at Sales (outgoing) Purchases and procurement (incoming)

MRP (Example)