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 YOUR BOOK DOES A VERY GOOD JOB WITH THIS TOPIC

Production Steps

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 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) SAP implements BOM as a flat structure Hierarchical BOMs can be created using “component” materials (assemblies) The BOM structure should mimic the manufacturing process See the BOMs in Figure 6-4 on page 184

Bill of Materials (Organization) A BOM applies to a “plant” Different plants 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) BOM Header

BOM Usage (+must, .can, -cannot)

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)

Bill of Materials (Organization)

Bill of Material (Item Categories) Inventory is maintained for stock items (L) Inventory is not maintained for non-stock items (N) Variable sized items (R) are available in different dimensions (quantities) Lumber, for example

Bill of Material (Item Categories) Document items (D) represent applicable documentation Manuals, for example Class Items (K) are used in variant (configurable) BOMs Different paint colors perhaps

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

Bill of Materials (Navigation) Logistics / Production / Master Data / Bills of Material / Bill of Material / Material BOM CS01 – Create CS02 – Change CS03 – Display

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)

Work Center (Introduction) Work centers can be arranged hierarchically Work centers have capacities They can produce finite outputs given a set of constraints People work 8 hours a day Machines can perform at some speed

Work Center (Global Bike) We have work centers for Bike Assembly Inspection Packaging

Work Center Hiererchy

Work Centers (SAP) A work center belongs to a plant Work centers have a category that describes the work center Machine / Labor / Production line / Etc.. A work center has a standard value key These are activities that consume time Setup Processing Teardown

Work Center Categories

Work Center Standard Value Key Execution time and costs are calculated in operations using formulas and standard values

Work Centers (Control Keys) Control keys define how an operation is processed based on a set of indicators Scheduling – Enables scheduling on the operation in Quality Management and Production Planning Capacity – Enables capacity planning for the work center Indicators to print time tickets and shop papers

Work Centers (Control Keys) Control keys are managed in the IMG

Work Centers (SAP) Default values containing wage data can be associated with a work center Note that work centers are associated with cost centers. This is how we allocate production costs See Figure 6-7 page 189

Work Center (Navigation) Logistics / Production / Master Data / Work Centers CR01 – Create CR02 – Change CR03 – Display

Work Center (Basic Data) Every work center belongs to a work center category (i.e. Labor) And has a standard value key for a dimension (time in this case)

Work Center (Basic Data) The Assembly work center has execution time for setup, machine, and labor

Work Center (Scheduling) A work center has a capacity category usually to indicate machine or labor capacity Formulas that calculate the setup, processing, and teardown time for the work center Formulas are a subject in themselves

Work Center (Scheduling) Formula use “special” variables to calculate the dimensional value (time)

Work Center (Costing) Here, we allocate the costs of the work center to a cost center The cost center must exist and belong to the plant’s controlling area All costs from a work center must be applied to the same cost center Costs are allocated based on a formula key Same as scheduling

Work Center (Costing)

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) Task / Usage (production / plant maintenance / …) Validity information Inspection (QA / QC) information

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) We have only one routing sequence

Routing (Operations) 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 Steps in a routing operation are performed in a work center

Production Routing for (DXTR1000) (Operations)

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

Production Routing for (DXTR1000) (Materials)

Routing (Navigation Path) Logistics / Production / Master Data / Routings / Routings / Standard Routings CA01 Create / CA02 Change / CA03 Display

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 Look at page 195 in your text.

Production Capacity (Factory Calendar) Multiple calendars describe Public holidays and the current The calendar used by the factory The assignment of a calendar to a plant

Production Capacity (Factory Calendar) Holiday calendar

Maintaining Capacities Each work center in a plant has a capacity A capacity name (SHIFT for example) A capacity category (machine or person for example)

Maintaining Capacities Capacity header describes available capacity

Maintaining Capacities Global Bike runs 1 shift with 1 hours of breaks per shift

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 Logistics / Production / Shop Floor Control / Order / create C001

Production Order (Illustration)

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

Introduction to Planning