The Production Process Chapter 6 The Production Process Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Learning Objectives Describe the master data associated with the production process. Identify the key steps in the production process and the data, documents, and information associated with each step. Effectively use SAP® ERP to execute the key steps in the production process. Effectively use SAP ERP to extract meaningful information about the production process. Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Types of Manufacturing Discrete vs. repetitive vs. process Discrete and repetitive Tangible products Manufactured in individual units Skateboards, bicycles Repetitive manufacturing Same or similar products are produced over a period of time A specified quantity is produced over a period of time Discrete Batches of different materials over time Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Types of manufacturing Process manufacturing Not manufactured in individual units Gallons, pints, liters Paint, soft drinks Magal and Word | Integrated Business Processes with ERP Systems | © 2011

A Basic Production Process Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Organizational Data Client Company code Plant Storage location Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Master Data Bill of materials (BOM) Work center Product routing Material master Production resource tools (PRT) Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Bill of Materials Identifies the components needed to make the material A component can have its own BOM to creates a multi-level BOM BOMs are used in Material planning Production Procurement Product costing Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Single-level and Multi-level BOMs Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Bill of Materials for Touring Bikes Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Bill of Materials for Off-road Bikes Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Bill of Materials - Header Applies to the entire BOM Status: active, inactive Base quantity: materials specified are needed to make the base quantity (typically 1 unit). Usage: production, engineering, costing, etc. Plant: each plant can have a different BOM Validity: date range Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Bill of Materials - Items Apply to the specific item in the BOM Item category: Stock item – must have a material master Nonstock item – no material master Variable-sized item – must specify size Document item – diagrams, additional instructions Material number Quantity Magal and Word | Integrated Business Processes with ERP Systems | © 2011

BOM Structure Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Demo 6.1 BOM for Bike and Wheel Assembly Review some of the data included in a material master Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Work Center Basic data Capacities Scheduling Cost center HR assignment Name, description Person responsible for maintaining master data Task list usage (which routings can use this work center) Capacities Scheduling Cost center HR assignment Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Work Center Data Magal and Word | Integrated Business Processes with ERP Systems | © 2011

GBI Dallas Production Facility Magal and Word | Integrated Business Processes with ERP Systems | © 2011

GBI Work Centers Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Demo 6.2 Review GBI Work Center Review the GBI work center Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Product Routing Steps necessary to produce a material Operations Sequence Standard Alternate Parallel Work center Times Setup, machine, labor Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Work Center Example Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Structure of a Routing Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Routing and Work Centers Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Routing for Deluxe Touring Wheel Assembly Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Routing for Deluxe Touring Bike Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Demo 6.3 Review Routing for a Bike and Wheel Assembly Review the routing for a bike and wheel assembly Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Component Assignment Specifies the relationship between a BOM and a routing Assigns components (materials) in a BOM either to a routing or to a specific operation within routing If not assigned assumed to be assigned to the first operation Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Component Assignment Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Production Capability A measure of how many units of a material a plant can produce within a given timeframe A data source for production planning Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Sample GBI Production Plan Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Material Master Previously discussed views Basic data Purchasing related Sales related Accounting related Additional view needed for production Work scheduling – plant specific MRP – plant specific More relevant in material planning Will be discussed in that chapter Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Production Resource Tools Movable objects required for production Shared among different work centers Documents (instructions) Materials (calibration tool) Equipment (machine that is not in a fixed location) Miscellaneous Magal and Word | Integrated Business Processes with ERP Systems | © 2011

The Production Process Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Request Production Planned order Generated by other processes What material How many When Generated by other processes Fulfillment Project management Material planning Can be created manually Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Elements of the Request Production Step Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Data in a Planned Order Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Demo 6.4 Create a Planned Order Review how to create a planned order Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Authorize Production With planned order: convert Convert to production order Without planned order: create production order Production order What material is to be produced? How many? When? Where will they be produced? What resources are to be used? How much is it expected to cost? Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Elements of the Authorize Production Step Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Data in a Production Order Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Structure of a Production Order Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Authorize Production - Outcomes Scheduling Availability checks Reservations Preliminary costing Purchase requisitions Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Preliminary Cost Estimates for Men’s Off-road Bike Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Cost Estimates in a Production Order Planned cost: planned cost for planned quantity Based on material and labor cost estimates Target cost: planned cost for actual quantity Actual cost: actual cost for actual quantity Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Demo 6.5 Create a Production Order Review how to create a production order Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Order Release On creation order status is created (CRTD) Order must be released (REL) to permit subsequent steps such as Goods movement not possible Confirmations not possible Documents cannot be printed Settlement Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Elements of the Order Release Step Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Order Release Automatic or manual Release at different levels If no time is needed between creation and release for preparation, then release occurs automatically Release at different levels Header: All operations are released Operations: Release specific operations Operations status: REL Order status: PREL (partially released) Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Order Release - Outcomes Execution of subsequent steps is possible Shop floor papers can be printed Communication with PDC is possible Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Goods Issue Movement type 261 Impact Material, FI, CO documents G/L accounts updated Inventory updated Reservations updated (reduced) Costs updated (actual cost in order) Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Elements of the Goods Issue Step Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Data in a Goods Issue Step Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Financial Impact of a Goods Issue Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Demo 6.6 Goods Issue to Production Order Review the steps from goods issue to production order Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Confirmations Order level confirmation Operations level confirmation Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Elements of the Confirmation Step Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Data in a Confirmation Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Financial Impact of a Confirmation Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Demo 6.7 Confirm Production Review confirm production Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Goods Receipt Goods receipt into storage Impact Movement type 101 Material, FI, CO documents Material master update (quantity and value) Production order update (quantity, date, costing) Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Elements of a Goods Receipt Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Data in a Goods Receipt Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Financial Impact of a Goods Receipt Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Demo 6.8 Goods Receipt from Production Review goods receipts from production Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Periodic Processing Overhead calculation Work in progress determination Settlement Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Overhead Calculation Indirect costs Accumulated in cost centers Supervisor, manager, other salaries Utilities Accumulated in cost centers Periodically allocated to production orders based on predetermined rules Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Work-in-Progress Determination Work-in-progress (WIP) inventory Inventory between GI and GR inventory Periodically the value of what is in the production process is calculated and posted to the general ledger Not essential For short production processes Value of materials is not high GBI Essential When value of materials is high Production takes weeks, months, or years Aircraft production, construction. Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Settlement Settle the difference between planned and actual costs (variance) Only panned costs are posted in the GR step Variance is settled in this step Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Financial Impact of a Settlement Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Reporting General SAP reporting options Online lists Work lists Analytics Production-specific reporting options Stock/requirement lists Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Production Information System - Components Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Production Information Systems - Operations Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Stock/Requirements List Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Demo 6.9 Stock/Requirement List Review/stock requirement list Magal and Word | Integrated Business Processes with ERP Systems | © 2011