1. Case Study 4: Operate a Manufacturing Company (Extension)
EGN Enterprise Systems Collaboration
Summer B, 2014

2. What’s New in Mfg Extension?
Company can design own products based on specified rules, but the total number of products keeps six.
Distribution channel 14 is available
Company can make investment to improve production capacity
Reduce set-up time
Increase production capacity
No starting inventory. Each company needs to do planning, run MRP, and convert purchase requisitions to POs before starting game.

3. What’s New in Mfg Extension?
Depreciation of fixed assets is assessed
Fixed overheads are assessed
Inventory storage cost for excess stock is assessed

4. 1. Develop New Products
At beginning of the game, each company has six finished products with a preset recipe for each product.
You can change the recipe of a product during the simulation by changing its bill of materials with T-code ZCS02. During simulation, your company always has six BOMs of finished products.
If your company still has inventory of the finished product, the system doesn’t allow you to change its BOM.
Your new product must meet the guideline for recipes.
When the system accepts your changes in BOM, it will change the description in the material master to match the new content and weight. 4 4

5. Muesli Manufacturing Association Label Regulation

6. List of Master Data Created for the Simulation
Alphanumeric codes
6 Finished products
$$-F01
$$-F02
$$-F03
$$-F04
$$-F05
$$-F06
6 Raw materials
$$-R01
$$-R02
$$-R03
$$-R04
$$-R05
$$-R06
4 Packaging materials
$$-P01
$$-P02
$$-P03
$$-P04
2 Vendors
V01
V02
6 Bill of materials
1 Work center $$
6 Routings
3 x 6 price lists (DC 10, 12, and 14)
6 info-records and 6 source lists for raw materials
V01-$$-R01
V01-$$-R02
V01-$$-R03
V01-$$-R04
V01-$$-R05
V01-$$-R06
4 info-records and 4 source lists for packaging materials
V02-$$-P01
V02-$$-P02
V02-$$-P03
V04-$$-P04
1 profit center
1 coster center

7. New Product Development (1/2)

8. New product development (2/2)

9. Change BOM for New Product (Before change)9 9

10. Change BOM for New Product (After Change)10 10

11. 2. Distribution Channel 14 Only buy small boxes (0.5 kg)
Less price sensitive
Sensitive to advertising
Payment delay of 5 to 15 steps
Stronger preference for 3 particular products during the simulation 11 11

12. 3. Investment for Production Capacity Improvement
Reduce set-up time
The default set-up time is 12 hours for changing product in your production line. If you want to keep product variety and wish to run small production batches, you can make investment to reduce the set-up time.
The table below shows the set-up time as a function of your investment. If your investment is zero, the set-up time is 12 hours. If you invest 44,117.65, then the set-up time reduces to 10.5 hours. 12 12

13. Investment for Reducing Set-up Time13 13

14. Production Improvement Decision

15. Special Investment for Reducing Set-up Time in the First Quarter
In the first quarter, every company must invest 5,000 euros to reduce set-up time.
After the first investment, it is up to your company to decide whether to make further investment. 15 15

16. Investment in SAP to Reduce Set-up Time
Use T-code: FB50
G/L Account: (Weizen bank)
D/C: credit
Amount: 5,000 (first investment)
G/L Account: (Lean manufacturing expense)
D/C: debit
Amount: ,000 (first investment)
Cost center: $$ 16 16

17. Investment for Reducing Set-up Time in SAP17 17

18. Investment for Increasing Production Capacity
Your company can make investment on equipment to increase your production capacity.
This is a strategic decision for your operation.
At the start of simulation, your production equipment is worth of 5 million euros with the production capacity of producing 21,000 boxes per day. 18 18

19. Increase Production Capacity
For an additional machinery investment of 100,000 euros you can increase production capacity by 400 boxes per day. In order to obtain a daily capacity of 25,000 boxes, you need to invest 1 million euros.
Formula for capacity improvement:
Total daily capacity = 21,000 + (0.004 x additional machinery investment). 19 19

20. Investment for Improving Production Capacity in SAP
Use T-code: FB50
G/L Account: (Weizen bank)
D/C: credit
Amount: Your investment
G/L Account: (Machinery & equipment)
D/C: debit
Amount: Your investment 20 20

21. Difference between Investment for Reducing Set-up Time & Improving Production Capacity
Investment for reducing set-up time is a one shot investment as manufacturing expense.
Investment for improving production capacity is an investment to increase machinery assets. The annual depreciation of machinery assets is calculated as 10% of machinery value. 21 21

22. Investment to Improve Production Capacity in SAP22 22

23. 4. No Inventory at Beginning
Each company needs to plan and complete the following steps before simulation:
- Planning for finished products (T-code: MD61),
- Run MRP (T-code, MD01), and
- Convert purchase requisitions to Purchase orders (T-code:ME59N)
- Convert planned orders to production order after raw and packing materials are available (T-code CO41)

24. Pricing decision

25. Marketing decision

26. Create Planned Independent Requirement for 6 Finished Products (MD61)

27. Create Planned Independent Requirement for 6 Finished Products (MD61)

28. Execute MRP

29. Create Purchase Orders from Purchase Requisitions (ME59N)

30. Convert Purchase Requisitions into Purchase Orders

31. Convert Planned Orders to Production Orders
After simulation is started and when required raw and packaging materials are received, the planning manager needs to convert planned orders to production orders (T-code: CO41).
You can release only those planned orders into production orders with which the required raw materials are available in your inventory.

32. Conversion of Planned Order (CO41)

33. Release Production Order(s)

34. Release Production Orders (CO41)

35. 5. Depreciation of fixed assets
Depreciation of fixed assets is assessed (ZCK11)
Annual depreciation is calculated as 5% of building value and 10% of machinery value at 5 million Euros.

36. 5. Depreciation of fixed assets
Depreciation of fixed assets is assessed (ZCK11)

37. 6. Fixed Mfg Overhead
Fixed mfg overhead is assessed (T-code: ZCK11)

38. 7. Inventory Storage Cost
Each team has 2 warehouse storage areas:
Finished product (02) - space for 250,000 boxes
Raw materials (88) - space for 250,000 kg of raw materials and space for 500,000 boxes and space for 500,000 bags
Additional warehouse space can be rented for:
100,000 boxes of finished products (or part € 200/step (less than € 0.01 per box per step)
100,000 kg (or part € 350/step (more expensive because they are raw materials)
100,000 boxes AND/OR bags (or part € 50 step
The cost of additional storage will be automatically billed, and paid immediately.

39. Corporate Roles Designation
CEO
Check Financial Statement
Make investment decisions for production
Check summary sales report
Check price market report
Market & Sales Manager
Check sales order report
Maintain and change market expenditure
Change selling prices for finished goods 39 39

40. Corporate Roles Designation
Production Planning & MM Manager
Create planned independent requirement
Run MRP
Release production orders
Modify BOM
Monitor production schedule
Check product costs, including overhead costs
Check raw materials cost per production order
Convert purchase requisitions to purchase orders
Track PO report
Check MRP results
Check individual stock level
Check inventory report 40 40

41. Tasks for the Manufacturing Case StudyNo
Roles
Functions
Transaction Code 1
CEO
Watch financial statement
F.01
Create GL Post (Investment)
FB50
Check Price market report
ZMarket
Check Summary sales report
ZVC2
Sales & Marketing Manager
Check Sales order report
ZVA05
Maintain marketing expense
ZADS
Change selling price for FG
VK32 3
Production & Planning &
MM Manager
Create planned independent Requirements
MD61
Run MRP
MD01
Convert planned orders to production orders
CO41
Modify BOM
ZCS02
Check production schedule
ZCOOIS
watch finished product cost analysis
ZCK11
Check raw materials cost per Prod. order
ZKSB1
Automatically generate POs from purchase requisitions
ME59N
Track Purchase order report
ZME2N
Check MRP results
MD07
Check individual stock level
MD04
Check Inventory report
ZMB52 2

42. Rules of the Game
Each round will last for 30 steps (approx 1 min per step)
End-of-round inventory is carried over to the next round
You can sell a product only if you have it in stock
You compete against the other teams and importers
Your objective is to maximize profit

43. Participant’s Job Aid & Menu for Mfg Extension

44. Participant’s Job Aid & Menu for Mfg Extension

45. Raw Material Cost per PO

46. Product Cost Planning

47. Game Layout
30 steps
20 min

48. Login Information Client : 570 Login : $# $ = Team Letter,
I, J, K, and L for pilot run
M, N, O, and P for real run
# = User 1 to User 4
Password: ERPSIM

49. User Menu for Mfg Extension

50. User Menu for Mfg Extension

51. Initial Financial Statement (F.01)