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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.
2. Identify the key steps in the production process and the
data, documents, and information associated with each
step.
3. Effectively use SAP ERP to execute the key steps in the
production process.
4. Effectively use SAP ERP to extract meaningful information
about the production process.
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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
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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

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Magal and Word | Integrated Business Processes with ERP Systems | 2011

Bill of Materials for Off-road Bikes

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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

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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

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Magal and Word | Integrated Business Processes with ERP Systems | 2011

BOM Structure

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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

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Magal and Word | Integrated Business Processes with ERP Systems | 2011

Work Center
Basic data
Name, description
Person responsible for maintaining master data
Task list usage (which routings can use this work center)

Capacities
Scheduling

Cost center
HR assignment

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Magal and Word | Integrated Business Processes with ERP Systems | 2011

Work Center Data

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Magal and Word | Integrated Business Processes with ERP Systems | 2011

GBI Dallas Production Facility

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Magal and Word | Integrated Business Processes with ERP Systems | 2011

GBI Work Centers

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Magal and Word | Integrated Business Processes with ERP Systems | 2011

Demo 6.2 Review GBI Work Center


Review the GBI work center

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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

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Magal and Word | Integrated Business Processes with ERP Systems | 2011

Work Center Example

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Magal and Word | Integrated Business Processes with ERP Systems | 2011

Structure of a Routing

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Magal and Word | Integrated Business Processes with ERP Systems | 2011

Routing and Work Centers

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Magal and Word | Integrated Business Processes with ERP Systems | 2011

Routing for Deluxe Touring Wheel


Assembly

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Magal and Word | Integrated Business Processes with ERP Systems | 2011

Routing for Deluxe Touring Bike

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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

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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

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Magal and Word | Integrated Business Processes with ERP Systems | 2011

Component Assignment

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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

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Magal and Word | Integrated Business Processes with ERP Systems | 2011

Sample GBI Production Plan

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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
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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

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Magal and Word | Integrated Business Processes with ERP Systems | 2011

The Production Process

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Magal and Word | Integrated Business Processes with ERP Systems | 2011

Request Production
Planned order
What material
How many
When

Generated by other processes


Fulfillment

Project management
Material planning

Can be created manually

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Magal and Word | Integrated Business Processes with ERP Systems | 2011

Elements of the Request Production


Step

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Magal and Word | Integrated Business Processes with ERP Systems | 2011

Data in a Planned Order

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Magal and Word | Integrated Business Processes with ERP Systems | 2011

Demo 6.4 Create a Planned Order


Review how to create a planned order

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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?
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Magal and Word | Integrated Business Processes with ERP Systems | 2011

Elements of the Authorize Production


Step

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Magal and Word | Integrated Business Processes with ERP Systems | 2011

Data in a Production Order

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Magal and Word | Integrated Business Processes with ERP Systems | 2011

Structure of a Production Order

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Magal and Word | Integrated Business Processes with ERP Systems | 2011

Authorize Production - Outcomes


Scheduling
Availability checks
Reservations
Preliminary costing
Purchase requisitions

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Magal and Word | Integrated Business Processes with ERP Systems | 2011

Preliminary Cost Estimates for Mens


Off-road Bike

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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

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Magal and Word | Integrated Business Processes with ERP Systems | 2011

Demo 6.5 Create a Production


Order
Review how to create a production order

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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

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Magal and Word | Integrated Business Processes with ERP Systems | 2011

Elements of the Order Release Step

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Magal and Word | Integrated Business Processes with ERP Systems | 2011

Order Release
Automatic or manual
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)

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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

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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)

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Magal and Word | Integrated Business Processes with ERP Systems | 2011

Elements of the Goods Issue Step

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Magal and Word | Integrated Business Processes with ERP Systems | 2011

Data in a Goods Issue Step

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Magal and Word | Integrated Business Processes with ERP Systems | 2011

Financial Impact of a Goods Issue

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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

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Magal and Word | Integrated Business Processes with ERP Systems | 2011

Confirmations
Order level confirmation
Operations level confirmation

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Magal and Word | Integrated Business Processes with ERP Systems | 2011

Elements of the Confirmation Step

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Magal and Word | Integrated Business Processes with ERP Systems | 2011

Data in a Confirmation

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Magal and Word | Integrated Business Processes with ERP Systems | 2011

Financial Impact of a Confirmation

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Magal and Word | Integrated Business Processes with ERP Systems | 2011

Demo 6.7 Confirm Production


Review confirm production

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Magal and Word | Integrated Business Processes with ERP Systems | 2011

Goods Receipt
Goods receipt into storage
Movement type 101

Impact
Material, FI, CO documents
Material master update (quantity and value)
Production order update (quantity, date, costing)

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Magal and Word | Integrated Business Processes with ERP Systems | 2011

Elements of a Goods Receipt

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Magal and Word | Integrated Business Processes with ERP Systems | 2011

Data in a Goods Receipt

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Magal and Word | Integrated Business Processes with ERP Systems | 2011

Financial Impact of a Goods Receipt

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Magal and Word | Integrated Business Processes with ERP Systems | 2011

Demo 6.8 Goods Receipt from


Production
Review goods receipts from production

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Magal and Word | Integrated Business Processes with ERP Systems | 2011

Periodic Processing
Overhead calculation
Work in progress determination
Settlement

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Magal and Word | Integrated Business Processes with ERP Systems | 2011

Overhead Calculation
Indirect costs
Supervisor, manager, other salaries
Utilities

Accumulated in cost centers


Periodically allocated to production orders based on

predetermined rules

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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.
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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

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Magal and Word | Integrated Business Processes with ERP Systems | 2011

Financial Impact of a Settlement

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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

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Magal and Word | Integrated Business Processes with ERP Systems | 2011

Production Information System Components

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Magal and Word | Integrated Business Processes with ERP Systems | 2011

Production Information Systems Operations

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Magal and Word | Integrated Business Processes with ERP Systems | 2011

Stock/Requirements List

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Magal and Word | Integrated Business Processes with ERP Systems | 2011

Demo 6.9 Stock/Requirement List


Review/stock requirement list

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Magal and Word | Integrated Business Processes with ERP Systems | 2011

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