Chapter 6

The Production Process

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 Learning Objectives
1. 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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 Types Of Manufacturing
Discrete Manufacturing
Repetitive Manufacturing
Process Manufacturing

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 Types of Manufacturing
Discrete Manufacturing
Tangible products
Manufactured in individual units
Skateboards, bicycles
Batches of different materials over time

Example : Apple Inc

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 Apple Inc : Discrete Mfg

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 Types of Manufacturing
Repetitive manufacturing
Same or similar products are produced over a period of
time
A specified quantity is produced over a period of time

Example : Intel Corporation

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 Intel Corporation : Repetitive Mfg

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 Types of manufacturing
Process manufacturing
Not manufactured in individual units
Gallons, pints, liters
Paint, soft drinks

Example: Valero Energy Corporation

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 Valero : Process Mfg

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 Manufacturing Strategies
Make-To-Stock Example: Apple Inc
Make-To-order Example : Dell

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 Make-To-Order

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A Basic Production Process

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 Organizational Data
Client
Company code
Plant
Storage location

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 Master Data
Bill of materials (BOM)
Work center
Product routing
Material master
Production resource tools (PRT)

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 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

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Single-level and Multi-level BOMs

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 Business Practice: Boeing 747 Mfg

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Bill of Materials for Touring Bikes

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Bill of Materials for Off-road Bikes

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 Bill of Materials - Header
Applies to the entire BOM
Material: Material Name
Status: active, inactive
Base quantity: materials specified are needed to make
the base quantity (typically 1 unit).
Usage code: (1) production, engineering, costing, etc.
Plant: Each plant can have a different BOM
Validity: date range till what period of time BOM is
valid up to

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 Bill of Materials - Items
Apply to the specific item in the BOM
Item category:
 Stock item – must have a material master
 Non-stock item – no material master
 Variable-sized item – must specify size
 Document item – diagrams, additional instructions
 Text item-Comments or Writings
 Class Items-Specific Class
 Intra Items-Similar Type

Material number
Quantity

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 Items List in BOM

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BOM Structure

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BOM Structure

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 Work Center
Work Center: Location where the work is carried out
to produce a material.
Where specific Operation is performed.
Work center :A Machine or Group of Machines
A Person or Group of Persons
Production Line , work area or Assembly
area

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Work Center Data

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GBI Dallas Production Facility

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GBI Work Centers

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 Work Center Example

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 Product Routing
Production Routing: List of operations that a company
must perform to produce the material.
Steps necessary to produce a material
Operations
Sequence
 Standard
 Alternate
 Parallel
Work center
Times
 Setup, machine, labor

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Structure of a Routing

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Routing and Work Centers

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Routing for Deluxe Touring Wheel
Assembly

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Routing for Deluxe Touring Bike

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 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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Component Assignment

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 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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Sample GBI Production Plan

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 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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 Production Resource Tools(PRT)
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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The Production Process

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 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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Elements of the Request Production Step

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Data in a Planned Order

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 Planned Order Creation

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 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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Elements of the Authorize Production
Step

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Data in a Production Order

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Structure of a Production Order

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 Tasks
Scenarios
Production Order creation –With or without Reference
Documents Individual Conversion, Partial and Collective
PO Creation-Using Master Data of BOM and Routing
PO Creation-Using BOM and Routing
PO Creation-Using PRTs

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 Authorize Production - Outcomes
Scheduling
Availability checks
Reservations
Preliminary costing
Purchase requisitions

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Preliminary Cost Estimates for Men’s
Off-road Bike

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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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 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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Elements of the Order Release Step

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 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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 Order Release - Outcomes
Execution of subsequent steps is possible
Shop floor papers can be printed
Communication with PDC is possible

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 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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 Examples of movement types
Goods Receipt
101: Goods receipt for a purchase order
102: Goods receipt for a purchase order - reversal
103: Goods receipt for a purchase order into blocked
stock
122: Return delivery to vendor
Goods Issue
261: Consumption for production order from
warehouse
231: Consumption for sales order from warehouse

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Elements of the Goods Issue Step

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Data in a Goods Issue Step

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 Task
Back flushing Technique
A technique which automatically records the goods
when they are confirmed.
Advantage-Efficient in production process

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Financial Impact of a Goods Issue

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 Outcomes
Material Master is updated.
GL is updated
Reservations are updated
Actual costs are updated
FI,CO documents are created
Goods issue documents are created

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 Confirmations
Order level confirmation
Operations level confirmation
Time event confirmation
Time Ticket confirmation
Collective and fast entry confirmation
Milestone confirmation
Progress confirmation

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Elements of the Confirmation Step

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Data in a Confirmation

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Financial Impact of a Confirmation

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 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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Elements of a Goods Receipt

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Data in a Goods Receipt

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Financial Impact of a Goods Receipt

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 Periodic Processing
Overhead calculation
Work in progress determination
Settlement

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 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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 Work-in-Progress Determination
Work-in-progress (WIP) 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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 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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Financial Impact of a Settlement

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 Completion
Order Completion
Technically Complete(TECO)
Closed(CLSD)
Archived

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 Reporting
General SAP reporting options
Online lists
Work lists
Analytics
Production-specific reporting options
Stock/requirement lists

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Production Information System -
Components

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Production Information Systems -
Operations

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 Stock/Requirements List

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