SAP Sales and Operations Planning Tutorial

By this point you should have completed the first task of your SAP internship: the
2005 sales forecast. In this tutorial you will learn about SAP’s built in Sales and
Operations Planning (SOP) tool. This planning tool will allow you to formulate a rough-
cut production plan based on the sales data you have created. It is important to note that
the rough-cut plan is just that, only a plan. When you create the plan you are not
scheduling production in the system. SAP separates the action of planning from
production scheduling to allow different plans to be created and analyzed before they are
actually used in production. This process allows a company to run a few different plans
to see which is best. Following the creation of the rough-cut plan you will learn how to
transfer this data to the demand management function. Demand management is the link
between the rough-cut plan and production scheduling. While SAP wanted companies to
have the ability to check several different plans without actually scheduling production, it
was still necessary to allow the rough-cut plan to be turned into a production schedule.
Not only is this a very fast and easy way to create a production schedule based on the
rough-cut plan, but it keeps the planning data secure from human data entry errors. Next,
you will activate the material requisition planning (MRP) run for the SOS Inc. Beach
cruiser model LX (BC-LX). Finally, you will convert the planned production order for
the Beach Cruiser LX into and actual production order.

Part 1: Display Stock/Requirements List

Before we create our rough-cut sales and operations plan, let’s take a look at the
current production for the SOS Beach Cruisers. This data is displayed on the
stock/requirements list screen. The stock requirements list screen displays pretty much
what the name implies; the stock level and future requirements for a material. Every
material used in Beach Cruiser production has one of these screens. In the case of a
finished good (BC-S, BC-LX) the requirements will be derived from production orders.
If there is a production order for 50 BC-LXs, then a requirement of 50 will appear on the
BC-LX stock/requirements page for that production date. In the case of raw materials
and semi-finished materials used in the production of Beach Cruisers, the requirement is
derived from the production order for the finished good and the bill of material (BOM)
for that finished good. If a production order is created for 50 BC-LXs and the BOM for
the BC-LX calls for 2 steering controllers (part BP-01), then the stock/requirements list
screen for steering controllers will show a requirement of 100 for that production date. It
is important to understand that the SAP system automatically determines the quantity of
materials needed to build the number of finished goods listed in the production order. All
the production scheduler needs to do is create the production order for the finished goods,
and the system calculates the rest. To display the stock/requirements list for the BC-LX
complete the following navigation.

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From the SAP Easy Access User menu: Logistics  Production  MRP 
Evaluations

Double click on Stock/Requirements list to access the initial screen. Enter BC-
LX in the material box. Your plant should already appear in the Plant box. Click the
enter button to display the stock/requirements list. As it stands right now, you should see
that you have a stock of 20 Beach Cruisers model LX (Available qty). The rest of the
screen should be empty, due to the fact that you have not created any planned orders or
production orders for your plant. Now let’s start looking at the process of creating your
rough-cut plan. Return to your SAP Easy Access User menu.

Part 2: Display Product Group

As mentioned in the introduction, the rough-cut plan is a tool used to determine

the best way to schedule production. The rough-cut plan takes into account dates,
projected sales, and inventory to produce the best possible production plan. Through the
use of the SAP shared database structure, the rough-cut plan tool already knows how
many production employees are available, how many hours these employees work, and
how many workdays are available during the specific planning periods (in our case,
number of workdays per month). As you will see, this makes creating a plan much easier,
and accurate.

In SAP, the rough-cut plan can be formulated using two different methods. A plan
can be formed to include a single product, or, the plan can be created using a predefined
product group. Many companies, SOS included, manufacture and sell several closely
related products. For this reason it usually becomes necessary to create a production plan
using aggregate sales. For example, through marketing analysis, SOS has predicted that
80% of future Beach Cruiser sales will come from the S model, while 20% of sales will
be derived from the LX model. Instead of completing two separate operations plans, one
can be created. This is due to the fact that the company does not expect total Beach
Cruiser demand to rise simply due to the introduction of the LX model. Instead, SOS
expects 20% of those customers in the market for a Beach Cruiser to select the LX model
over the S model. As the LX and S model Beach Cruisers share total consumer demand
numbers, it makes sense to complete a single sales and operations plan. Instead of
creating an aggregate plan, and then calculating how many of each individual Beach
Cruiser model to produce, the SAP product group will automatically complete the
calculation for you. Now let’s take a look at the SOS Beach Cruiser product group.

From the SAP Easy Access Menu: Logistics  Production  SOP  Product
Group  Display

On the Display Product Group Initial Screen, enter BCPG (short for Beach
Cruiser Product Group) in the Product group box. Your plant should already be filled in.
Click the enter button to display the product group. As you can see, the Beach Cruiser
product group consists of two products, the Beach Cruiser S and the Beach Cruiser LX.

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If you look at the Proportion Column, you will see that 20% of the product group will
consist of the LX model, and 80% will consist of the S model. It is also important to note
that the Aggr. fact (aggregation factor) is set at 1 for both products. This means that
during the planning forecast, the system will schedule 2 LX models to be made every
time 8 S models are scheduled. This may sound pretty basic, but what if we are running
short of supplies and wanted to make sure we had enough materials to create 80 S models
(since they sell better) before scheduling the creation of the 20 LX models? In this case,
we could simply set the Aggr. fact to 80 for the Beach Cruiser S. The system would then
complete the planning for 80 model S Beach Cruisers before scheduling the LX models
(actually, if the LX Aggr. fact were left at 1, the system would schedule 1 LX and 80 S
out of the first 81 cruisers scheduled, then schedule the remaining 19 LX models if
enough supplies remain). By using this function, we could make sure that enough of
either model is built to meet demand before the other model is scheduled. Return to your
SAP Easy Access User menu.

Part 3: Creating the Rough-cut Plan

Now that you have examined the product group for SOS Beach Cruisers, it’s time
to create the rough-cut plan.

From the SAP Easy Access Menu: Logistics  Production  SOP  Planning 
For Product Group  Create

You should now be at the Create Plan: Initial Screen. Enter BCPG for Product
Group. Your plant should already be filled in. Click the enter button. A Define Version
box will appear on your screen. SAP allows for multiple plan versions to be created and
saved. This allows several different plans to be created, which improves a company’s
ability to quickly adjust production due to unforeseen circumstances in the future. You
should see a three digit number in the Version box. Write this number down where you
will not forget it, then click enter. Upon entering the Create Rough-Cut Plan screen,
you will notice that the planning time frame begins with the current month. To help
avoid potential user error due to attempting to schedule production in the past, the system
will only allow scheduling to take place during the current or future periods. Examine
the screen for a moment. Notice that there are areas for you to enter the projected sales,
projected production, target stock level, and target day’s supply. We will be
concentrating on the entries for sales and production. Notice that there are a few boxes
grayed out. These are the fields which SAP will automatically calculate once you have
entered your sales and production numbers. Before the sales and production numbers are
entered, we must consider the impact of beginning inventory (called opening stock in
SAP). As SAP is going to automatically calculate your stock level according to the sales
and production numbers you insert, we have to enter the opening stock level in the
system. Click on Goto on the menu at the top of the screen. Now select Opening stock
level. Enter your beginning inventory of 100 in the Stock level box, and click the enter
button. You should see your beginning inventory number displayed for each month in the
Stock level row. So, how many LX models, and S models are currently in your

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inventory? It is important to remember that we are dealing with a product group on this
screen. Your current inventory is comprised of 20% of the LX model and 80% of the S
model. You therefore have 80 BC-S and 20 BC-LX in your inventory.

Now let’s start creating our rough-cut plan. Before we start entering our sales and
production numbers, we need to change the view of our screen. SOS Inc. uses a daily
schedule. However, your screen currently shows a monthly breakdown. To change the
view, Click on Edit, then select Period Splitting. Next select Total, and then click on
Days. You should now see a daily schedule on your screen, starting with the first day of
the current month. To page ahead to the next month, click the double arrow at the bottom
of the screen which is facing to the right. To advance one day at a time, click the single
arrows at the bottom of the screen. Advance your schedule to the start of the month
which you wish to schedule. We now need to determine how many Beach Cruisers to
schedule for production. According to the sales report homework you completed earlier,
SOS Inc. can expect to sell 385 Beach Cruisers in March, and 512 in April. To determine
how many Beach Cruisers to schedule, simply count the number of days in the month you
wish to schedule by advancing your on screen schedule one day at a time. Now divide
the number of Beach Cruisers from your monthly sales total by the number of days listed
for that month to get your daily requirement. For example, the SAP scheduling screen
shows that March has 21 workdays (notice that weekends are not included on the
schedule). To find the number we need to schedule per day, divide 385 by 21. This gives
us a result of 18.33 Beach Cruisers per day. Since we cannot make part of a Beach
Cruiser, we will simply round this number to 19 (having a couple extra sitting around is
often better than having none to sell).

To complete the rough-cut plan for March, enter 19 in the sales and production
rows for each day in March. Next, click the enter button to see the result. The system
will automatically display your stock level as it changes due to production and sales. In
addition, the system will tell you how many days worth of sales you have on hand (Day’s
supply). To calculate this number, SAP determines the average daily sales from the
numbers you entered, and divides the amount of stock you have on hand during that
period. We will not be concentrating on day’s supply, but it is used in many organizations
for planning, especially if the company is trying to build up a specific amount of supply
based on historic sales data.

For your assignment, complete a Rough-cut plan for April using the same steps as
you did for the March, keeping in mind your daily numbers will be different. Remember
to write down your Version number as instructed above, and make sure you SAVE
your Rough-cut plan before exiting SAP.

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 Demand Management and MRP Tutorial

Now that you have successfully created your rough-cut plan, we will continue
forward with demand management and MRP.

Part 4: Transfer Rough-Cut Plan to Demand Management

As mentioned in the introduction to the Sales and Operations Planning Tutorial,

the demand management function is the link between sales and operations planning and
the actual production planning system. Assuming that the rough-cut plan you created is
appropriate, SOS will decide to use the plan for scheduling production. To avoid the
possibility of a production scheduler entering your production numbers incorrectly (can
you imagine the problems an extra zero could cause?), SAP allows the plan data to be
transferred to production scheduling automatically.

From the SAP Easy Access Menu: Logistics  Production  SOP  Planning 
For Product Group  Transfer Product Group to Planning

The product group, and plant should already be filled in. Click in the empty
Version box, and enter your version number from your April schedule from Part 3 above.
In the Transfer strategy and period, make sure Prod. Plan for mat. or PG members as
proportion of PG is selected. This is telling the system that we want to create a
production plan from our rough-cut plan data while taking the product group proportions
into consideration. Make sure the Invisible transfer box is checked, and click the
Transfer now button. You will probably see a yellow message flash across the bottom of
the screen telling you that the plan version you are trying to transfer is not the current
version. This is just a warning. Click the enter button to continue. After a moment, the
sales and operations data will be transferred, and individual requirements (as opposed to
product group requirements) for the Beach Cruisers will be created. Now let’s take a
look at the effect of transferring the sales and operations data to demand management.
Return to the SAP Easy Access User menu, and navigate to the stock/requirements list
initial screen.

From the SAP Easy Access User menu: Logistics  Production  MRP 
Evaluations  Stock/Requirements List

Just as you did in part 1, display the stock/requirements list for BC-LX. As you
can see, independent requirements (IndReq) have been created. Look at the Rec./reqd.
qty (received/required quantity) column for October. Notice that the number listed is
20% of the total aggregate production you entered on the sales and operations plan. At
this point, no production plan has actually been created, only a requirement for the Beach
Cruisers. To create the production plans, we need to run the material requirements
planning function for the Beach Cruisers. Return to your SAP Easy Access User menu.

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Part 5: MRP

By running the MRP function for the Beach Cruisers, the system goes through the
process of accessing the bill of material (BOM) for the Beach Cruiser, and calculates
what will be necessary as part of the production plan. Before we run the MRP however,
let’s take a quick look at the BOM for the Beach Cruiser LX.

From the SAP Easy Access User menu: Logistics  Production  Master Data 
Bills of Material  Bill of Material  Material BOM  Display

Enter BC-LX for Material, and 1 for BOM usage. Your plant should already be
filled in. Click the enter button enter to display the BOM. As you can see, there are 17
different materials which go into one LX model Beach Cruiser. You can also see that
more than one of some materials are necessary for each Beach Cruiser. For example, 3 of
material WHSA are required. WHSA stands for wheel sub-assembly. These are the
wheels and hubs for the Beach Cruisers, and are assembled in Nogales, Mexico. The last
three materials listed in the BOM (Battery, CD player, and GPS) are what makes the BC-
LX different from the BC-S. If you would like, you can look at the BOM for BC-S by
returning to the initial BOM display screen and entering BC-S for material. Now that
you have seen the BOM, let’s run the MRP for the LX Beach Cruisers.

From the SAP Easy Access User menu: Logistics  Production  MRP 
Planning

Double click on Single Item, Multi-Level. This is telling SAP that you wish to
run the MRP function so that is takes into account all those materials you saw in the
BOM. Enter BC-LX for material (leave all other boxes as is), and click the enter button.
A yellow warning message will flash across the bottom of the screen asking you to check
the input parameters. Click the enter button again to continue. After a short delay
(during which the system is locating all the necessary BOM data and applying it to the
planning process) the run report will be displayed. You do not need to be concerned with
the actual report as it just shows the amount of time it took the system to run all of the
BOM data. Let’s take a look at the result of the MRP run in the stock/requirements list.

In the same manner as before, display the stock/requirements list for the BC-LX.
Upon examination, you will notice that there are now planned production orders (PlOrd.)
listed with the independent requirements. Make a note of the number of BC-LX which
will be built in the first planned production order (the number in the Rec./reqd. qty
column). To really see the effect of the MRP run, change the material from BC-LX to
LX-02 (the material number for the CD player), and click enter. During the MRP run, the
system used the BOM to determine that 1 CD player is necessary to build each Beach
Cruiser. The system then automatically created a dependent requirement (DepR) equal to
one CD player for every BC-LX in the individual planned production orders. Notice that
the dependent requirement number for the first entry is the same as the number of BC-
LXs in the first planned production order. This is how SAP keeps all stock levels in

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control, and keeps all ordering and manufacturing completely accurate at all times. You
will notice that there was never a time when the incorrect number of CD players could be
calculated or entered for the planned production plans.

Now that we have created the production plan for our LX Beach Cruisers, we
need to convert the planned production orders into solid production orders. At this point
the production runs are only planned, and could be changed without problem. When the
plans are converted into solid production orders, the production is actually scheduled
making the data available to the system as an actual event.

Part 6: Converting the Planned Production Order

Your last step in this tutorial will be to create a solid production order. Since the
SAP system already contains all of the necessary information, this step becomes very
simple. If you are not already there, navigate to the stock/requirements list screen, and
display the stock requirements list for the Beach Cruiser LX (BC-LX). Locate the
planned production order for 4/26/2005 (PlOrd), and click on the small magnifying glass
directly to the left of that line. At the bottom of the small screen which appears, you will
see a button reading -> Prod.ord. This button, when pressed, will tell the system that you
agree with the information contained in the planned production order, and you would like
to concert it into a solid production order. Click the button now. After a moment you
will be taken to the Production order create screen, and a message will flash across the
bottom of the screen telling you that the release has been carried out. This message
confirms that the planned order data has been released and transferred into a production
plan. Click the save button to save the production order. Now click the green back
button to return to the stock/requirements screen. Once you are back to the
stock/requirements screen, click the refresh button, and you will see the planned
production order become a production order (PrdOrd). You have now successfully
created a production order for the Beach Cruiser LX. Click on the magnifying glass
button to the left of your Production Order line and record the production order number
in the upper left part of the pop up screen at the bottom of this page.

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