Lecture5 Production Planning

Production Planning and Execution (PP)
Curriculum: Introduction to S/4HANA using Global Bike

GLOBAL BIKE: Value
Chain
© 2019 SAP SE / SAP UCC Magdeburg. All rights reserved. 2

Module Information
Learning Objectives
 Understand a manufacturing process cycle

 Get familiar with the basics of a production plan

Unit Overview
 PP Organizational Structure or Data
 PP Master Data
 PP Processes
• Material Planning
• Production Planning
• Manufacturing Execution Process

PP Organizational Structure
 Client
• An independent environment in the system
 Company Code
• Smallest org unit for which you can maintain a legal set of books
 Plant
• Operating area or branch within a company
- Manufacturing, distribution, purchasing or maintenance facility
 Storage Location
• An organizational unit allowing differentiation between the various stocks of a material in a plant
 Work Center Locations (in SAP system  master data)

• An organizational unit that defines where and when an operation is performed
• Has an available capacity
• Activities performed are valuated by charge rates, which are determined by cost centers and activity types.
• Can be machines, people, production lines or groups of tradespeople

Global Bike Structure for Production Planning
Global Bike Client
Company
Global Bike Inc. Global Bike Germany GmbH Code
Dallas Heidelberg Plant
Raw Materials Raw Materials
Semi-fin. Goods Semi-fin. Goods

Storage
Location
Finished Goods Finished Goods
Miscellaneous Miscellaneous
Assembly Assembly
Packaging Packaging (Work Center Location)
Inspection Inspection

GBI Enterprise Structure in SAP ERP (Logistics)
Shipping Point DL00 MI00 SD00 TO00 HD00 HH00 PE00
RM00 TG00 TG00 TG00 RM00 TG00 TG00

Storage SF00 FG00 FG00 FG00 SF00 FG00 FG00
Location
FG00 MI00 MI00 MI00 FG00 MI00 MI00
MI00 MI00
Central Purchasing Organization (global) GL00

Purchasing Org. US00 CA00 PO DE00 AU00
Purchasing Group North America PGr Europe Asia

N00 E00 A00
Dallas Miami S. Diego Toronto Heidelb. Hamburg Perth Plant

DL00 MI00 SD00 TO00 HD00 HH00 PE00
CC US00 CA00 CC DE00 AU00 Company Code
Client GBI

PP Master Data
 Material
 Bill of Materials (BOM)
 Routing
• BOM and routine are like a cooking recipe
• BOM = ingredients and routing = steps in the recipe
 Work Center
 Product Group

Bill of Materials (BOM)
 List of components that make up a product or assembly
 Wheel Assembly  Seat Kit

• Tire
 Handle Bar
• Tube
• Wheel
 Pedal Assembly
• Hex nut  Chain
• Lock Washer  Brake Kit
• Socket Head Bolt  Warranty Document
 Frame  Packaging
 Derailleur Gear Assembly

 Single-Level
Single-Level
Finished Bike
Wheel Assembly Pedal Assembly
Frame Chain
Derailleur Gear
Brake Kit
Assembly
Seat Kit Warranty Doc.
Handle Bar Packaging

 Single-Level vs. Multi-Level Single-Level
Finished Bike
Single-Level
Wheel Frame Derailleur Seat Handle Bar Pedal Chain Brake Doc. Pack.
Tire
Tube
Wheel
Hex nut
Lock
Bolt
Multi-Level

 Variant Bill of Materials (BOM)

• Several products with a large proportion of identical parts.
Single-Level
Deluxe Bike (red) Single-Level
Professional Bike (black)

Aluminum Wheel Pedal Assembly
Carbon Wheel Pedal Assembly
Frame red Chain
Frame black Chain
Derailleur Gear
Brake Kit
Assembly Derailleur Gear
Brake Kit
Assembly

BOM

BOM
(cont)
How many M1 & M2 needed to make End

item?

BOM

BOM

Build a Bike? https://www.youtube.com/watch?v=d3-pZfUcW0M
Routing
 Routings enable you to plan the production of materials (products).  Routing – Operation 20
 • Attach seat to frame
 Routings are used as a template for production orders and run schedules
 Work Center – ASSY1000
 Routing are also used as a basis for product costing. • Assembly Work Center
 Series of sequential steps (operations) that must be carried out to produce a  Time
given product • 1 minute
 Routings contain:
• What, Where, When, How

Build a Bike? https://www.youtube.com/watch?v=d3-pZfUcW0M
Routing
 Routing for Finished Bike
Operation Plant Description Activity Type - unit in a

controlling area that classifies the
activities performed in a cost center
Work Center Control Key - A key
Example in production cost centers are
machine hours or finished units.
that specifies how an operation
or a sub-operation is processed
in functions such as orders,
Time and Unit of Measure
costing or capacity planning.

Work Center
 A location within a plant where value-added work (operations or activities) are performed
• Work Centers can represent
- People or Groups of People
- Machines or Groups of Machines
- Assembly Lines
 Work center used to define capacities

• Labor
• Machine
• Output
• Emissions
 Capacities used in
• Capacity requirements planning (CRP)
• Detailed scheduling
• Costing
Work Center
 Work centers capture and use the following Resource Related data
• Basic Data
- Person Responsible, Location of Work Center
• Scheduling Information
- Queues and Move Times (interoperation), Formula Keys
• Costing Data
- Cost Center, Activity Types
• Personnel Data
- People, Positions, Qualifications
• Capacity Planning
- Available Capacity, Formulas, Operating Time FMS and
Automation lab @ IU
• Default Data
- Control Key, Standard Text Key

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

Product Group
 Aggregate planning that groups together materials or other product groups (Product Families)
 Multi- or Single- Level Product Groups

• The lowest level must always consist of materials

PP Processes
 Production Planning & Execution

• Forecasting
• Sales and Operations Planning (SOP)
• Demand Management
• Master Production Scheduling (MPS)
• Material Requirement Planning (MRP)
 Production Order

Production Planning & Execution
SIS Forecasting CO/PA
Sales & Operations

Planning
Strategic Planning
Demand
Management
Detailed Planning
MPS
MRP
Manufacturing Procurement
Execution Process
Order
Settlement
Manufacturing Execution

Production Planning & Execution
 Players in the Game SIS Forecasting CO/PA
• Strategic Planning Sales & Operations Strategic

- CEO, COO, CIO, CFO, Controller, Marketing Director
Planning Planning
• Detailed Planning Demand

Management
- Line Managers, Production Scheduler, MRP Controller,
Capacity Planners
Detailed
MPS
Planning
• Execution
- Line Workers, Shop Floor Supervisors
MRP
Manufacturing Procurement
Execution Process
Order Manufacturing
Settlement Execution

Forecasting
 Forecasting is the foundation of a reliable SOP
 Accurate forecasts are essential in the manufacturing sector
 Overstocked & understocked warehouses result in the same

thing: a loss in profits.
 Forecasts are ALWAYS WRONG

Moving Average
Situation?
+ No trend
+ No seasonablity
+ Matured products with
large historial data

Notation

Forecasting
 Forecasting Models
• Trend
• Seasonal
• Trend and Seasonal
• Constant
 Selecting a Model
• Automatically
• Manually

Sales and Operations Planning (SOP)
 Information Origination
• Sales
• Marketing
• Manufacturing
• Accounting
• Human Resources
• Purchasing
 Intra-firm Collaboration
• Institutional Common Sense

Sales and Operations Planning (SOP)
 Flexible forecasting and planning tool
 Usually consists of three steps:

• Sales Plan
• Production Plan
• Rough Cut Capacity Plan
 Planned at an aggregate level in time buckets

Example: Sales & Operations Planning (S&OP) with Linear
Programming (LP)

Objective Function

Constraints:
Demand &
Capacity

Solution
Maximum profit = 12*80 +

15*140 = $3060
With xA = 80 units, xB =
140 units

Role of Sales and Operations Planning (S&OP)
 Production planning is done at aggregate level (Eg. Zara produces 12,000 different products designs each year.
BWM produce more than 1,000 different car variants assembled daily).
 Objective of aggregate planning (sales and operations planning) is to meet forecasted demand while minimizing
cost over the planning period)

Sales & Operations Plan: Example

Demand Management
 The planning of requirement quantities and requirement dates for finished products and important assemblies,
and definition of the strategy for planning and producing or procuring a finished product.
 Link between Strategic Planning (SOP) & Detailed Planning (MPS/MRP)
 Demand management can be done manually or based on previous planning results such as sales planning,
SOP, and forecast.
 The results of Demand Management is called the Demand Program, it is generated from our independent
requirements - PIR - Planned Independent Requirements and CIR - Customer Independent Requirements

Demand Management
Forecast Sales
Planned Customer
Independent Independent
Requirements Requirements
Demand
Program
MPS / MRP

Planning Strategies
 Planning strategies represent the business procedures for

• The planning of production quantities
• Dates
 Wide range of strategies
 Multiple types of planning strategies based upon environment

• Make-To-Stock (MTS)
• Make-To-order (MTO)
- Driven by sales orders
• Configurable materials
- Mass customization of one
• Assembly orders

Planning Strategy for Make-to-Stock
 Planning takes place using Independent Requirements
 Sales are covered by make-to-stock inventory
 Strategies
• 10 – Net Requirements Planning
• 11 – Gross Requirements Planning
• 30 – Production by Lot Size
• 40 – Planning with Final Assembly

Planning Strategy for Make-to-Order
 Planning takes place using Customer Orders
 Sales are covered by make-to-order production
 Strategies
• 20 – Make to Order Production
• 50 – Planning without Final Assembly
• 60 – Planning with Planning Material

Master Production Scheduling (MPS)
 Master production schedule (MPS) specifies what is to be made and when in accordance with aggregate
production plan.
 MPS is the result of the production planning process
 If aggregate planning works with product families, MPS disaggregates them into specific products.
 Eg: aggregate planning determined 2000 tables should be produced in August. MPS determines (600 tables, 1 st
week, 400 tables 2nd week, 700 tables 3rd week, and 300 tables 4th week)

MPS (cont)

Material Requirement Planning (MRP)
 In MRP, the system calculates the net requirements while considering available warehouse stock and scheduled
receipts from purchasing and production
 During MRP, all levels of the bill of material are planned
 The output of MRP is a detailed production and/or purchasing plan
 Detailed planning level

• Primary Functions
• Monitor inventory stocks
• Determine material needs
- Quantity
- Timing
• Generate purchase or production orders

Structure of MRP Systems

MRP Calculation

MRP Calculation
(cont)
BOM for
Finished
Product E

MRP Calculation

MRP Calculation (Aggregate)

Demand-Independent vs. Dependent
 Independent Demand – Original source of the demand.

• Independent demand is demand for a finished product, such as a computer, a bicycle, or a pizza.
 Dependent Demand – Source of demand resides at another level.

• Dependent demand, on the other hand, is demand for component parts or subassemblies. For example, this would be the
microchips in the computer, the wheels on the bicycle, or the cheese on the pizza

MRP Calculation (Independent & Dependent Demand)

MRP Calculation & Planned
order release

Output of MRP
MRP
In-House External
Planned Order
Production Procurement
Convert to
Production Purchase
Orders Requisitions
Process Purchase Schedule

Orders Orders Lines

Orders, orders, orders
 Planned Order (planning)

• A request created in the planning run for a material in the future (converts to either a production or purchase order)
 Production Order (execution)

• A request or instruction internally to produce a specific product at a specific time
 Purchase Order (execution)

• A request or instruction to a vendor for a material or service at a specific time

Manufacturing Execution Process
Capacity
Production Planning Schedule
Proposal and Release
(Planning/Other)
Shop Floor
Documents
Order
Settlement
Goods
Issue
Goods
Receipt Completion
Confirmation

Thank you!

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Production Planning and Execution (PP)

Curriculum: Introduction to S/4HANA using Global Bike

© 2019 SAP SE / SAP UCC Magdeburg. All rights reserved. 2

 Understand a manufacturing process cycle

© 2019 SAP SE / SAP UCC Magdeburg. All rights reserved. 9

 PP Organizational Structure or Data

© 2019 SAP SE / SAP UCC Magdeburg. All rights reserved. 10

 Work Center Locations (in SAP system  master data)

© 2019 SAP SE / SAP UCC Magdeburg. All rights reserved. 11

Global Bike Client

Dallas Heidelberg Plant

Raw Materials Raw Materials

Semi-fin. Goods Semi-fin. Goods

Packaging Packaging (Work Center Location)

© 2019 SAP SE / SAP UCC Magdeburg. All rights reserved. 12

Shipping Point DL00 MI00 SD00 TO00 HD00 HH00 PE00

RM00 TG00 TG00 TG00 RM00 TG00 TG00

Central Purchasing Organization (global) GL00

Purchasing Group North America PGr Europe Asia

Dallas Miami S. Diego Toronto Heidelb. Hamburg Perth Plant

© 2019 SAP SE / SAP UCC Magdeburg. All rights reserved. 13

 Bill of Materials (BOM)

© 2019 SAP SE / SAP UCC Magdeburg. All rights reserved. 14

 List of components that make up a product or assembly

 Wheel Assembly  Seat Kit

 Derailleur Gear Assembly

© 2019 SAP SE / SAP UCC Magdeburg. All rights reserved. 15

Wheel Assembly Pedal Assembly

Seat Kit Warranty Doc.

Handle Bar Packaging

© 2019 SAP SE / SAP UCC Magdeburg. All rights reserved. 16

 Single-Level vs. Multi-Level Single-Level

© 2019 SAP SE / SAP UCC Magdeburg. All rights reserved. 17

 Variant Bill of Materials (BOM)

Deluxe Bike (red) Single-Level

Professional Bike (black)

© 2019 SAP SE / SAP UCC Magdeburg. All rights reserved. 18

© 2019 SAP SE / SAP UCC Magdeburg. All rights reserved. 19

How many M1 & M2 needed to make End

© 2019 SAP SE / SAP UCC Magdeburg. All rights reserved. 20

© 2019 SAP SE / SAP UCC Magdeburg. All rights reserved. 21

© 2019 SAP SE / SAP UCC Magdeburg. All rights reserved. 22

© 2019 SAP SE / SAP UCC Magdeburg. All rights reserved. 23

 Routing for Finished Bike

Operation Plant Description Activity Type - unit in a

© 2019 SAP SE / SAP UCC Magdeburg. All rights reserved. 24

 Work center used to define capacities

© 2019 SAP SE / SAP UCC Magdeburg. All rights reserved. 26

© 2019 SAP SE / SAP UCC Magdeburg. All rights reserved. 27

 Multi- or Single- Level Product Groups

© 2019 SAP SE / SAP UCC Magdeburg. All rights reserved. 28

 Production Planning & Execution

© 2019 SAP SE / SAP UCC Magdeburg. All rights reserved. 29

SIS Forecasting CO/PA

Sales & Operations

© 2019 SAP SE / SAP UCC Magdeburg. All rights reserved. 30

 Players in the Game SIS Forecasting CO/PA

• Strategic Planning Sales & Operations Strategic

• Detailed Planning Demand

© 2019 SAP SE / SAP UCC Magdeburg. All rights reserved. 31

 Forecasting is the foundation of a reliable SOP

 Accurate forecasts are essential in the manufacturing sector

 Overstocked & understocked warehouses result in the same