the production process chapter 6 1 magal and word | integrated business processes with erp systems |...

The Production Process

Chapter 6

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

Learning Objectives1. 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.

2Magal and Word | Integrated Business Processes with ERP Systems | © 2011

Types of ManufacturingDiscrete vs. repetitive vs. process Discrete and repetitive

Tangible productsManufactured in individual units Skateboards, bicycles

Repetitive manufacturingSame or similar products are produced over a

period of timeA specified quantity is produced over a period of

timeDiscrete

Batches of different materials over timeMagal and Word | Integrated Business Processes with ERP Systems | © 2011

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Types of manufacturingProcess manufacturing

Not manufactured in individual unitsGallons, pints, litersPaint, soft drinks

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A Basic Production Process

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Organizational DataClientCompany codePlantStorage location

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Master DataBill of materials (BOM)Work centerProduct routingMaterial masterProduction resource tools (PRT)

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Bill of MaterialsIdentifies the components needed to make

the materialA component can have its own BOM to

creates a multi-level BOMBOMs are used in

Material planningProduction ProcurementProduct costing

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Single-level and Multi-level BOMs

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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 - HeaderApplies to the entire BOMStatus: active, inactiveBase 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 BOMValidity: date range

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Bill of Materials - ItemsApply to the specific item in the BOMItem category:

Stock item – must have a material masterNonstock item – no material masterVariable-sized item – must specify sizeDocument item – diagrams, additional instructions

Material numberQuantity

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BOM Structure

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Demo 6.1 BOM for Bike and Wheel Assembly

Review some of the data included in a material master

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Work CenterBasic data

Name, descriptionPerson responsible for maintaining master

dataTask list usage (which routings can use this

work center)CapacitiesSchedulingCost centerHR assignment

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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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Demo 6.2 Review GBI Work CenterReview the GBI work center

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Product RoutingSteps necessary to produce a material

OperationsSequence

StandardAlternateParallel

Work centerTimes

Setup, machine, labor

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Work Center Example

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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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Demo 6.3 Review Routing for a Bike and Wheel AssemblyReview the routing for a bike and wheel

assembly

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Component AssignmentSpecifies the relationship between a BOM

and a routingAssigns components (materials) in a BOM

either to a routing or to a specific operation within routingIf not assigned assumed to be assigned to

the first operation

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Component Assignment

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Production CapabilityA 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 MasterPreviously discussed views

Basic dataPurchasing relatedSales relatedAccounting related

Additional view needed for productionWork scheduling – plant specificMRP – plant specific

More relevant in material planningWill be discussed in that chapter

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Production Resource ToolsMovable objects required for production

Shared among different work centersDocuments (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 ProductionPlanned order

What materialHow manyWhen

Generated by other processesFulfillmentProject managementMaterial 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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Demo 6.4 Create a Planned OrderReview how to create a planned order

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Authorize ProductionWith planned order: convert

Convert to production orderWithout planned order: create production

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

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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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Authorize Production - OutcomesSchedulingAvailability checksReservationsPreliminary costingPurchase requisitions

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Preliminary Cost Estimates for Men’s Off-road Bike

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Cost Estimates in a Production Order

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Planned cost: planned cost for planned quantityBased on material and labor cost estimates

Target cost: planned cost for actual quantity

Actual cost: actual cost for actual quantity

Demo 6.5 Create a Production OrderReview how to create a production order

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Order ReleaseOn creation order status is created (CRTD)Order must be released (REL) to permit

subsequent steps such as Goods movement not possibleConfirmations not possibleDocuments cannot be printedSettlement

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Elements of the Order Release Step

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Order ReleaseAutomatic or manual

If no time is needed between creation and release for preparation, then release occurs automatically

Release at different levelsHeader: All operations are releasedOperations: Release specific operations

Operations status: RELOrder status: PREL (partially released)

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Order Release - OutcomesExecution of subsequent steps is possibleShop floor papers can be printedCommunication with PDC is possible

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Goods IssueMovement type 261Impact

Material, FI, CO documentsG/L accounts updatedInventory updatedReservations updated (reduced)Costs updated (actual cost in order)

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Elements of the Goods Issue Step

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Data in a Goods Issue Step

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Financial Impact of a Goods Issue

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Demo 6.6 Goods Issue to Production Order

Review the steps from goods issue to production order

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ConfirmationsOrder level confirmationOperations level 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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Demo 6.7 Confirm ProductionReview confirm production

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Goods ReceiptGoods receipt into storage

Movement type 101Impact

Material, FI, CO documentsMaterial 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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Demo 6.8 Goods Receipt from ProductionReview goods receipts from production

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Periodic ProcessingOverhead calculationWork in progress determinationSettlement

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Overhead CalculationIndirect costs

Supervisor, manager, other salariesUtilities

Accumulated in cost centersPeriodically allocated to production orders

based on predetermined rules

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Work-in-Progress DeterminationWork-in-progress (WIP) inventory

Inventory between GI and GR inventoryPeriodically the value of what is in the

production process is calculated and posted to the general ledger

Not essential For short production processesValue of materials is not highGBI

Essential When value of materials is high Production takes weeks, months, or yearsAircraft production, construction.

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SettlementSettle the difference between planned and

actual costs (variance)Only panned costs are posted in the GR stepVariance is settled in this step

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Financial Impact of a Settlement

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ReportingGeneral SAP reporting options

Online listsWork listsAnalytics

Production-specific reporting optionsStock/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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Demo 6.9 Stock/Requirement ListReview/stock requirement list

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