SAP PP - Production Planning... Part 2/3

This article is the second of the series of three articles on Overview of SAP PP (Production Planning). Please find the link to the first one here. The series will cover basic theory and concepts around Production Planning module (or Plan-to-Produce business scenario, as frequently called). Continuing our discussion on planning strategies appplicable to Make-to-Stock production scenario...

Make-to-Stock Production (Net Requirements Planning)

Suppose there is a manufacturing industry. In order to move ahead with production, it should have a production plan having information on ‘what to produce’, ‘how much to produce’, ‘where to produce’, ‘how to produce’ and ‘when to produce’. This production plan needs an input in the form of requirement which drives the planning process in the SAP system. Now the requirement can be of two types:

Customer Requirement i.e. direct and confirmed requirement for the product/s from the customer. and hence we have information on ‘what’, ‘how much’ and ‘when’ to produce.

Independent Requirement which comes from the sales forecast and is independent of any customer requirement. The requirement is determined by using various forecasting tools. The purpose is to predict the demand in future as close as possible.

The independent requirement triggers the planning process in make-to-stock production and if there are any customer requirements they are ignored as these are to be covered from the warehouse stock.

Demand Management is the application in PP where such requirements are maintained and are called Planned Independent Requirements (PIRs). So we have a Demand Program ready with us. Based on this demand program, material planning (MRP) is carried out. The system performs net requirement calculations in order to determine the Planned Order quantity. We get planned orders as the result of MRP which contain information for production. A planned order as the name implies is in the planning stage only. The planned orders are converted to production orders once we decide to produce at our production facilities. During net requirements calculation the system considers any planned orders, production orders, purchase orders, and so on as planned supplies. After production, the finished product is shipped to customers. Deliveries are posted to the sales orders. Accordingly the planned independent requirements in the demand program are reduced.

Material Requirements Planning (MRP) application thus performs the planning process. The BOMs are exploded for all the assemblies in the manufactured product. Routings are selected. Scheduling is performed to determine the planned dates. Capacity requirement is calculated. The planned orders are created. Another feature is Master Production Scheduling (MPS) where we plan parts which are very important from the viewpoint of company profits or which take up critical resources. These parts are called master schedule items. Only the concerned assembly’s BOM is exploded so dependent requirements for one level of BOM are covered only. Other BOM levels are not exploded and levels below are not planned. MRP is normally carried out after MPS planning. Master schedule items are not included in the MRP run.

A feature called Planning Time Fence is used in MRP / MPS planning. Planning time fence is used to protect the master plan from automatic changes for the duration of planning time fence. Though MRP controller, the person who is responsible for monitoring of materials can make manual changes to the master plan. It is natural that MRP controller wants to have a master plan for a definite period which should not undergo automatic changes during MRP run and thus avoiding any disturbances to his master plan. Any changes outside planning time fence can take place.

Another feature in MPS is Interactive Planning. We can check the results of the automatic planning run for master schedule items with simple and easy-to-use tools and simulate changes and perform regenerative planning. Any changes are not saved in the system until we save interactive planning.

Receipts and Issues

The elements which add or will add in future to the stock inventory are called Receipts. Examples are planned orders, production orders, purchase orders, purchase requisitions, etc. On the other hand, The elements which subtract or will subtract in future from the stock inventory are called Issues. Examples of issues are sales orders, material reservations, dependent requirements, etc.

Lot Sizing procedures

The system performs net requirements calculation during MRP run and calculates the shortage quantities to be produced to meet the requirement. Then it creates the appropriate receipt elements to cover the shortage. The size of the receipt elements is controlled by the lot-sizing procedure allocated to the planned material. If it is lot-for-lot procedure, the size of the receipt elements is equal to the size of requirement. If it is replenish-to-maximum stock level, as soon as the stock inventory falls below the defined minimum level, receipt of the appropriate size is created to replenish the stock to the defined maximum level. And likewise there are other lot-sizing procedures. These have been divided under three headings.

Static lot sizing procedures - Period lot sizing procedures - Optimum lot sizing procedures

- Lot for lot - Daily lot size - Part period

- Fixed lot size - Weekly lot size - Least unit cost

- Replenish to maximum stock level              - Monthly lot size - Groff reorder procedure

 - Accounting period based - Dynamic lot size

We may put additional restrictions on the lot size by defining minimum lot size, maximum lot size, etc.

Stock/Requirements List

The stock/requirements list shows the current situation of receipt and issues elements. We can display dates of the various MRP elements. It is dynamic in nature and we can refresh it to view the fresh information. In the Stock/ Requirements list, we can work with display filters and selection rules. We can process individual MRP elements from the list. We can analyze the capacity situation here. The system displays the available capacity, the material independent total capacity requirement, etc. Overload situations are highlighted in color. We can display overview tree which comprises of Worklist tree, Order tree and Product group tree. In Order tree, the system displays all components or assemblies for a selected MRP element corresponding to the order report. In Worklist tree, the system displays all the materials in the current session. In Product group tree, the system displays all materials in a product group only when using collective display by product group. All in all stock/ requirements is a very important tool for getting an overall picture of the current status of the product/s in question.

MRP List

The result of an MRP run is the MRP list. MRP list is similar to stock/ requirement list. Being the result of an MRP run, we may want to refer to it later on and therefore, the list is static in nature. And the information in the MRP list pertains to the results of the last MRP run. This list can not be processed like stock/ requirements list. We can not use selection rules like stck/ requirements list.

Production Order

Production order comes into picture when the final decision has been reached to manufacture the material. Before it everything was in planning stage only. MRP run creates receipt elements like planned orders. These planned orders can be converted to production orders if we finally decide to commence production against them. These production orders then are released by the MRP controller so that production department can access them. Material components are withdrawn from the stores against individual production orders. Production is started and after completion of individual steps in he production order (operations), confirmation is posted in the system. Finally when the production is over, the finished goods are sent to store and Goods Receipt (GR) is posted. This completes the lifecycle of a production order.

We can also create production orders independently for a material. The system explodes the relevant BOM and selects a valid routing.

...to be continued

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