SAP PP - Production Planning... Part-1/3

Keeping the spirit behind the theme of "SAP simplified" for this blog and to include more areas for wider audience, I thought of writing the present series of three articles on SAP PP (Production Planning). The discussion will cover basic theory and concepts around Production Planning module (or Plan-to-Produce business scenario, as frequently called). Best suitable for the people from Manufacturing background. Enjoy !

Broadly all manufacturing industries operate in one of the following environments: Discrete manufacturing, Repetitive manufacturing, and Process manufacturing.

Discrete manufacturing is characterized by a changing sequence of work centers where the products are processed. This sequence is determined by routings which is a list of operations / tasks to be performed and it can be very complex. Production commences against a production order which accumulates costs during its lifetime. Component materials are issued / staged with reference to individual production orders. Work progress is documented in the order. Confirmations for operations in the production order are made for fine control. There is a frequent switching from one product to another. Examples of products manufactured in discrete manufacturing environment include turbines, generators, motors, pumps, various mechanical machines and equipments.

Repetitive manufacturing involves production lines where usually a constant flow of production is maintained. Routings are fairly simple and mostly similar for different products. It is also called period based production as the production takes place at a certain production rate. Costs are collected periodically at a product cost collector. Components are often staged at the production lines with no reference to an order and backflushes are usually executed periodically e.g. all the quantities produced in one shift. The same product is produced on a certain production line over a longer period of time. Examples include automobile industry, motherboard manufacturing industry, etc.

Process manufacturing entails chemical, pharmaceutical, food and beverage industries as well as the batch-oriented electronics industry. SAP provides an integrated planning tool for batch-oriented process manufacturing.

Make-to-Stock / Make-to-Order Production

Next depending on the business environment of an industry, it plans its production. There is Make-to-Stock and Make-to-Order Production broadly.

Make-to-Stock production is used in industries where demand and sales fluctuate which means the industry produces without any customer requirements in anticipation of future demand and the production capacities are to be kept engaged. Fluctuations in demand and sales are smoothed by warehouse stock. This should always be used if the stock is produced independently of the customer orders because customers are to be provided with goods immediately from the stock.

Make-to-Order production is used where the customer requirement is available in advance and the stock is built up to satisfy the requirements of each sales order.

Planning Strategies

Under the make-to-stock and make-to-order production methods, a wide range of production planning strategies are available in the SAP R/3 System, offering a large number of different options. Depending on the strategy one chooses, one can use sales orders and / or sales forecast values to create the demand program. One can also move the stocking level down to the assembly level so that final assembly is triggered by the incoming sales order. One can also carry out the demand management specifically for the assembly.

Major strategies of Make-to-Stock production alongwith their strategy nos. in SAP system are listed below :
  • Make-to-Stock production (Anonymous): 10
  • Make-to-Stock production (Gross Reqmts Planning): 11
  • Production by lots: 30
  • Planning with final assembly: 40
  • Planning at Assembly level: 70
  • Planning at Phantom Assembly level: 59
Major strategies covered under Make-to-Order production alongwith their strategy nos. are as follows :
  • Make-to-Order production: 20
  • Planning without Final Assembly: 50
  • Planning at Assembly level without Final Assembly: 74
  • Planning with Planning Material: 60
It is not possible to discuss all these strategies here in detail, so we will focus on the make-to-stock production strategy (10) which is often used in industries where demand is seasonal and / or where production needs to be smooth. This strategy is also called the Net Requirements Planning Strategy.

...to be continued

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