PowerPoint Presentation

SAP ERP

Material Master DataMaterial MasterContains all the information a company needs to manage about a materialIt is used by most components within the SAP systemSales and DistributionMaterials ManagementProductionPlant MaintenanceAccounting/ControllingQuality ManagementMaterial master data is stored in functional segments called Views

SAP ERPPage 5-# SAP AGMaterial Master ViewsMaterial MasterBasic DataSales DataControlling DataForecasting DataPurchasing DataMat. Plan. DataAccounting DataStorage DataQuality DataSAP ERPPage 5-# SAP AGSales Org. UW00Sales Org. UE00Material MasterClient XXXGeneral Information relevant for the entire organization: Name Weight Unit of MeasureSales specific information:

Delivering Plant Loading Grp Storage Location specific information: Stock QtyStorage Loc. FG00Storage Loc. TG00SAP ERPPage 5-# SAP AGAll of this together makes up the Master Record for a Material.

Purchasing Information RecordFramework for Purchase OrderContains the relationship between a vendor and a materialCan be created:ManuallyAutomatically QuotationsAutomatically Purch. OrdersReportingVendor Evaluation

Material MasterVendor Master PurchasingInformation RecordSAP ERPPage 5-# SAP AGPurchasing Information RecordAllows buyers to quickly determine:Which vendors have offered or supplied specific materialsInfo Records contain:Data on pricing and conditionsLast purchase orderTolerance limits for deliveriesSpecific lead timesAvailability periodsVendor Evaluation dataServes as default information for Purchase OrdersSAP ERPPage 5-# SAP AG5/20/20147Material Master ViewsBasic Data 1Basic Data 2ClassificationSales: Sales Org Data 1Sales: Sales Org Data 2Sales: General/Plant DataForeign Trade: Export DataSales TextPurchasingMRP 1MRP 2MRP 3MRP 4ForecastingWork SchedulingGeneral Plant Data/Storage 1General Plant Data/Storage 2Warehouse Management 1Warehouse Management 2Quality ManagementAccounting 1Accounting 2Costing 1Costing 2Basic Data, Classification arenot plant-specificOther views are plant-specific

5/20/20148Material Master ViewsPlant 1000NRG-A BarsBase unit: CSGross wt: 72 lb.

NRG-A BarsLead Time: 2 daysStd. Price: 216.80

Plant 2000NRG-A BarsLead Time: 3 daysStd. Price: 223.20

BasicDataViewMRPViewsNon-plant specificPlant specific: Material MasterIndustry Sector and Material TypeViews in material Masters

Bill of Materials10Title SlideContents of TutorialDefinition of a bill of materialsHow a bill of materials is usedTypes of bill of materialsBill of materials informationBenefits of a bill of materialsExamples of bill of materials11This is the outline of the entire tutorial in the order that the topics appear.DefinitionBill of Materials (BOM)A listing of all the subassemblies, intermediates, parts, and raw materials that go into a parent assembly showing the quantity of each required to make an assembly.

Bozarth, Cecil C. and Handfield, Robert B. Introduction to Operations and Supply Chain Management. Pearson Education, Inc., Upper Saddle River, New Jersey, 2006. p.461.12This definition is provided in our class text and is cited on the slide. It is not a very clear definition so the next slide explains what is means.Definition ExplainedBasically, a bill of material (BOM) is a complete list of the components making up an object or assembly.It is also part of material requirements planning (MRP)13This is a simple explanation that can be understood of what a BOM actually is. MRP translates the master productions schedule into orders for actual parts. The BOM is part of this process. Next we will discuss how a BOM can be used in business.Processes that utilize a BOMProductionMaterials planningProduct costingPlant maintenance14This is just a few of many different areas in business that use a BOM to organize their materials. This list was obtained from the following web site: http://help.sap.com/saphelp_40b/helpdata/en/cd/daf2cd4ab011d18a0f0000e816ae6e/content.htmHow can a BOM be used in your organization?Several software programs are available that store item information and prepare bill of materials automatically15The easiest way for a company to implement a BOM into their materials planning is to use a software program that organizes the parts and prepares the BOM easily. Before we see some software screenshots, lets learn about types of BOMs.Types of BOMsStatic (fixed) billA bill of material for a part that is normally made from the same components, labor and raw materials.Used for standard assemblies, components, and engineer-to-order customer orders.

Example:A bill of materials for a standard chair16A static bill of materials is a fixed bill for standard assemblies. They use the same materials and components every time. An example of this is the building of a standard chair. The BOM would be the same every time so it would be a static bill of materials.Types of BOMsDynamic (parametric) billA bill of material for a product or part for which size, color, laminate, and other options can be selected.

Example:A bill of materials for a Dell computer17A dynamic bill can vary in the components that make up a product. An example of this type of BOM is for a Dell computer. For the most part the components are standard, but the customer can choose different features and so those parts will vary from project to project. Types of BOMsSingle level bill of materialA bill of material that lists the materials, parts and labor required to make another part.

Example:A bill of materials to make a Dell computer18A single level BOM lists the parts included in a single product like a Dell computer.Types of BOMs Multilevel bill of materialA bill of material that lists the components, assemblies, and materials required to make a part, the components, assemblies, and materials required to make each component and assembly of the part, and so forth.

Example:A BOM for the battery inside the Dell computer.19To go deeper into a product, a multilevel BOM not only lists the parts of a product, but the parts of the components in the product. For example the BOM not only lists the parts in a Dell computer, but also the parts that are in the battery in the Dell computer. This information was found on the following website: http://www.feldmanengineering.com/BoM_Glossary.htmStructure of a BOM

20The diagram illustrates a bill of material for product A. Product A is made of assembly B, components C and D, and material E. Assembly B is made from components F, G, and H (as well as other assemblies or products). Purchased parts are normally identified as materials (items E, F, and G) but can be any product, assembly or component that depending on workload you choose to buy-out or manufacture. This chart was found at the following website: http://www.feldmanengineering.com/BoM_Glossary.htmWhat information is on a BOM?QuantityItem ID#Description of ItemCost of ItemTotal Project Cost21These five items are the most typical and important items on a BOM. Some examples provided later in the presentation do not follow this exact format because there is no standard format for a BOM. Each company needs to modify where needed to fit their individual needs. To illustrate a bill of materials, we will use the project of building a basic chair.QuantityTells user how many of each part is needed for each project

Example:A chair needs 1 seat, 4 legs, 1 back, and 5 nails.22The quantity is one of the most important parts of the BOM because it tells us how many parts are needed for a project. The chair for example needs 1 seat, 4 legs, 1 back, and 5 nails to hold it together. The builder would not want to order 3 legs or forget to order the back on accident because the chair would not be finished correctly to order.Item ID #Tells us which part to orderCan be any of the following:Catalog number, UPC, or any other identification number.

Example:The chair needs a 2PC seat, 5DR legs, 6TU8 back, and 1 inch nails.23The item ID number tells us which type of part to buy. The numbers need to be exact for the correct part to be ordered. In our example the chair needs a specific type of seat, legs, back, and nails. The ID number can be a catalog number assigned by either the company or the vendor, or can be a type of UPC scan-able label.Description of ItemProvides a check that the correct item is being ordered.24The description of the item is just a quick check to make sure all the parts were included. This way the user does not have to memorize each part by ID number. Instead, they can quickly scan the BOM and see that a seat, legs, back, and nails are included.Cost of ItemCost is included to show how much each part is per item and the total cost of all like parts.

Example:The cost of a leg is $5 per leg. Then the total price of the legs ordered would be $20 because there are 4 legs.25The cost of the item lets the user know the cost per item. We can then figure out the cost for all like items. Because we only need 1 seat and 1 back, their cost for like items would be the same as the cost per item. The legs, however, have different costs because we are ordering more than one leg. In this example the legs are $5 each, so the total price of legs ordered are $20.Total Project CostShows the total cost of all items and is also the total cost of the direct materials used in the project.

Example:Seat-$10, Back-$5, Leg-$5 per leg, Nail-$.5 per nailTotal Cost of a chair = 10 + 5 + 5*4 + .5*5 = $37.5026The total project cost may be included in some BOM to show the total cost of all the items being ordered. In our example, the total cost of the chair is $37.50.Benefits of a BOMOptimize engineering, planning and purchasing efforts by providing centralized and up-to-date information in Make-To-Stock, Repetitive, JIT or Job Shop environments.

Improve material management by responding to changes in production.

Reduce inventory levels and obsolete parts.

Reduce manufacturing costs.27The benefits of a bill of materials comprise this slide and the next slide. The first benefit is that it helps a company to optimize engineering and planning by providing centralized, current information. A bill of materials also improves material management and helps the company respond to changes in demand and production. A bill of materials reduces inventory levels and gets rid of unneeded parts. It can also reduce manufacturing costs.Benefits of a BOMMinimize clerical and engineering efforts by optimizing the tasks of maintaining and changing multi-level bills.

What-If capabilities for estimating or quoting.

Supports variable length part numbers and unlimited descriptive text.

Easy methods for accessing part information28This slide is a continuation of the previous slide in explaining the benefits of a bill of materials. It can reduce clerical and engineering efforts and provide what-if scenarios for estimating or quoting. A bill of materials also helps keep track of specific items such as the same items in every way except small details like varying lengths. A bill of materials also is a easy method for accessing part information about a project. This information was found on the following web site: http://www.grms.com/BillsofMaterial.htmBOM ExampleQuantityID#DescriptionUnit PriceTotal Cost16TU8Back$5/Unit$ 5.0045DRLegs$5/Unit 20.0012PCSeat$10/Unit 10.0051Nails$0.50/Unit 2.50

Total Project Cost$37.5029This is a sample BOM based on the examples provided in this tutorialBOM Example161kV H-Frame TangentQuantity Catalog No. Description 2 70-foot Wood Pole 1 DP1-457-156-156 Crossarm Shop Assembly DP1-457-156-156W Crossarm, 3-5/8" x 9-1/2" x 32'-0", Laminated3 5860-3545 Adjustable Spacer Filling Assembly, 8-3/4" to 12-3/46W4104-4SBolt, Washerhead, 1/2" x 10-1/2", SN12W5050-3SBolt, Washerhead, 5/8" x 5", SN141058BS Bolt, Bent Double End 7/8" x 8", 2SN, 2MF2 41058BB Bolt, Bent Machine 7/8" x 6", SN, MF 30This example was found at the following website: www.brooksmfg.com/bom.html BOM ExampleProject Bill of MaterialsPine Lake HomeSitesCost ItemQuantityCost/ItemTotal $Site DevelopmentClearing & Grading1.00 Each59,429.0059,429.00Paving1.00 Each114,549.00114,549.00Curb & Gutter1.00 Each64,232.0064,232.00Sanitary Sewer1.00 Each158,810.00158,810.00Storm Sewer1.00 Each61,277.0061,277.00Water1.00 Each63,602.0063,602.00Entrance1.00 Each36,000.0036,000.00Power & Street Lighting1.00 Each9,300.009,300.00Amenity1.00 Each270,000.00270,000.00Contingency1.00 Each35,000.0035,000.00Total Site Development$872,199.0031Here is another example of a BOM found at the following website: www.planease.com/samples/unitsales/projectbill.htm Screenshots of BOM Software

32This is an exploded Multilevel BOM screenshot.A Example of BOM SAP R/3BOMs ( single level)BOM (Items) BOM

Multiple BOMOne Product

Item Categories

NR. :L D. : BOM

BOMGroup BOM (plant)Plant-special BOM (plant)

MM Master DataVendor Master DataMaterial Master DataPurchasing Info RecordOutput Master DataCondition Master DataSAP ERPPage 5-# SAP AGVendor Master DataVendor MasterContains all the necessary information needed to business with an external supplierUsed and maintained primarily by the Purchasing and Accounting DepartmentsEvery vendor MUST have a master record

SAP ERPPage 5-# SAP AGVendor Master ViewsClient LevelAddressVendor NumberPreferred CommunicationCompany Code DataReconciliation AccountTerms of PaymentBank AccountPurchase Org DataPurchasing CurrencySalesmans NameVendor PartnersGeneral DataCompany Code DataFinancial Accounting (FI)Purchasing DataMaterials Mgmt (MM)SAP ERPPage 5-# SAP AGVendor MasterGeneral Information relevant for the entire organization: Name Address CommunicationClient XXXCompany Code US00Company Code DE00Company Code specific information: Acc. Mgmt Payment BankPurch. Org. US00Purch. Org. DE00Purch. Organization specific information: Incoterms Currency SAP ERPPage 5-# SAP AGProduction Planning SAP AGWork Centers for Fitter SnackerRaw Material Warehouse (100)MixerMixerMixerMixerFormBakePackFinished Goods Warehouse (300)Snack Bar LineProduction (200)Production Master DataCompanyCodeValuationAreaPlantMaterialMasterWorkCenterBill of MaterialRoutingCapacityPlanningProductionOrdersProductCostingSAP ERPPage 5-# SAP AGNavigating Material Master Views

Click on tabs to selectUse direction arrows to scroll Use icon to get listSAP ERPPage 5-# SAP AGMaterial TypesA Material Type is used to classify materials:Defines material attributes like:Valuation (value of material as market changes)Procurement (internal, external or both)Controls screen sequence and number assignmentCan restrict access using authorization groupsA number of material types are pre-definedAbbreviations are abbreviations of German termsUsers can create their own material typesUsually best to copy a pre-defined type, then modify

SAP ERPPage 5-# SAP AGMaterial Types in ExercisesROH: Raw materialExternally purchased only, no sales viewOats, Wheat Germ, Honey, Cinnamon, etc.HALB: Semifinished ProductNo purchase or sales viewDough for NRG-A and NRG-B barsFERT: Finished ProductProduced internally, has sales views, no purchasing viewsNRG-A and NRG-B barsSAP ERPPage 5-# SAP AGOther Material TypesHAWA: Trading GoodsHIBE:Operating SuppliesVERP:Customer returnable packagingLEER:Empty containersKMAT:Configurable materialERSA:Spare partsDIEN:ServicesNLAG:Non-stock, non-valuated materialUNBW:Non-valuated, stocked materialFHMI:Production resources/toolsWETT:Competitive productsPROD:Product groupIBAU:Maintenance assemblySAP ERPPage 5-# SAP AGDocumentation in Material MasterThe SAP R/3 system documents all changes to the material master:

Click for documentationSAP ERPPage 5-# SAP AGDocumentation in Material Master

SAP ERPPage 5-# SAP AGMaster Data Bill of MaterialBOMs are represented as single-level relationships between a material and its components and sub-assemblies## NRGA(case)## Dough NRGA(lb)## Oats(lb)## Wheat Germ(lb)## Cinnamon(lb)## Nutmeg(lb)## Cloves(lb)## Honey(gal)## Vit/Min Powder(lb)## Carob Chips(lb)## Raisins(lb)## Canola(gal)BOM for NRG-ABOM for Dough NRG-ASAP ERPPage 5-# SAP AGRoutingsRoutings define the relationship between a material and the sequence of workcenters (operations) that are required to produce the materialAlso specifies where sub-components and sub-assemblies are needed in producing the material 201030405060SAP ERPPage 5-# SAP AGFunctions of Production Orders(part 1 of 2)Status Management: Tracking, User-defined statusSchedulingCalculation of Capacity Requirements (detailed)Costing/Collection of CostsAvailability Checks (material, capacity, PRT- production resources and tools)Printing of Paper Orders/related documentsAssembly drawings and instructionsInspection instructionsStorage regulationsMaterial Staging: withdrawal of materials used in production, e.g. components and sub-assembliesSAP ERPPage 5-# SAP AGConfirmations: quantities, activities, timesGoods receipt: receipt of completed materialsPeriod-end closing: Process cost allocation, overhead costs, surcharges, WIP (work-in-process) calculation, variance calculation, order settlementArchiving and retrievalMany more: rework, serial numbers, as-built, quality control, etc.

Production Orders capture actual datacosts, dates, etc.Functions of Production Orders(part 2 of 2)SAP ERPPage 5-# SAP AGStatus Management(part 1 of 2)Status Management is one tool that can be used to manage released production ordersA status can allow, allow with warning, or block a business transactionTwo status types are availableSystem status: internal, predefined, fixed numberUser status: freely definable, set by userSAP ERPPage 5-# SAP AG

StatusStatus detail

Status Management(part 1 of 2)SAP ERPPage 5-# SAP AGPlanned Orders vs. Production OrdersPlanned Orders are for PLANNINGProduction Orders are for EXECUTION

Planned Order 3 weeks in futurePlanned Orders 2 weeks in futurePlanned Orders 1 week in futureProduction Orders released todayPlanningExecutionSAP ERPPage 5-# SAP AGMaster Data for Production OrdersMaster Data is data that does not change frequentlyMaster Data for the production order comes from:Material MasterBill of Material (BOM)Work CenterRoutingProduction Resources/Tools (PRT)Materials like gages, fixtures, test equipmentCan also be items like drill bits that can be consumed in production but arent consumed INTO the productMost Production Order data comes from BOM and RoutingSAP ERPPage 5-# SAP AG1Order Request2Order Creation3AvailabilityChecksMachineReservation4Order Release56Print Order7Download toPDC system8Material staging9Material withdrawalposting10Upload fromPDC system11VarianceCalculationConfirmation12WIPDetermination13Goods Receipt1415Ordersettlement16Archiving &DeletionProductionOrderCycleRouting SelectionDifferent routings can be selected for a product depending on a number of criteria like:Raw material usedLot sizeProduct features/configurations (variants)A complicated, automatic selection process can be configuredSAP ERPPage 5-# SAP AGBill of Material (BOM)The system selects the FIRST Valid BOM it findsValidity can depend on:Date (engineering changes)CustomerSerial numberSAP ERPPage 5-# SAP AGMaterialMaterial AssignmentOP0010OP0020OP0030OP0080OP0090..MaterialMaterialMaterialOP0010OP0020OP0030OP0080OP0090..MaterialMaterialAssigned via BOM: All materials assigned to first operation Assigned via Routing: Materials can be assignedto specific operations SAP ERPPage 5-# SAP AG

Enterprise SystemsConfiguration

Production PlanningMaster Data

EGN 5620 Enterprise Systems ConfigurationSpring, 2012

SAP AG63January 2008 SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.64Enterprise Operations Planning ProcessExecutionExecution Detailed PlanningHigh Level PlanningForecastingSales and OperationsPlanningDemandManagementMPSMRPSales InformationSystemCO/PAManufacturingExecutionOrderSettlementProcurementProcessECC 6.0January 2008 SAP AG and The Rushmore Group, LLC 200864SalesProcessBPI II Final RoadmapJanuary 2008 SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.65Sales OrderEntryCheck AvailabilityProductionProcessRun MPS w/MRPConvert ProductionProposalScheduleand ReleaseProcurementProcessPick MaterialsGoodsIssuePurchase RequisitionPurchase OrderGoodsReceiptInvoiceReceiptPaymentto VendorCompletionConfirmationGoods ReceiptQualityInspectionOrder SettlementPost Goods IssueInvoice CustomerReceipt ofPaymentSAP ERPPage 5-# SAP AGECC 6.0January 2008 SAP AG and The Rushmore Group, LLC 200865

Production and PlanningMaster Data

Concept & Theories

SAP AG66Production and PlanningProduction planning is a business process which creates and maintains production plans for manufacturing of semi-finished goods or assembly of finished goods

Common manufacturing processes:Discrete, and ContinuousJanuary 2008 SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.67 SAP ERPPage 5-# SAP AGECC 6.0January 2008 SAP AG and The Rushmore Group, LLC 200867Production Planning & ExecutionDemandManagementSales & OperationsPlanning (SOP)MPSMRPManufacturingExecutionOrderSettlementProcurementProcessStrategic PlanningDetailed Planning Manufacturing ExecutionSAP ERPPage 5-# SAP AGProduction and PlanningJanuary 2008 SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.69 Players in the PlanningStrategic PlanningCEO, COO, CIO, CFO, Controller, Marketing DirectorDetailed PlanningLine Managers, Production Scheduler, MRP Controller, Capacity PlannersExecutionLine Workers, Shop Floor SupervisorsSAP ERPPage 5-# SAP AGECC 6.0January 2008 SAP AG and The Rushmore Group, LLC 200869Sales and Operations Planning (SOP) - reviewFlexible forecasting and planning toolUsually consists of three steps:Sales PlanProduction PlanRough Cut Capacity PlanPlanned at an aggregate level in time bucketsSAP ERPPage 5-# SAP AGDemand Management - reviewLink between Sales Planning (SOP) & Detailed Planning (MPS/MRP)The results of Demand Mgmt is called the Demand Program, it is generated from our independent requirements planned independent requirement (PIR) and customer independent requirement (CIR)

SAP ERPPage 5-# SAP AGAggregating forecasts across multiple items reduces forecasting errors. A clothing store, for instance, might be able to estimate within a pretty narrow range what the demand will be for mens dress shirts. But when that store tries to estimate the demand for individual styles, colors, and sizes of shirts, the accuracy of their forecasts will be considerably worse. Firms handle this kind of forecasting problem usually in one of three ways; they either forecast from the bottom up, from the top down, or they start in the middle and work both up and down. The top down forecast essentially estimates total sales demand and then divides those sales dollars level by level until the stock keeping unit (SKU) is reached. The bottom up method, as one might expect, starts with forecasts at the SKU level and then aggregates those demand estimates level by level to reach a companylevel forecast. Another method, one might call the in-between method, starts forecasts at the category level (like mens dress shirts), and then works up to determine store sales and works down to divide up the forecast into styles, colors and SKUs.

Demand ManagementPlannedIndependentRequirementsCustomerIndependentRequirements

SalesForecastDemandProgramMPS / MRPSAP ERPPage 5-# SAP AGPlanning StrategiesPlanning strategies represent the business procedures forThe planning of production quantities Dates Wide range of strategies

Multiple types of planning strategies based upon environmentMake-To-Stock (MTS)Make-To-order (MTO)Driven by sales ordersConfigurable materialsMass customization of oneAssembly ordersSAP ERPPage 5-# SAP AGPlanning strategies represent the business procedures for the planning of production quantities and dates. A wide range of production planning strategies are available in the SAP R/3 System, offering a large number of different options ranging from pure make-to-order production to make-to-stock production. Depending on the strategy you choose, you can:Use sales orders and/or sales forecast values to create the demand program Move the stocking level down to the assembly level so that final assembly is triggered by the incoming sales order Carry out Demand Management specifically for the assemblyStrategies for Make-to-Stock Production PurposeThe planning strategies explained in this section are designed for planning procurement (production or purchasing) of components by planning the final products. If you can plan at component level more easily.PrerequisitesChoose a make-to-stock strategy, if:The materials are not segregated. In other words, they are not assigned to specific sales orders. Costs need to be tracked at material level, and not at sales order level.

Strategies for Planning Components PurposeThe planning strategies explained in this section are designed for planning the procurement (production or purchasing) of components by planning the components themselves. This is particularly useful in the following cases:There is a variety of finished products (possibly with an irregular demand pattern where planning is not possible). The finished products are consumption-based.The overall purpose of planning at component level is to procure components to stock (without sales orders) in order to react to customer demand as quickly as possible. PrerequisitesChoose a strategy for planning components, if:The components are not segregated; that is, they are not uniquely linked at specific orders. Costs should be tracked at component (material) level and not at order level.Planning Strategy for Make-to-StockPlanning takes place using Independent RequirementsSales are covered by make-to-stock inventoryStrategiesNet Requirements PlanningGross Requirements PlanningProduction by Lot SizePlanning with Final AssemblySAP ERPPage 5-# SAP AGStrategies for Make-to-Order (MTO) Production PurposeThe planning strategies explained in this section are designed for the production of a material for a specific individual sales order. In other words, you do not want to produce finished products until you receive a sales order. This means that make-to-order strategies always support a very close customer-vendor relationship, because your sales orders are closely linked to production.The same relationship exists between the sales order and production that exists in a make-to-order environment. Make-to-order is also used in the following environments.Production using variant configuration Assemble-to-orderPrerequisitesChoose a make-to-order strategy, if:The materials are segregated. In other words, they are uniquely assigned to specific sales orders. Costs must be tracked at sales order level and not on material level.

Strategies for Configurable Materials DefinitionA configurable material is a material for which different variants are possible.The strategies for configurable materials allow you to plan products with an almost unlimited number of possible combinations of characteristics and combination value keys. Use these strategies if you want to plan a product that uses a feasible combination of characteristic values and that does not include final assembly. Typical examples of such products are cars, elevators, forklifts, trucks, buses.

Assemble-to-order An assemble-to-order environment is one in which the product or service is assembled on receipt of the sales order. Key components are planned or stocked in anticipation of the sales order. Receipt of the order initiates assembly of the customized product. Assemble-to-order is useful where a large number of finished products can be assembled from common components.

Planning Strategy for Make-to-OrderPlanning takes place using Customer OrdersSales are covered by make-to-order productionStrategiesMake to Order ProductionPlanning without Final AssemblyPlanning with Planning Material

SAP ERPPage 5-# SAP AGMaster Production Scheduling (MPS)MPS creates and maintains a weekly schedule of production for meeting independent demands. SAP ERPPage 5-# SAP AGUsing MPS you can carefully plan important parts or bottleneck parts in a separate planning runat the highest BOM level before the planning results have an effect on all of the production levels.

Material Requirement Planning (MRP)In MRP, the system calculates the net requirements while considering available warehouse stock and scheduled receipts from purchasing and productionDuring MRP, all levels of the bill of material are plannedThe output of MRP is a detailed production and/or purchasing planDetailed planning levelPrimary Functions Monitor inventory stocksDetermine material needsQuantityTimingGenerate purchase or production ordersSAP ERPPage 5-# SAP AGThe central role of MRP is to monitor stocks and in particular, to automatically create procurement proposals for purchasing and production (planned orders, purchase requisitions or delivery schedules). This target is achieved by using various materials planning methods which each cover different procedures.Consumption-based planning is based on past consumption values and uses the forecast or other statistical procedures to determine future requirements. The procedures in consumption-based planning do not refer to the master production schedule. That is, the net requirements calculation is not triggered either by planned independent requirements or dependent requirement. Instead, it is triggered when stock levels fall below a predefined reorder point or by forecast requirements calculated using past consumption values.

Demand-Independent vs. Dependent Independent Demand Original source of the demand.Dependent Demand Source of demand resides at another level.SAP ERPPage 5-# SAP AGNet RequirementsProcurement ProposalFirmed ReceiptsFirmed Orders or Purchase RequisitionsRequirements Planned Ind. Req., ReservationsSales Orders, Etc.StockSafety StockShortageSAP ERPPage 5-# SAP AGLot sizingStaticBased on fixed values in the Material MasterPeriodicGroups net requirements together from multiple periodsOptimumCalculates the optimum lot size for a several periods of net requirementsSAP ERPPage 5-# SAP AGThe lot-size calculation is carried out in MRP. In the net requirements calculation, the system determines material shortages for each requirement date. These shortage quantities must be covered by receipt elements. The system then calculates the quantities required for the receipts in the planning run in the procurement quantity calculation. In static lot-sizing procedures, the procurement quantity is calculated exclusively by means of the quantity specifications entered in the material master.FeaturesThe following static lot-sizing procedures are available:Lot-for-lot order quantity Fixed lot size Fixed lot size with splitting and overlappingReplenishment up to maximum stock levelIn period lot-sizing procedures, the system groups several requirements within a time interval together to form a lot. FeaturesYou can define the following periods: days weeks months periods of flexible length equal to posting periods freely definable periods according to a planning calendar The system can interpret the period start of the planning calendar as the availability date or as the delivery date.In static and period lot-sizing procedures, the costs resulting from stock keeping, from the setup procedures or from purchasing are not taken into consideration. The aim of optimum lot-sizing procedures, on the other hand, is to group shortages together in such a way that costs are minimized. These costs include lot size independent costs (setup or order costs) and storage costs.

Procurement TypeExternal ProcurementPurchase RequisitionPurchase OrderSchedule LineInternal ProcurementPlanned OrderProduction OrderProcess OrderSAP ERPPage 5-# SAP AGMulti-Level SchedulingTimeFinished ProductAssembly 1Semi-Finished GoodRaw MaterialComponentRequirementsDatePlanned OrderPurchase RequisitionSAP ERPPage 5-# SAP AGMRP vs. Consumption-Based Whether or not a material is planned using MRP or Consumption Based is determined by the MRP Type on the MRP1 screen of the Material MasterMRPVB Reorder-PointConsumption BasedVV Forecast BasedRP ReplenishmentPD MRPVSD Seasonal MRPSAP ERPPage 5-# SAP AGConsumption-Based Lot SizeReplenishment Lead TimeSafety StockReorder PointSAP ERPPage 5-# SAP AGOutput of MRP MRPPlanned OrderConvert toIn-HouseProductionProductionOrdersProcessOrdersPurchaseRequisitionsPurchaseOrdersScheduleLinesExternalProcurementSAP ERPPage 5-# SAP AG

Production and PlanningMaster Data

SAP Implementation

SAP AG86Business Process Integration January 2008 SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved. 87MMPPSDOrg Data RulesMMPPSD Master DataMMPPSDFISDMMTransactionsFIFIFIPPSAP ERPPage 5-# SAP AGECC 6.0January 2008 SAP AG and The Rushmore Group, LLC 200887In the Business Process Integration class we use the stool as a metaphor for the SAP structure. There are four basic components needed to run execute SAP. Three of these are the legs of the stool: org data, master data, and rules. These hold up the transactions. Transactions cannot be run unless these are setup. The legs are typically configured during the implementation process. During BPI 1 we will setup the stool for Finance, Materials management and Sales and Distribution.

Business Process IntegrationJanuary 2008 SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.88PPOrg DataMaster DataPPRulesPPPPSAP ERPPage 5-# SAP AGECC 6.0January 2008 SAP AG and The Rushmore Group, LLC 200888ProductionProcessScheduleand ReleaseShop FloorDocumentsGoods ReceiptOrder SettlementGoodsIssueProductionProposal(Planning/Other)CompletionConfirmationCapacity Planning

Production Process (Make-to-Stock)PP: Master Production Schedule (MPS)MPS focuses on independent demand items only and serves as an input to MRP to generate subsequent dependent demands.ESETEPENStandGiftboxCartridgeCrownCapBarrelMPS runMPS ItemsNon-MPS ItemsSAP ERPPage 5-# SAP AGUsing MPS you can carefully plan important parts or bottleneck parts in a separate planning runat the highest BOM level before the planning results have an effect on all of the production levels.

Elements of A Production OrderJanuary 2008 SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.91Raw Materials & Sub-ComponentsBill of MaterialComponents(Production PartsList)Work CenterOperationsProduction RoutingProduction OrderSAP ERPPage 5-# SAP AGECC 6.0January 2008 SAP AG and The Rushmore Group, LLC 200891Business Process IntegrationJanuary 2008 SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.92PPOrg DataPPPPPPSAP ERPPage 5-# SAP AGECC 6.0January 2008 SAP AG and The Rushmore Group, LLC 200892Organization DataClientCompany codePlantStorage locationShipping pointWork CenterJanuary 2008 SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.93 SAP ERPPage 5-# SAP AGECC 6.0January 2008 SAP AG and The Rushmore Group, LLC 200893Enterprise StructurePlant(P0XX)Client (600)Chart of AccountsCompanyCode (C0XX)Fiscal YearVariant (2012)Credit ControlAreaPurchasingOrganizationPurchasing GroupShipping PointSalesOrganizationDistribution ChannelDivisionSales AreaControlling AreaSL10SL20Work CentersWC 10WC 20SAP ERPPage 5-# SAP AGOrganization Data - Work Center Unique production or assembly areaMay includeEquipment Groups of equipmentProduction linesEmployeesGroups of employees Operations carried out at work centerJanuary 2008 SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.95SAP ERPPage 5-# SAP AGECC 6.0January 2008 SAP AG and The Rushmore Group, LLC 200895Organization Data Plant specific organizational unitsMRP controller Production controller/production scheduler/planner group Person responsible (financially)Non-plant specific organizational units Capacity planner

January 2008 SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.96 SAP ERPPage 5-# SAP AGECC 6.0January 2008 SAP AG and The Rushmore Group, LLC 200896Business Process IntegrationJanuary 2008 SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.97PPMaster DataPPPPPPSAP ERPPage 5-# SAP AGECC 6.0January 2008 SAP AG and The Rushmore Group, LLC 200897Master Data for Production PlanningBill of Material Master DataWork Center Master DataWork Center Control KeyProduct RoutingMaterial Types Allowed in ProductionControlling Activities For ProductionActivity PricesMaterials

January 2008 SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.98SAP ERPPage 5-# SAP AGECC 6.0January 2008 SAP AG and The Rushmore Group, LLC 200898Bill of MaterialsBOM is a hierarchical structure of the materials needed to produce a finished goods or semi-finished goods.BOMs in SAP are defined as single-level, but can be constructed multi-level by nesting several single-level BOMs.Nesting refers to a hierarchy in which a bill of materials contains its own bills of materials.

January 2008 SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.99SAP ERPPage 5-# SAP AGECC 6.0January 2008 SAP AG and The Rushmore Group, LLC 200899Bill of Material Master DataBill of Materials (BOM) are created as single-level or multi-level relationships between one parent material and the sub-component materialJanuary 2008 SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.100EPENBarrelCapCrownCartridgeBandClipECC 6.0January 2008 SAP AG and The Rushmore Group, LLC 2008100Bill of Material Master DataVariant Bill of Materials (BOM)Several products with a large proportion of identical parts.January 2008 SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.101EPEN - RedRedCartridgeBandEtc.BlackCartridgeBandEtc.EPEN - BlackECC 6.0January 2008 SAP AG and The Rushmore Group, LLC 2008101Bill of Material Master DataMultiple versions of Bill Of Materials (BOM)One product produced from alternative components or processes, where the differences are small (usually the quantity of a component).BOM 1 = lot size 1 - 100BOM 2 = lot size 101 999January 2008 SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.102BlackCartridge(Make)BandEtc.EPEN - BlackBlackCartridge(Buy)BandEtc.EPEN - BlackECC 6.0January 2008 SAP AG and The Rushmore Group, LLC 2008102Bill of Material Master Data January 2008 SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.103Semi-finished goodsRaw MaterialSemi-finished goodFinished GoodRaw MaterialRaw MaterialRaw MaterialRaw MaterialECC 6.0January 2008 SAP AG and The Rushmore Group, LLC 2008103Bill of Material Master DataJanuary 2008 SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.104

SAP ERPPage 5-# SAP AGECC 6.0January 2008 SAP AG and The Rushmore Group, LLC 2008104Bill of Material Master DataJanuary 2008 SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.105

SAP ERPPage 5-# SAP AGECC 6.0January 2008 SAP AG and The Rushmore Group, LLC 2008105Bill of Material Master DataBOM in SAP consists of a header section and an item section.Header section includes data that apply to entire BOM, such as finished material number, plant, usage, validity, status, and base quantity.The BOM is valid from the date specified in the header. Usage identifies the purpose for which the BOM can be used. For example, 1 is for production.January 2008 SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.106SAP ERPPage 5-# SAP AGECC 6.0January 2008 SAP AG and The Rushmore Group, LLC 2008106Bill of Materials Master DataItems section identifies all materials needed to make finished goods or semi-finished goods identified in the header.Item category determines how material is used in the BOM. Data for each item are: material number, description, quantity, and item category.

January 2008 SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.107SAP ERPPage 5-# SAP AGECC 6.0January 2008 SAP AG and The Rushmore Group, LLC 2008107Bill of Material Master Data (item category)L: Stock itemN: Non-stock itemR: Variable size itemT: Text item used to include notes and comments within the BOM. Notes may explain how to use the material or identify any unusual assembly requirement.D: Document item used to include document such as engineering drawings, assembly instructions, and photographs.

January 2008 SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.108SAP ERPPage 5-# SAP AGECC 6.0January 2008 SAP AG and The Rushmore Group, LLC 2008108Bill of Material Master DataK: Class item used in variant BOMs to identify a class or group of items. A variant BOM is used to create multiple versions.M: Intra material, or phantom items used as a logical grouped set of materials that could collectively be considered as a single material. Phantom material is not an actual material and is mostly temporarily used during production planning.January 2008 SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.109SAP ERPPage 5-# SAP AGECC 6.0January 2008 SAP AG and The Rushmore Group, LLC 2008109Bill of Material Master DataWhere is the Bill Of Materials (BOM) used?MRP uses BOM to determine dependent requirementsControlling uses BOM to calculate product costsProduction uses BOM to issue the proper quantities of components and raw materials to the shop floorJanuary 2008 SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.110SAP ERPPage 5-# SAP AGECC 6.0January 2008 SAP AG and The Rushmore Group, LLC 2008110Work CenterWork center is a location where value-added work needed to produce a material is carried out. A work center can be a machine, a group of machines, an entire production line, a work area, or a person or group of people who are responsible for completing operations.A work center is a resource that can be used for a variety of purposes and for multiple processes.January 2008 SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.111SAP ERPPage 5-# SAP AGECC 6.0January 2008 SAP AG and The Rushmore Group, LLC 2008111Work CenterWork center used to define capacities LaborMachineOutputEmissions Capacities used inCapacity requirements planning (CRP)Detailed schedulingCostingJanuary 2008 SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.112SAP ERPPage 5-# SAP AGECC 6.0January 2008 SAP AG and The Rushmore Group, LLC 2008112Work CenterAssignedCost centerHuman Resources (HR)QualificationsPositionsPeopleJanuary 2008 SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.113SAP ERPPage 5-# SAP AGECC 6.0January 2008 SAP AG and The Rushmore Group, LLC 2008113Work CenterWork Centers have multiple views of:Basic dataDefault valuesCapacity overviewSchedulingCost center assignmentTechnical data

January 2008 SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.114SAP ERPPage 5-# SAP AGECC 6.0January 2008 SAP AG and The Rushmore Group, LLC 2008114Work CenterJanuary 2008 SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.115Basic data section: Name, and description of the work centerPerson or group of people who are responsible for completing operationsTask list: a list of operations that are required to accomplish a task. Operations are the specific tasks that must be completed, such as drilling, cutting, assembling. In production, a task list takes the form of a product routing or a master recipe.Standard value key: used to assign standard or planned values for operations, such as setup and execution time. Companies use these values to calculate costs, execution times, and capacity requirements.

SAP ERPPage 5-# SAP AGECC 6.0January 2008 SAP AG and The Rushmore Group, LLC 2008115Work CenterJanuary 2008 SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.116

SAP ERPPage 5-# SAP AGECC 6.0January 2008 SAP AG and The Rushmore Group, LLC 2008116Work CenterJanuary 2008 SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.117Default Values: for operations performed at the work center.Control Keys: specify how an operation or a sub-operation is scheduling, how costs will be calculated, and how operations will confirmed once they are completed in the work center.Wage data: used by processes in human capital management, such as payroll. Standard value keys: identify the normal time elements the activities that consume time associated with the work center. Typical time elements are setup time, machine time, labor time, and teardown time.SAP ERPPage 5-# SAP AGECC 6.0January 2008 SAP AG and The Rushmore Group, LLC 2008117Work CenterJanuary 2008 SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.118

SAP ERPPage 5-# SAP AGECC 6.0January 2008 SAP AG and The Rushmore Group, LLC 2008118Work CenterJanuary 2008 SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.119Available capacity defines how much work can be performed at the work center. A work center can include more than one resource or capacity, such as labor and machine.

Scheduling basis determines the specific capacity to be utilized for production.SAP ERPPage 5-# SAP AGECC 6.0January 2008 SAP AG and The Rushmore Group, LLC 2008119Work CenterJanuary 2008 SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.120

SAP ERPPage 5-# SAP AGECC 6.0January 2008 SAP AG and The Rushmore Group, LLC 2008120Work CenterJanuary 2008 SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.121

SAP ERPPage 5-# SAP AGECC 6.0January 2008 SAP AG and The Rushmore Group, LLC 2008121Work CenterJanuary 2008 SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.122A work center is associated with a cost center which is a container for accumulation of costs. Costs associated with operations completed in a work center are calculated using formulas that utilize the costs and standard values associated with each activity type, for example, setup, labor, and machine.SAP ERPPage 5-# SAP AGECC 6.0January 2008 SAP AG and The Rushmore Group, LLC 2008122Work CenterJanuary 2008 SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.123

SAP ERPPage 5-# SAP AGECC 6.0January 2008 SAP AG and The Rushmore Group, LLC 2008123Work Center Control KeySchedulingDetermine capacity requirementsInspection characteristics requiredConfirmation requiredReworkCostSchedule external operations std values

January 2008 SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.124SAP ERPPage 5-# SAP AGECC 6.0January 2008 SAP AG and The Rushmore Group, LLC 2008124Product RoutingA list of tasks or operations that must be performed to convert a material to a part, component, or product.Routing is a sequence of operations which detail the manufacture of a productRoutings are used as a template for production orders and run schedules as well as a basis for product costing.

January 2008 SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.125SAP ERPPage 5-# SAP AGECC 6.0January 2008 SAP AG and The Rushmore Group, LLC 2008125RoutingRouting are used to determine:OperationsWork centersMaterial components Production resources and toolsQuality ChecksJanuary 2008 SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.126SAP ERPPage 5-# SAP AGECC 6.0January 2008 SAP AG and The Rushmore Group, LLC 2008126RoutingJanuary 2008 SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.127

SAP ERPPage 5-# SAP AGECC 6.0January 2008 SAP AG and The Rushmore Group, LLC 2008127RoutingJanuary 2008 SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.128

SAP ERPPage 5-# SAP AGECC 6.0January 2008 SAP AG and The Rushmore Group, LLC 2008128RoutingJanuary 2008 SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.129

SAP ERPPage 5-# SAP AGECC 6.0January 2008 SAP AG and The Rushmore Group, LLC 2008129Routing UseRoutings will be used inScheduling (dates, times)CostingCapacity planningProduction orders

January 2008 SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.130SAP ERPPage 5-# SAP AGECC 6.0January 2008 SAP AG and The Rushmore Group, LLC 2008130RoutingJanuary 2008 SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.131StandardSequenceAlternateSequenceParallelSequenceOperation 10Operation 20Operation 30Operation 40Operation 10Operation 20Operation 30Operation 40Operation 25Operation 20Operation 10Operation 30Operation 40Operation 25ECC 6.0January 2008 SAP AG and The Rushmore Group, LLC 2008131Material Types Allowed In ProductionMultiple material types may be used in a routing/BOMRaw materialsSemi-finished productTrading goods are allowed but not standardText or Reference materials commonJanuary 2008 SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.132SAP ERPPage 5-# SAP AGECC 6.0January 2008 SAP AG and The Rushmore Group, LLC 2008132Display Routing ListA collective report displaying the available routings and the material allocations to operations Four General TypesOperations RelatedComponent RelatedPRT RelatedGeneral List (Operation Control TicketJanuary 2008 SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.133SAP ERPPage 5-# SAP AGECC 6.0January 2008 SAP AG and The Rushmore Group, LLC 2008133Controlling Activities for Production Used to perform internal cost allocation, where activities by a cost center are measuredLabor timeMachine hoursOutput activities are valuedAllocation of an activity type is always made with the allocation cost element created in activity type planning

January 2008 SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.134SAP ERPPage 5-# SAP AGECC 6.0January 2008 SAP AG and The Rushmore Group, LLC 2008134Activity Prices Prices (costs) for planned activitiesFixed or VariableLabor = $$/hourMachine = $/hourOverhead = %January 2008 SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.135SAP ERPPage 5-# SAP AGECC 6.0January 2008 SAP AG and The Rushmore Group, LLC 2008135Product GroupAggregate planning that group together materials or other product groups (Product Families)Manufacturing procedureProduct designMarket niche, etc.Proportional Factors (Percentages for components)

SAP ERPPage 5-# SAP AGAggregate forecasts of a group of similar products are generally more accurate than individual forecasts of the individual products that make up the group.Product GroupsJanuary 2008 SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.137Multi-level or single-levelA product group is multi-level if it contains other product groupsLowest level in a product group hierarchy always consists of materials.A product group is single-level if its members are materials onlyA material or product group can be a member of more than one owner product group SAP ERPPage 5-# SAP AGECC 6.0January 2008 SAP AG and The Rushmore Group, LLC 2008137Business Process IntegrationJanuary 2008 SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.138PPPPRulesPPPPSAP ERPPage 5-# SAP AGECC 6.0January 2008 SAP AG and The Rushmore Group, LLC 2008138MRP Control ParametersEnvironmentNumber rangeMaster Data Materials Requirements Planning controllersFloat timesPlanned OrdersConversion order typeDependant requirement availability

January 2008 SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.139 SAP ERPPage 5-# SAP AGECC 6.0January 2008 SAP AG and The Rushmore Group, LLC 2008139MRP Control Parameters (continued)Planning run Bill of Material (BOM) selection External procurementPlanning horizonAvailability CheckMaterialProduction Resource/Tool (PRT )CapacityScheduling Control Parameters

January 2008 SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.140 SAP ERPPage 5-# SAP AGECC 6.0January 2008 SAP AG and The Rushmore Group, LLC 2008140General Planning ParametersOrder Type Control ParametersTypes of routings, BOMs per order type: manually or automaticallyAvailability checkingCreate Confirmation Parameters ReservationsStatus UpdatesDefine Valuation of Goods ReceivedMoving Average Price Control evaluation

January 2008 SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.141 SAP ERPPage 5-# SAP AGECC 6.0January 2008 SAP AG and The Rushmore Group, LLC 2008141Material Master Planning ParametersMaterials Requirements Planning views for materialsWork Scheduling views for manufactured productsJanuary 2008 SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.142 SAP ERPPage 5-# SAP AGECC 6.0January 2008 SAP AG and The Rushmore Group, LLC 2008142

PEN, Inc.

Production and PlanningMaster Data SAP AG143Pen Inc. Business Module II for Selling Finished Goods by ProductionJanuary 2008 SAP AG - University Alliances and The Rushmore Group, LLC 2008. All rights reserved. 144Pre-Sales ActivitySales OrderDeliveryBillingPlanned OrderProduction OrderCompletion ConfirmationIn InventoryPlant or WarehouseAvailability CheckNOYESGoods Issued to DeliveryGoods from Production OrderGeneral Ledger AccountsInventoryPostingsAccountsReceivableIssue Goods to Production OrderPurchase RequisitionPurchase OrderGoods ReceiptInvoice ReceiptAccountsPayableNOOrSAP ERPPage 5-# SAP AGECC 6.0January 2008 SAP AG and The Rushmore Group, LLC 2008144Can start out with a pre-sales activityEnded up in Order processingBecame an orderMakePlanexecute production orderIssue goodsComplete to inventoryCostAssign to sales orderSend to customerBill customerAccount for all activitiesActivity Type/Price PlanningJanuary 2008 SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.145

SAP ERPPage 5-# SAP AGECC 6.0January 2008 SAP AG and The Rushmore Group, LLC 2008145Production GroupJanuary 2008 SAP AG - University Alliances and The Rushmore Group, LLC 2007. All rights reserved.146

SAP ERPPage 5-# SAP AGECC 6.0January 2008 SAP AG and The Rushmore Group, LLC 2008146Orders, orders, ordersPlanned 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 timePurchase Order (execution)A request or instruction to a vendor for a material or service at a specific timeSAP ERPPage 5-# SAP AGA request or instruction from a purchasing organization to a vendor (external supplier) or a plant to deliver a quantity of material or to perform services at a certain point in time.

Production and Supply Chain ProcessesMIS 2101: Management Information SystemsDouglas M. Schutz

Based on material developed by C.J. Marselis, Munir Mandviwalla. and Mart Doyle SAP AGLearning ObjectivesDescribe the steps in the production planning process. Describe Fitter Snackers production and materials management problems. Describe how a structured process for production and materials management planning enhances efficiency and decision making. Describe how production planning data in an ERP system can be shared with suppliers to increase supply-chain efficiency. 149SAP ERPPage 5-# SAP AG149Problems at Fitter Snacker (FN)

Production manager schedules production based onexperience, rather than formal planning techniquesConsequences of the Failure to Use Formal Planning TechniquesInaccurate delivery promises to the customerInability to effectively manage shortages/overages when the order is placed151SAP ERPPage 5-# SAP AG151What is Material Requirements Planning (MRP) and what is its relation to Enterprise Resource Planning (ERP)?

SAP ERPPage 5-# SAP AGFacilitating the Production PlanProduction plan answers the following types of questions:How much product should we make?When should we make the product?How much ____ materials should we procure and when?A successful company must be able toDevelop and execute a good production planMake adjustments when customer demand differs from the forecast

SAP ERPPage 5-# SAP AGThree Categories/Approaches of Production Systems

1. Make to Stock2. Make to Order

3. Assemble to Order

Fitter Snackers Manufacturing Process

155155Raw Material WarehouseMixerMixerMixerMixerFormBakePackFinished Goods WarehouseSnack Bar LineProduces 200 bars/minute, 3,000 lb/hrOperates 1 8-hour shift per dayMixes 4,000 lbs/hrExcess capacity to ensure line doesnt shutdown Changing from NRG-A to NRG-B bars takes 30 minutesProduction Problems in Un-integrated Systems

CommunicationInventoryAccountingWhat are some of these problems?SAP ERPPage 5-# SAP AGProduction Problems in Un-integrated SystemsProblems due to poor communications between Marketing and Production Sales promotions, large orders, stockouts, increased procurement and production costsProblems related to inventory managementNot real-time, based on finished goods, large order production capacity conflicts, unable to accurately adjust production schedules, oversupply in raw materials Problems related to accountingDifficult to accurately estimate costs158SAP ERPPage 5-# SAP AG158Production Planning ProcessWhat are the major steps in the SAP R/3 Production Planning Process? (of any typical high-volume manufacturer such as Fitter Snacker)?

SAP ERPPage 5-# SAP AGMajor Steps in the SAP R/3 Production Planning Process are:

Sales ForecastingSales and Operations Planning Demand ManagementMRP

160SAP ERPPage 5-# SAP AG160161An Integrated Process

Predicts future demand for productsBreak production plan down into smaller time incrementsCreate production schedule based on production plan from demand managementUses the schedule to determine products and staffingDetermines what company should produceRequires starting inventory levels and sales forecast based on capacityDetermines amount and timing of raw material ordersTakes quantity and timing information from MRP and creates orders for suppliersSAP ERPPage 5-# SAP AG162Sales and Operations PlanningDemand ManagementMRPDetailedSchedulingSales ForecastingPurchasingProductionStartingInventory1) Sales ForecastingIn an integrated system, where do I get the information to support my sales forecast?Simple Sales Forecasting example:

SAP ERPPage 5-# SAP AG2) Sales and Operations Planning (SOP or S&OP)What question does S&OP answer?

SAP ERPPage 5-# SAP AGDemand StrategiesIf demand is greater than capacityOptionResultChoose not to meet the demandLost salesReduce promotional expendituresPotential lost salesUse overtime to increase capacityIncreased costsBuild up inventory in earlier periodsIncreased costs and lost inventory

SAP ERPPage 5-# SAP AGForecasting in an Integrated SystemAccurate historical sales values available for forecastingFix historical sales:If production was unable to meet demand, sales does NOT represent actual demandUnusual conditions like weather The effect of sales promotions

Sales provided fromSales and Distribution (SD) moduleField where planner can correct the sales valueSAP ERPPage 5-# SAP AGSales and Operations Planning (SOP) Case StudyKelloggs achieved significant savings from coordinated Sales and Operations Planning (SOP)Changed focus based on how they were evaluated; in the past:Marketing and Sales: Evaluated on tons of cereal sold What is wrong with that measure?Manufacturing: Evaluated on tons of cereal producedNo one evaluated on profit! Kelloggs new sales order process focused on profitKelloggs has reduced capacity, inventory and capital needs while increasing sales

SAP ERPPage 5-# SAP AG168Sales and Operations PlanningDemand ManagementMRPDetailedSchedulingSales ForecastingPurchasingProductionStartingInventory3) Demand ManagementWhat does Demand Management do?

4/22 represents how many work weeks are in each monthSAP ERPPage 5-# SAP AG170Sales and Operations PlanningDemand ManagementMRPDetailedSchedulingSales ForecastingPurchasingProductionStartingInventory4) MRPs Bill of Material (BOM)What is a BOM?

SAP ERPPage 5-# SAP AGLead Times and Lot SizingWhen it comes to purchasing raw materials, what areLead Times?Lot Sizes?

and why do I care?SAP ERPPage 5-# SAP AG5) Purchasing and ERPBenefits if my production planning system is integrated with my procurement system

Options to evaluate vendors

Convert MRP data to a purchase orderSAP ERPPage 5-# SAP AGProduction and Accounting in an Integrated SystemWhat benefits do I get when my production systems are integrated with my accounting systems?

Material received (for MRP) and the purchase orderSAP ERPPage 5-# SAP AGImplications for Supply Chain Management (SCM)How quickly does information flow from the retailer all the way back to the raw materials suppliers when demand changes in:Un-integrated system?Integrated system?

SAP ERPPage 5-# SAP AGSupply Chain IntegrationWhat kind of benefits do I get when I integrate my supply chain with my partners? SAP ERPPage 5-# SAP AGInventory Control Case Study Hoyt ArcheryPre ERP, complete inventory count two times each yearClosed plant for 3 days at cost of $5000 /dayPost ERP, accurate, real-time inventory information and ongoing cycle- counting process: items are counted each day

SAP ERPPage 5-# SAP AGSCM with Customer Collaboration: Case Study Wal-MartPOS (Point of Sale) data from bar code scanners is recorded in a data warehouse at Wal-Mart headquartersWal-Mart uses data mining techniques to predict what customers will buy at different times of the yearData is shared with Wal-Mart suppliers to plan productionWal-Mart also allows its 5,000 suppliers to directly access its data warehouse through its Retail Link programWal-Mart is leading the effort to leverage RFID technology

SAP ERPPage 5-# SAP AGSCM Critical Success Factors1) Business-driven strategy Focus on customer2) Management Commitment Driven top down from the business supported by MIS3) Supplier/Partner Expectation Management Change Management4) Internal Expectation Management training and information5) Learning Period Acceptance takes timeSAP ERPPage 5-# SAP AG180SummaryAn ERP system strategy can improve the efficiency of production and purchasing processesBegins with Marketing sharing sales forecasts Production plan is created based on forecast and shared with Purchasing so raw materials can be properly ordered. Production planning could be done without an integrated system, but ERP containing MRP enables Production to be linked to Purchasing and AccountingData sharing increases efficiency and accuracy

SAP ERPPage 5-# SAP AGSales & Operations Planning Two Decades of Learning at BASFAlan L. Milliken CFPIM CIRM CSCPApril 14, 2007Advancing Productivity, Innovation, and Competitive Success

Region IV SAP AGAlan L. Milliken CFPIM CIRM CSCP 20+ years at major manufacturing sites working in Production, Logistics, Process & Quality Control, Industrial Engineering, Training, and Scheduling 11+ years as a Supply Chain Consultant and APICS Instructor including two years in Mexico City helping BASF Mexicana improve their supply chain Identified by an independent consulting firm as one of three APICS members who best answer the question, What is a Supply Chain Manager? Served as an SME (Subject Matter Expert) on the team that developed the new Certified Supply Chain Professional (CSCP) program. Served as an SME on the team that developed the new Certified Forecasting Professional (CFP) for the Institute of Business Forecasting (IBF) Engineering Degree from Auburn University and MBA from Clemson UniversityObjectives of the Presentation Define formal Sales & Operations Planning (S&OP) Describe the primary steps in the formal S&OP Process and explain the purpose of each Relate the inputs and outputs of each step in the process Identify the participants in and responsibilities for each primary step Discuss Key Performance Indicators (KPIs) for each step in the processS&OP Process OverviewS&OP is the process with which we bring together all the plans for the business (customers, sales, marketing, development, manufacturing, sourcing, and financial) into one integrated set of plans.The objective of Sales & Operations Planning is to arrive at a business Game Plan to help manage and allocate critical resources to meet the needs of the customer at the least cost to do so.What is formal Sales & Operations Planning?

Source: APICS Illustrated DictionaryS&OP links Strategic Planning to OperationsS&OP as part of ERPSales & OperationsPlanning

Master SchedulingDetailed Planning& SchedulingCAPACITY

PLANNING

FORECASTING & DEMAND

BusinessPlanningHigh Level Enterprise Resource Planning ModelAnnuallyMonthlyWeeklyDailyStrategicPlanning2-10 YearsForecast OnlyForecast OnlyForecast OnlyForecast & OrdersOrders OnlyRough-cut Capacity PlanningCapacity Requirements PlanningResource Planning1871SKU by Customer by LocationSKU by CustomerStock Keeping Unit (SKU)Package SizeModel / Brand Subfamily FamilyBusinessUnitTotalCompanyS&OP LevelsToo AggregatedToo DetailedForecasts are more accurate higher in the hierarchyActual Demand is collected at the detailed level.S&OP in Product HierarchyS&OP is usually performed at an aggregated level (e.g. Product Family or Group)

S&OP is a Five-Step Process:Pre-S&OP and Executive S&OP may be combined into one meeting

The Basic S&OP Grid:History is included to highlight past plan-to-actual performanceInventory Plan = Planned Opening Inventory + Planned Production - Planned SalesActual Inventory = Opening Inventory + Actual Production - Actual SalesMarketing &SalesProductDefinitionProductDemandCapitalMasterScheduleBusinessPlanWorkforceAvailabilityFinanceMaterialsOperationsHumanResourcesEngineeringManagementCapacityS&OP ProcessS&OP is a Cross-Functional ProcessMust champion the process improved customer service reduced inventory lower manufacturing & distribution costs better control of overall business performance increased team work within and across functionsBenefits of S&OPIf implemented and used effectively, S&OP will yield major benefits to the firm:Steps in the S&OP ProcessStep 1: Updating Input DataResults: High Inventory Low Service High Unit Cost Poor DecisionsRemember the GIGO Principle. It takes much effort to ensure accurate & timely data is driving the process.

S&OP Planning ProcessDataERRORKey input data (e.g. inventory, sales, production, KPIs, etc..) should be updated as soon after month-end as feasible. Typically, 2-3 business days are allowed for this sub-process. Key Performance Indicators (KPIs) for data gathering include: Accuracy of the data Timeliness of sharing the data How well the data conforms to agreed upon formats Step 1: Updating Input Data (Continued)Take care to get what you like or you will be forced to like what you get. George Bernard ShawStep 2: Demand Planning Process OverviewMarketing & Sales are responsible for this step in the S&OP process. The output is used to drive supply planning.The key performance measure for output is accuracy and for the process step is meeting timing commitments.Review and update forecast(Marketing & Sales)

Demand PlanInternalDemandMarketIntelligenceCustomer OrdersSales ForecastInputsOutputsProcessStep 2: Demand Planning Activities Generate new forecast (IT if automated)Marketing/Sales: Review new forecast, revise if needed, and approve for updating of S&OP grid Review previous months forecasting performance and identify root causes for data outside tolerance Provide status for new product introductions Document assumptions and risks associated with new forecast

Management Overrides Go HereProduct Family or GroupHistoryStep 2: Demand Planning Sample PlanThe final plan is used to update the S&OP Grid and drive supply planning.

Step 2: Demand Planning ForecastabilityThe accuracy of the forecast depends heavily on whether or not the forecasting tool is applicable to the history data. One test to determine this is the Coefficient of Variation (COV). COV = Standard Deviation of Period-to-Period Sales/ Average Period Sales. If COV >0.8, conventional forecasting such as moving average should not be used.Step 2: Demand Planning Symptoms You Need a Formal S&OP Process

Shareholder or OwnerBoard of Directors

ProfitsRevenue ForecastSales Manager3-Year Plan

Sales RepresentativeStuff Flows This DirectionActual SalesTop-Down Directives Conflict Significantly with Current Market Conditions:A formal S&OP Process will ensure alignment across organization & planning levels.Marketing/Sales Suffer with the Field of Dreams SyndromeIf we make it, they will come!Well guess what, in many cases we made it and they did not come. OutputForecastManufacturing

InventoryStep 2: Demand Planning Symptoms You Need a Formal S&OP ProcessA formal S&OP process will ensure cross-functional review of forecasting performance.

Supply Chain ManagerBill, this is Jim. I want to make an appointment with you to discuss our Demand Planning process?

InventoryThe Supply Chain Manager contacts the Marketing Manager.

Forecast+10%

Oh, Hi Jim. Actually we dont have a formal Demand Planning process. However, Im updating the latest forecast at this very moment.The Marketing Manager responds.The Scope of Marketing/Sales Participation is Limited Step 2: Demand Planning Symptoms You Need a Formal S&OP ProcessStep 2: Supply Planning Process OverviewSupply Plan by Production FamilyDemand PlanDevelop and Review Production & Purchasing Plans

Assess Manufacturing &Supplier Capabilities

Integration of Supply PlanningInputsOutputsProcessInventoriesManufacturing operations and purchasing are responsible for the Supply Planning step of the S&OP process. The key KPI for the process output is the deviation between planned and actual supply. For the process itself, timely & accurate data to drive the next step is most important.Step 2: Supply Planning Activities Develop the preliminary supply plan based on the demand plan Perform Resource Planning (Capacity Planning) for key resources Identify and resolve imbalances in demand & supply as feasible Identify imbalances to be reviewed by managementKey activities for the Supply Planning sub-process include:Step 2: Supply Planning Sample Plan

Machine Hours & No. of Batches are Key Resources

Supply Chain ManagerJim, what is going on in Production. Fred did not make the rate decrease we had in the S&OP Plan and Inventory is out-of-control.ProductionSalesInventoryStep 3: Supply Planning Symptoms You Need a Formal S&OP ProcessManufacturing & Business Goals are not Aligned

Congratulations Fred, your unit cost in production was below plan last month and Ive been authorized to give you a bonus.Plant ManagerJIMStep 4: Demand-Supply Balancing Process OverviewThe Master Scheduler will typically facilitate the balancing of demands with supply once the preliminary S&OP plans are developed.The primary objective is to resolve any imbalances at the least cost to do so.Demand PlanSupply PlanBalance Demand/Supply

Balance 1Load vs.

Capacity

Model / Option Against Inventory PolicyCustomer Service vs. InventoryBalance 2Balance 3SupplyPlanDemandPlanUpdatedFinancialViewUpdatedInventoryTargetsResourceRecommend-ationsS&OPMeetingAgendaExceptionsInputsOutputsProcessStep 4: Demand-Supply Balancing Activities Make decisions regarding demand-supply balancing Resolve issues and formulate recommendations Document the issues that could not be resolved and the alternatives for each Convert the plans to financial units for management review Develop the agenda for the executive S&OPNote: Depending on the size and complexity of the business, this step may require a formal meeting or may be done leveraging communications technology (e.g. shared files).Step 5: Executive S&OP MeetingThe purpose of this meeting is to approve recommendations, make decisions, and issue the firms game plan. Sample Agenda Executive S&OP Meeting Review of Overall Business Performance Review & Discussion of Key Performance Indicators Discuss Status of New Product Introductions Family-by-Family Review and Decisions Approve Production/Supplier Rate Changes Collective Impact on the Business Plan Review of Decisions Made & Action Items Assigned Critique of the MeetingStep 5: Outputs & Objectives of Executive S&OP MeetingThe outputs of the meeting are the Meeting Minutes, modifications to the Business Plans, and the finalized S&OP Plan. Collectively, these are referred to as the Game Plan. Objectives for the meeting include: Make final decisions for issues raised during the S&OP process- accept or change proposals- choose from alternatives provided Compare the financial numbers from the S&OP Plan to the current Business Plan and reconcile the two. Finalize the S&OP Plan. Review current performance for Customer Service, Inventory, etc.. , and make any necessary changes to plans or targets. Review New Product Issues, Special Projects, and Business Level Issues and make the necessary decisions.Step 5: Sample S&OP Plan in SAP

DEMANDSUPPLYRESOURCE PLANNINGINVENTORYNote: Most ERP Systems provide a platform to enable S&OPStep 5: Sample S&OP Plan in EXCEL

Historical PerformancePlanStep 5: Sample S&OP Business Scorecard

Keys to SuccessS&OP is Journey not a Destination

Get the basics in orderContinuous ImprovementLearn by Doing /Align EffortsFocus the S&OP Process

S&OP Basics Early Implementation TasksResponsible Person and Due Date required for each task.Get the Basics in Place:Sample S&OP Planning Calendar

1 (1) 2 (2) 34 5 (3) 6 (4) 7 (5) 8 (6) 9 (7) 1011 12 (8) 13 (9) 14 (10 15 (11) 16 (12) 1718 19 (13) 20 (14) 21 (15) 22 (16) 23 (17) 2425 26 (18) 27 (19) 28 (20) 29 (21) 30 (22) 31The Journey BeginsUpdate Actuals into FCST ModelMktg. Finalizes Demand FCSTDmnd Plng Mtg.- Final Plan DueSupply Plan Finalized (Mtg.?)S&OP Mtg. - Exceptions ResolvedSr. Mgmt. Approves S&OP PlanApproved S&OP Plan to SAPKPI Scorecard AvailableAll team members must meet sub-process due dates to ensure success.Focus the Process:

Includes planned and actual as well as volume and value. Includes estimated profit margins. Sample S&OP Grid with FinancialsOnly white rows require entry; other data is populated automatically or calculated automatically.The S&OP Plan must be aligned with the Financial Business PlanLearn by Doing/Align Financials:Sample Key Performance Indicators (KPIs) for the S&OP ProcessOverall Process- Customer Satisfaction (e.g. OTD)- ROI/ROA/Cash Flow,etc..- Market Share - Inventory PerformanceNew Product Planning- Due Date (milestones)- Velocity (time to market)- Revenue/Cost

Demand Planning - Forecast Accuracy - Sales Plan Performance Supply Planning - Plnd. vs. Actual Production - On-time Supplier Delivery - Prime Yield - Cost to AcquireContinuously Improve:Focus on Performance-to-Target and Trends in Performance SAP AG219S&OP - Barriers to Success Process Ownership is with Planning not the Leadership Team Lack of understanding of the S&OP Process Insufficient resources for process implementation Inadequate performance measurement Resistance to giving up individual freedom to achieve best overall results220S&OP is a Key Process at BASF

2006 Supply Chain ProjectThe Supply Chain Project of the Year 2006 Award goes to the Implementation of a Global Sales & Operations Planning Process in the EVN Business. The award pays tribute to innovative supply chain solutions and outstanding performance in the implementation of supply chain concepts. The award is sponsored by Dr. Kurt Bock, CFO for BASF Group.

BASF Corporation 5-Year Stock PerformanceAt BASF, We dont make a lot of the products you buy, we make a lot of the products you buy better.(PPS in USD)Source: YAHOO.comS&OP is one of many things BASF Corporation has done well to improve overall performance.

Enterprise Wide Information Systems

The Procurement Process

Instructor: Richard W. Vawter

SAP AG224ObjectivesRather than selling, as you studied in the Customer Order Management process, you will now be focusing on the purchasing process. You will be able to:Describe the basic business process of procuring stock materials in an ERP System.Discuss the integration points in procurement to Financial Accounting and Inventory Management.Execute the procurement process in the SAP R/3 System.Discuss the reporting and analysis tools used by R/3 in the procurement cycle.SAP ERPPage 5-# SAP AG225TopicsOrganizational Elements and Master DataBusiness Process for ProcurementReporting and AnalysisSAP ERPPage 5-# SAP AG226ProcurementThe primary SAP R/3 application modules that support the Procurement process are:Materials ManagementPurchasingGoods ReceiptsInvoice VerificationProduction PlanningPurchase RequirementsFinancial AccountingPayment ProcessingMaterials Valuation

227Organizational ElementsThe SAP R/3 Procurement business process uses the following organizational elements:

SAP ERPPage 5-# SAP AG228Master DataThe following master data is used in the Procurement cycle:Material masterVendor masterSAP ERPPage 5-# SAP AG229Material Master Primary ViewsBasic DataMaterial Resource PlanningStocks in InventoryAccountingStorageWarehouse ManagementPurchasingSalesWork SchedulingQuality ManagementForecastingClassificationSAP ERPPage 5-# SAP AG230Vendor MasterThe Vendor Master includes all data necessary for processing business transactions and corresponding with vendors.Information is shared between the accounting and purchasing departments.All data is grouped into three categories:General dataCompany code dataPurchasing dataSAP ERPPage 5-# SAP AG231TopicsOrganizational and Master DataBusiness Process for ProcurementReporting and AnalysisSAP ERPPage 5-# SAP AG232Procurement CycleThe procurement cycle may consist of eight processes:

SAP ERPPage 5-# SAP AG233Business Process Flow for ProcurementThe main documents and transactions in the Procurement process are:

Note: Payments to vendors are usually made at specified times (e.g. at the end of the month).Payment amounts are determined according to the open invoices posted on the system.SAP ERPPage 5-# SAP AG234Purchase Requisition Processing

235Purchase OrdersA purchase order is a formal request to a vendor to provide certain materials or services under specific conditions (quantity, price, delivery date, etc.)

SAP ERPPage 5-# SAP AG236Purchase Order Processing

SAP ERPPage 5-# SAP AG237Goods ReceiptWhen goods are received from a purchase order, the item data is copied from the purchase order into the goods receipt document.

SAP ERPPage 5-# SAP AG238Goods Receipt for Stock MaterialEntering the goods receipt increases the inventory level of a material that is procured for stock.Inventory Management (MM module) controls and records all goods movement, form purchase order receipt through the plant, to consumption

239Results of a Goods Receipt PostingTransaction documents are created both for materials management and finance.

Goods ReceiptPostingAccountingdocumentStock quantityConsumption statisticsPoint of consumptionCost center OrderTransferOrderPurchasing data:Order item, Order historyGoods receiptslipMaterialdocumentG/L accounts:Consumption accountGR/IR accountSAP ERPPage 5-# SAP AG240Invoice ProcessingThis last step in the procurement process includes invoice verification and updating accounts payable in the FI module.

Payment will then be made later based upon the open invoices posted on the systemSAP ERPPage 5-# SAP AG241Invoice Verification EnvironmentInvoice verification accesses data from purchasing, inventory management, material master, and vendor master files.

SAP ERPPage 5-# SAP AG242Vendor PaymentAccounts payable reads the invoice file and pays all posted invoices due. (Payment runs can be automated to occur at specific times.)

SAP ERPPage 5-# SAP AG243Procurement IntegrationPurchase OrderGoods ReceiptInvoice VerificationPP FIFIMMPurchase OrderInvoice244TopicsOrganizational and Master DataBusiness Process for ProcurementReporting and AnalysisSAP ERPPage 5-# SAP AG245Reporting and AnalysisStandard Reporting provides List Displays (pre-defined programs) by:VendorMaterialAccount assignmentMaterial groupPurchase order numberTracking numberGeneral AnalysisOrder Value AnalysisInventory Transaction AnalysesSAP ERPPage 5-# SAP AG246Logistics Information System (LIS)The Logistics Information System (LIS) contains several information systems such as:Purchasing Information SystemInventory ControllingSales Information SystemShop Floor Information SystemLIS extracts its data from the operative applications; it offers many different views on this information.SAP ERPPage 5-# SAP AG247Logistics Information System (LIS)The LIS exists for the entire logistics system in R/3The LIS contains several information systems such as:Sales Information SystemPurchasing Information SystemThe LIS extracts data from the operative applications; offering it in many different views, the depth of which is determined by the user.Inventory ControllingShop Floor Info SystemSalesInformationSystemPurchasingInformationSystemInventoryControllingShop FloorInformationSystemMaintenanceInformationSystemQuality MgmtInformationSystemSales andDistribution(SD)MaterialsManagement(MM)ProductionPlanning(PP)PlantMaintenance(PM)QualityManagement(QM)Logistics Information LibraryR/3LogisticsInformationSystemsLogisticsProcessingSystemsSAP ERPPage 5-# SAP AG248In SummaryThe basic procurement process includes:Purchase requisitionPurchase order Procurement master data includes the vendor and material master files.At various times during the Procurement process, integration occurs between the PP, MM and FI modules.The two reporting tools used in the procurement environment are:Standard ReportingList Displays General Analysis Inventory AnalysisLogistics Information System Purchasing Information System Inventory Controlling SystemGoods receiptInvoice processingSAP ERPPage 5-# SAP AG249Consumption-based Planning SAP AGMaterial PlanningMaterial Planning(MRP Procedures)Independent Demand(Consumption-basedPlanning)MRP-MaterialRequirements PlanningReorder pointplanningForecast-basedplanningTime-phasedplanningManual reorderpointAutomatic reorderpointSAP TermsSAP ExerciseSAP ERPPage 5-# SAP AGPlanning ProcessExternal procurementIn-houseproductionPlanning RunPlanned OrderConversionProductionOrderPurchaseRequisitionPurchaseOrderScheduleLineCan be automaticSAP ERPPage 5-# SAP AGPlanning ProcessPlanned Order:Recommendation by the MRP planning process of quantity and timing of production or purchase orderProduction Order:Actual order given to shop floor to commence production. May be electronic or paper. Can include production details (routing, quality requirements, drawings, instructions, etc.)SAP ERPPage 5-# SAP AGPlanning ProcessPurchase Requisition:Request to purchasing to create purchase orderPurchase OrderRequest to vendor to supply materialsSchedule LineDirect request to vendor for materials, covered by scheduling agreement (blanket PO)SAP ERPPage 5-# SAP AGReorder Point ProcessingReorder PointSafety StockTimeReplenishmentLead TimeLotSizeSAP ERPPage 5-# SAP AGReorder Point ProcessingWhen the inventory level for a product that is planned using consumption-based planning reaches the ROP, an order for the material is NOT created automaticallyConsumption-based planning uses the Material Requirements Planning (MRP) planning process to create purchase ordersThe MRP planning process is typically run overnight on a daily basisHistorically, might have used weekly runsTime until MRP planning run is executed should be considered in ROP calculation (daily runs, add 1 day to lead time)SAP ERPPage 5-# SAP AGForward Scheduling forExternal ProcurementToday(Release Date)Purchase OrderDateGoods ReceiptDateAvailabilityDateProcessing TimeFor PurchasingPlanned Delivery TimeGoods ReceiptProcessing TimeReplenishment Lead TimeSAP ERPPage 5-# SAP AGMRP Planning ProcessFor a company with thousands of materials to plan, the computing resources needed to calculate material plans can be significantTo make sure that:Only those calculations that are necessary are performed:Only on materials that need planningTwo filters are used:Planning Run TypePlanning Horizon SAP ERPPage 5-# SAP AGPlanning Run TypesNETCH: Net change in the total horizonIn the MRP Planning Process, materials are planned if there have been any:Changes in material stocks (receipts, issues)Addition of purchase requisitions, purchase orders, planned orders, dependent requirementsChanges in Material Master Data (Lot Size, ROP, etc.)SAP ERPPage 5-# SAP AGPlanning Run TypesNETPL: Net change in the planning horizonSame at NETCH, EXCEPT:Changes must occur within the planning horizonPlanning horizon keeps MRP planning process from making plans for future periods that:Do not impact current operationsWill be made irrelevant through the dynamics of businessSAP ERPPage 5-# SAP AGPlanning Run TypesPlanning HorizonNETCHPlanning HorizonNETPLOrder/RequisitionRequirementTimeSAP ERPPage 5-# SAP AGPlant Parameters: Planning Horizon

SAP ERPPage 5-# SAP AGPlanning Run TypesNETUPL: Regenerative PlanningPlans all materials for total planning horizonGood idea to run this option regularly (e.g. every weekend), even though it is more resource intensiveCustomizing changes dont trigger planning under NETCH or NETPLTime passage problem with NETPLSAP ERPPage 5-# SAP AGNETPL: Potential ProblemPlanning HorizonNETPLTodayPlanning HorizonNETPLTodaySolution: Run NETUPLPassage of time is not an eventWould require monitoring to detectSAP ERPPage 5-# SAP AGPlanning FileA Planning File entry exists for each materialKeeps track of changes that would require material to be planned under NETCH or NETPL optionsMRP Planning process looks at planning file entries for each material to see if it should be planned SAP ERPPage 5-# SAP AGPlanning File

Low-levelCodeNETCHIndicatorNETPLIndicatorSAP ERPPage 5-# SAP AGPlanning Run Options

Planning Run Type:NETCHNETPLNETUPLCreate Purchase Req: 1 Purchase Requisitions 2 Purchase Requisitions in Opening Period 3 Planned Orders

Defined by Schedule Margin KeyUsu. does not impact consumption-based planningSAP ERPPage 5-# SAP AGPlanning Run Options

Planning mode: Determines how system deals with previous plans (planned order, purchase requisitions)Create MRP List: 1 Yes 2 Depending on Exception Messages 3 NoScheduling: Determines level of detail in schedule calculation for production ordersDisplay results before they are saved Lets planner make changes before the results are savedSAP ERPPage 5-# SAP AGPlanning Run OptionsWith consumption-based planning in practice:You would not run MRP for a single material, but do it as part of a group (MRP Area based on storage location)You would have it scheduled to run automaticallyYou would have it either:Create purchase requisitions automaticallyCreate schedule linesSAP ERPPage 5-# SAP AGNet Requirements CalculationReorder PointStockFirm PlannedOrdersPurchaseOrdersOrder Proposalfor Lot SizeShortageFixed PurchaseRequisitionsHow does safety stockfigure into this process?SAP E