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SAP University AlliancesVersion2.30, May 2014Authors Hans-Jürgen ScheruhnBret WagnerStefan WeidnerProductSAP ERP 6.0 EhP7Global Bike Inc.LevelBeginnerFocusCross-functional integrationProduction Planning andExecutionProduction Planning andExecution (PP)In addition to the standard Production Planning and Executionslides, this presentation includes links to the GBI enterprise modelprovided by a team at Hochschule Harz in Germany led by Prof.Dr. Hans-Jürgen Scheruhn.The model is based on an architecture of four IT integration layerswhich were created for the GBI curriculum using ARIS BusinessDesigner for SAP and are made available to the SAP UAcommunity using ARIS WebPublisher. All necessary licenses forthis project were provided by Software AG.Each link in the presentation is indicated by the symbolof all links can be found on the second last slide. A list SAP AG

SAP ERPCourse Overview§ Introduction to SAP§ Navigation§ Introduction to GBI§ Sales & Distribution§ Materials Management§ Production Planning§ Financial Accounting§ Controlling§ Human Capital Management§ Warehouse Management§ Project SystemPage 6-2

SAP ERPFunctionality§ SAP divides production into multiple processes- Production Planning- Manufacturing Execution Discrete Manufacturing Repetitive Manufacturing KANBAN- Production – Process Industries Integrated planning tool for batch-orientated process manufacturing Design primarily for chemical, pharmaceutical, food and beverageindustries along with batch-oriented electronicsPage 6-3

SAP ERPUnit Overview§ PP Organizational Structure§ PP Master Data§ PP Processes- Material Planning- Production Planning- Manufacturing Execution ProcessPage 6-4

SAP ERP§ Client-§ An independent environment in the systemCompany Code-§ PP Organizational StructureSmallest org unit for which you can maintain a legal set of booksPlant-Operating area or branch within a company Manufacturing, distribution, purchasing or maintenance facility§ Storage Location-§ An organizational unit allowing differentiation between the various stocks of amaterial in a plantWork Center Locations (in SAP system à master data)-An organizational unit that defines where and when an operation is performedHas an available capacityActivities performed are valuated by charge rates, which are determined bycost centers and activity types.Can be machines, people, production lines or groups of craftsmenPage 6-5

SAP ERPGlobal Bike Structure for Production PlanningClientGlobal BikeGlobal Bike Inc.DallasGlobal Bike Germany GmbHHeidelbergRaw MaterialsRaw MaterialsSemi-fin. GoodsSemi-fin. GoodsFinished GoodsFinished tStorageLocation(Work Center Location)Page 6-6

SAP ERPGBI Enterprise Structure in SAP ERP (Logistics)Shipping HH00PE00TG00TG00FG00FG00MI00MI00MI00MI00Central Purchasing Organization (global) GL00Purchasing Org. US00CA00PO DE00Purchasing Group North AmericaN00DallasDL00CC US00Client GBIMiamiMI00S. DiegoTorontoSD00TO00CA00AU00PGr EuropeE00Heidelb.HD00CC DE00HamburgHH00AsiaA00PlantPerthPE00AU00Company CodePage 6-7

SAP ERPPP Master Data§ Material§ Bill of Materials (BOM)§ Routing§ Work Center§ Product GroupData Model PPPage 6-8

SAP ERPMaterial Master RecordScreen Diagram MaterialPage 6-9

SAP ERPBill of Materials (BOM)§ List of components that make up a product or assembly§ Wheel Assembly-TireTubeWheelHex nutLock WasherSocket Head Bolt§ Frame§ Derailleur Gear Assembly§ Seat Kit§ Handle Bar§ Pedal Assembly§ Chain§ Brake Kit§ Warranty Document§ PackagingBusiness Vocabulary PPPage 6-10

SAP ERPBill of Materials (BOM)§ Single-LevelSingle-LevelFinished BikeWheel AssemblyPedal AssemblyFrameChainDerailleur GearAssemblyBrake KitSeat KitWarranty Doc.Handle BarPackagingPage 6-11

SAP ERPBill of Materials (BOM)§ Single-Level vs. Multi-LevelSingle-LevelFinished BikeSingle-LevelWheelFrame Derailleur Seat Handle BarPedalChainBrakeDoc.Pack.TireTubeWheelHex nutLockBoltMulti-LevelPage 6-12

SAP ERPBill of Materials (BOM)§ Variant Bill of Materials (BOM)- Several products with a large proportion of identical parts.Single-LevelDeluxe Bike (red)Single-LevelProfessional Bike (black)Aluminum WheelFrame redDerailleur GearAssemblySeat KitHandle BarPedal AssemblyCarbon WheelChainFrame blackBrake KitDerailleur GearAssemblyWarranty Doc.Seat KitPackagingHandle BarPedal AssemblyChainBrake KitWarranty Doc.PackagingPage 6-13

SAP ERPBOM – Item Categories§ Item Categories-Stock ItemNon-stock ItemVariable Material – Sheet of steelIntra Item – Phantom material – process industryClass Item – place holderDocument ItemText ItemBusiness Vocabulary PPPage 6-14

SAP ERPRouting§ Routings enable you to plan the production of materials (products).§ Routings are used as a template for production orders and runschedules§ Routing are also used as a basis for product costing.§ Series of sequential steps (operations) that must be carried out toproduce a given product§ Routings contain:- What, Where, When, HowBusiness Vocabulary PPData Model PPPage 6-15

SAP ERPRouting§ Routing – Operation 20- Attach seat to frame§ Work Center – ASSY1000- Assembly Work Center§ Time- 1 minuteScreen Diagram RoutingPage 6-16

SAP ERPRouting§ Routing for Finished BikeOperationWork CenterPlantScreen Diagram RoutingDescriptionControl KeyActivity TypeTime and Unit of MeasurePage 6-17

SAP ERPWork Center§ A location within a plant where value-added work (operations oractivities) are performed- Work Centers can represent People or Groups of People Machines or Groups of Machines Assembly Lines§ Work center used to define capacities-LaborMachineOutputEmissions§ Capacities used in- Capacity requirements planning (CRP)- Detailed scheduling- CostingBusiness Vocabulary PPData Model PPPage 6-18

SAP ERPWork Center§ Work centers capture and use the following Resource Related data- Basic Data Person Responsible, Location of Work Center- Scheduling Information Queues and Move Times (interoperation), Formula Keys- Costing Data Cost Center, Activity Types- Personnel Data People, Positions, Qualifications- Capacity Planning Available Capacity, Formulas, Operating Time- Default Data Control Key, Standard Text KeyPage 6-19

SAP ERPProduct Group§ Aggregate planning that group together materials or other productgroups (Product Families)§ Multi- or Single- Level Product Groups- The lowest level must always consist of materialsBusiness Vocabulary PPPage 6-20

SAP ERPSOP provides a method for Sales Planning, Production Planning,FeasibilitySales, Production, ayilAprchMarryruaFebary0JanuUnits§ Material PlanningPage 6-21

SAP ERPPP Processes§ Production Planning & Execution-ForecastingSales and Operations Planning (SOP)Demand ManagementMaster Production Scheduling (MPS)Material Requirement Planning (MRP)§ Production OrderPage 6-22

SAP ERPProduction Planning & ExecutionSISForecastingSales & OperationsPlanningCO/PAStrategic PlanningDemandManagementMPSDetailed ocurementProcessManufacturing ExecutionData Model PPPage 6-23

SAP ERPProduction Planning & Execution§ Players in the Game-Strategic PlanningSIS CEO, COO, CIO,CFO, Controller,Marketing Director-Sales & OperationsPlanningCO/PAStrategicPlanningDetailed Planning Line Managers,ProductionScheduler, MRPController, ailedPlanningExecution Line Workers, ShopFloor SupervisorsMRPManufacturingExecutionOrganization Chart GBI ecutionPage 6-24

SAP ERPForecasting§ Forecasting is the foundationof a reliable SOP§ Accurate forecasts areessential in the manufacturingsector§ Overstocked & understockedwarehouses result in the samething: a loss in profits.§ Forecasts are ALWAYSWRONGPage 6-25

SAP ERPForecasting§ Forecasting Models-TrendSeasonalTrend and SeasonalConstant§ Selecting a Model- Automatically- ManuallyBusiness Vocabulary PPPage 6-26

SAP ERPSales and Operations Planning (SOP)§ Information uman ResourcesPurchasing§ Intra-firm Collaboration- Institutional CommonSensePage 6-27

SAP ERPSales and Operations Planning (SOP)§ Flexible forecasting and planning tool§ Usually consists of three steps:- Sales Plan- Production Plan- Rough Cut Capacity Plan§ Planned at an aggregate level in time bucketsData Model PPPage 6-28

SAP ERPDemand Management§ Link between Strategic Planning (SOP) & Detailed Planning (MPS/MRP)§ The results of Demand Mgmt is called the Demand Program, it isgenerated from our independent requirements - PIR and CIRBusiness Vocabulary PPData Model PPPage 6-29

SAP ERPDemand ntsCustomerIndependentRequirementsDemandProgramMPS / MRPPage 6-30

SAP ERPPlanning Strategies§ Planning strategies represent the business procedures for- The planning of production quantities- Dates§ Wide range of strategies§ Multiple types of planning strategies based upon environment- Make-To-Stock (MTS)- Make-To-order (MTO) Driven by sales orders- Configurable materials Mass customization of one- Assembly ordersBusiness Vocabulary PPPage 6-31

SAP ERPPlanning Strategy for Make-to-Stock§ Planning takes place using Independent Requirements§ Sales are covered by make-to-stock inventory§ Strategies-10 – Net Requirements Planning11 – Gross Requirements Planning30 – Production by Lot Size40 – Planning with Final AssemblyPage 6-32

SAP ERPPlanning Strategy for Make-to-Order§ Planning takes place using Customer Orders§ Sales are covered by make-to-order production§ Strategies- 20 – Make to Order Production- 50 – Planning without Final Assembly- 60 – Planning with Planning MaterialPage 6-33

SAP ERPMaster Production Scheduling (MPS)§ MPS allows a company to distinguish planning methods betweenmaterials that have a strong influence on profit or use criticalresources and those that do notPage 6-34

SAP ERPMaterial Requirement Planning (MRP)§ In MRP, the system calculates the net requirements whileconsidering available warehouse stock and scheduled receipts frompurchasing and production§ During MRP, all levels of the bill of material are planned§ The output of MRP is a detailed production and/or purchasing plan§ Detailed planning level- Primary Functions- Monitor inventory stocks- Determine material needs Quantity Timing- Generate purchase or production ordersBusiness Vocabulary PPPage 6-35

SAP ERPDemand-Independent vs. Dependent§ Independent Demand – Original source of the demand.§ Dependent Demand – Source of demand resides at another level.Business Vocabulary PPPage 6-36

SAP ERPMaterial Requirement Planning (MRP)§ MRP is used to ensure the availability of materials based on theneed generated by MPS or the Demand Program- 5 Logical Steps Net Requirements CalculationLot Size CalculationProcurement TypeSchedulingBOM ExplosionData Model PPPage 6-37

SAP ERPNet RequirementsProcurementProposalFirmed ReceiptsFirmed Ordersor PurchaseRequisitionsStockShortageRequirements –Planned Ind. Req.,ReservationsSales Orders,Etc.Safety StockBusiness Vocabulary PPPage 6-38

SAP ERPLot sizing§ Static- Based on fixed values in the Material Master§ Periodic- Groups net requirements together from multiple periods§ Optimum- Calculates the optimum lot size for a several periods of netrequirementsBusiness Vocabulary PPPage 6-39

SAP ERPProcurement Type§ External Procurement- Purchase Requisition- Purchase Order- Schedule Line§ Internal Procurement- Planned Order- Production Order- Process OrderScreen Diagram MaterialBusiness Vocabulary PPPage 6-40

SAP ERPMulti-Level SchedulingRequirementsDatePlanned OrderPurchase RequisitionFinished ProductAssembly 1Semi-Finished GoodRaw MaterialComponentBusiness Vocabulary PPTimePage 6-41

SAP ERPMRP vs. Consumption-Based§ Whether or not a material is planned using MRP or ConsumptionBased is determined by the MRP Type on the MRP1 screen of theMaterial MasterMRPConsumption BasedPD – MRPVB – Reorder-PointVSD – Seasonal MRPVV – Forecast BasedRP – ReplenishmentScreen Diagram MaterialBusiness Vocabulary PPPage 6-42

SAP ERPConsumption-BasedLotSizeReorderPointSafety StockReplenishmentLead TimePage 6-43

SAP ERPOutput of MRPMRPIn-HouseProductionPlanned OrderExternalProcurementConvert sPurchaseOrdersScheduleLinesData Model PPPage 6-44

SAP ERPOrders, orders, orders§ Planned Order (planning)- A request created in the planning run for a material in the future(converts to either a production or purchase order)§ Production Order (execution)- A request or instruction internally to produce a specific product at aspecific time§ Purchase Order (execution)- A request or instruction to a vendor for a material or service at aspecific timePage 6-45

SAP ERPManufacturing Execution lanningScheduleand ReleaseShop tCompletionConfirmationPage 6-46

SAP ERPProduction Order§ Production orders are used to control production operations andassociated costs- Production Orders define the following Material producedQuantityLocationTime lineWork involvedResources usedHow to costs are settledPage 6-47

SAP ERPProduction OrderHowComponentsWhatHow manyTime LineScreen Diagram Production OrderPage 6-48

SAP ERPSchedule§ Calculates the production dates and capacity requirements for alloperations within an order- Determines a Routing