SAP Production Planning – What it brings to a Business

 

A SAP production planning system gives companies the ability to optimize inventory management and scheduling, which leads to better production efficiency, reduced costs and improved customer service levels. In order to understand how SAP production planning systems work and what they can do for your business, it’s important to be familiar with the core components of such systems and how they work together. Whether you’re looking to learn more about SAP Production Planning or you’ve been working in it for years, this article will provide you with everything you need to know about SAP Production Planning. It’s an overview of the program and its related processes.

 

Introduction

What is SAP Production Planning?

The SAP production planning process is a critical component in the overall strategic supply chain management system. It is responsible for managing customer demand and making sure that there are sufficient quantities of inventory on hand to meet that demand. This process includes the steps that go into planning, forecasting and scheduling, as well as what is required to get your product made on time. The SAP production planning process also works with suppliers to coordinate the delivery of materials and components, manages manufacturing processes, monitors capacity and makes adjustments to resource utilization.

SAP production planning also goes over specific rules of how to organize your plan, how to make it accurate and how to know when it's time for a new one.

 

 

The Three Main Elements of Production Planning

There are three main elements of production planning. The first element is to estimate demand. This involves creating a forecasted schedule of the products that will need to be created or purchased in order to satisfy customer demand (also known as sales). The second element is to forecast the supply capacity required to meet this projected demand. This can be done by evaluating how much time and/or material it will take to produce a product or purchase it from another company, and then comparing that information with the amount of time available in the lead-time window. The third element is then balancing these two forecasts so that there are no shortages or excess inventories.

 

The Four Basic Principles of Production Planning

The first step in this process is forecasting, where you predict what future demand will be for your product. The second step is order planning, which determines what quantity of inventory should be ordered from suppliers to meet the forecasted demand. The third step is production planning, which determines how much raw material should be produced to meet the projected demand. And the fourth and final step is procurement planning, which determines how much raw material suppliers need to produce their own products.

 

The Five Key Steps in Production Planning

Production planning is the process of mapping out the demand and capacity information to create a plan that will allow an organization to manage production. This can be done by analyzing manufacturing data or by collecting information from customers and suppliers. The SAP production planning process includes five key steps:

1. Defining the forecast
2. Determining the demand
3. Determining capacities
4. Optimizing supply chains
5. Implementing plans. 

What is SAP Production Planning? It’s a system that provides decision-making tools for optimizing and managing production resources in order to meet customer demands while reducing costs. With its real-time monitoring capabilities and integrated business processes, it allows you to use your workforce more efficiently while automating many tasks.

 

Conclusion

Production planning is a vital, yet sometimes overlooked, process in the supply chain. It can be used as a tool to manage risk, minimize production costs and increase production quality. The SAP production planning process has four major steps: 

1. Requisition and planning
2. Production order control
3. Production order release and confirmation
4. Execution of the production orders with respective suppliers.

Work Center in SAP

 

WORK CENTER

A Work Center can be a place or a machine or a labor where production operations/activities are performed. In SAP PP, Work Center is used in routing operations and production orders. Work centers also used in other applications (SAP modules) like Plant Maintenance, Project System, and Quality Management.

Work center is an organization unit where manufacturing activities are performed. In other words, Work Centers are the master data which represent real machines, Production Lines, Assembly Work Center, etc.

Work center can be an individual or a group of same resources (machines or labors etc.)

 

In production planning, data in work center can be used for the following operations:

1. Capacity Calculation

As you may know that Work centers are used in recipe/routing. So after the confirmations posted in process/production orders, the utilized capacity of a work center will be calculated as it was defined in recipe/routing as per the UOM (unit of measure). This capacity utilization can be seen/calculated in different transactions.

2. Scheduling of Operations/Orders

When a process/production order is created, system will automatically schedule the duration of an operation as per the order quantity. This calculation is based on the defined recipe/routing and the formulas which are entered in a work center.

3. Calculate Operation Costs

As we have got the utilization of a work center on the basis of postings in process/production orders, so the operation costs of this particular order will be calculated as per the defined formulas in this work center.

Let’s go to the procedure of creating a new work center in SAP.

Step 1:

Starting from ->SAP menu ->Logistics ->Production ->Master Data ->Work centers ->Work center ->Create

Or you can simply type the transaction code CR01.

1. Enter the Plant (on which you are going to create a new resource.
2. Enter the resource (you can define resource name as you want, here I am creating as “MACHINE1”)
3. Enter the resource category (it can be Machine, Labor, Production line etc.)

As we are creating a Work center for a machine, so we will choose “0001” as the resource category and press ENTER to go to the next screen.

Note: You can also copy a Work center, simply by providing a reference Work center code of the same type. It can spare your time and mostly things (which are common in an organization/Plant) will be auto filled.

Step 2:

Now we are going to fill the “Basic data” of our new Work center,

1. Define your Work center in description easily understandable to you and others.
2. Enter the person responsible defined for this work center. It can be an individual or a group of people or any particular department.
3. Enter the defined physical location number for this work center (if defined and required).
4. Enter the supply area (if defined and required).
5. Enter the shift type (if applicable). It can be 8hrs shift, Day/Night shift etc. as defined in your Plant.
6. Check mark on “Backflush” (if applicable).
7. Enter Standard value key (it contains different activity types used for standard cost calculation).

Step 3:

Go to the “Default values” tab,

1. Enter the Control Key.
2. Enter the other required fields if required.
3. Enter “Unit of Measurement of standard values (it can be HR/MIN/DAY etc.), your standard values can be:

• Direct Labor
• Variable Overhead
• Fixed Overhead
• Factory Overhead
• Utilities Overhead

Press ENTER.

Step 4:

Go to the “Capacities” tab,

1. Enter capacity category (here it is machine).
2. Enter the Processing formula. It is used to calculate the available capacity of Work Center.
3. After filling above details, click on the Capacity button below, it will get you to the next screen.

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4. Enter the capacity description.
5. Enter “Capacity responsible/ capacity planner group”, responsible for machine capacity.
6. Under “Available capacity” heading, fill up the below details,
• Factory calendar ID (region). Your regional calendar is listed with public holidays which helps the work center to exclude these day from available capacity.
• Active version (different versions of calendar may be available as per Plant needs).
• Capacity Base unit of measure (we’ve selected HR (hours) here).
7. Enter the time duration in which the work center will be operational, it will calculate the available capacity (in terms of time) for your work center. You can define breaks also.
8. Enter the capacity utilization, this number is basically percent of total capacity (available time*available days). Also enter Number of individual capacity (here it is a single machine).
9. Now, Planning details. Check mark “Relevant for finite scheduling and “Long term planning” which allows system to show capacity constraints (if available).
10. Press “Back” to exit this screen.

Step 5:

Go to the “Scheduling” tab,

1. Enter the capacity category, in this case it is machine (001). It is used in scheduling time in process/production orders.
2. Enter Processing formula as defined in your plant.

Press ENTER.

Step 6:

Go to the “Costing” tab,

1. Enter the Validity start and end dates. This work center will be non-functional after the end date.
2. Enter the cost center on which this work center will be costed.
3. Under Activities overview heading, you have already defined activity types in Step 3.3. Enter the defined formulas for activity costs calculation.

Click the SAVE button on your screen, and your work center has been created.

You can make changes in work center using transaction CRC2 and display in CRC3.

Recipe / Routing in SAP Production Planning

 

The basic purpose of recipe / routing in SAP Production Planning is to charge that costs of a product which cannot be defined as materials / components, such as Fixed cost, variable cost, utilities cost, labor cost etc... and for capacity utilization.

Top FAQ about recipe / routing is:

What is the difference between recipe and routing?

Pertaining to their role in SAP Production Planning, actually there is no difference in a Master recipe and routing. But there are bit differences in their usage and construction.

To understand the difference between these two, we will have to understand their usage first. As per my understanding, recipes are mostly used in process industries whereas routing are used for discrete manufacturing in production industries.

Definition:

Recipe / Routing is the sequence of operations to be followed in order to process / manufacture a Material. Both of these are consists of a header and (several) operations. Each of which is carried out at a primary resource. You have to specify which resource is being used to consume the activities (such as Fixed cost, variable cost, utilities cost, labor cost etc...)

There are some additional features in a Master recipe which doesn’t exists in routing such as…

• In a Master recipe, phases are assigned to the operations.
• In a Master recipe, control recipe destination is assigned.
• Materials (Task list) are assigned within the Master recipe. Whereas in routing, BOM is externally defined and assigned to routing.
• Process Instructions (PI sheets) can be added to a Master recipe.

Another difference between recipe and routing is of control keys. Such as PI01, PI02 etc… used for recipes and PP01, PP02 etc… are used for routing.

Another question very often asked by the beginners is:

What is the difference between Master Recipe and Control recipe?

Actually there is no difference between a Master recipe and a Control recipe. As per my understanding, the recipe you have created with the recipe builder (C201) for any product is its Master recipe (acts as a template), and when it is used in a Process order it is a control recipe (copy of a Master recipe).

While creating a Master recipe, you will have to mention a destination “Control Recipe” because you cannot assign phases until unless you define its destination.

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Let’s create a Master Recipe for a product “ABCD”. We will discuss only the mandatory things here.

• Open a transaction C201.
• Enter your material “ABCD” and Plant.
• Enter the validity Key date. Validity date can be from Past or Future. System will only allow the usage of this recipe within the validity period. If key date is not defined, then system will consider the create date as validity start date.
• You can create “n” number of recipes using the same recipe group (generated with the first recipe)
• Press ENTER, and you will jump to the next screen.
• You have to enter “Status” and “Usage” in assignment views.
• Go to the “Operations” tab. Below are the list of details required to define operations.

1. Operation / Phase
2. Phase Indicator
3. Super-ordinate operation (Assigning phase to the operation)
4. Resource
5. Control Key
6. Operation description
7. Base quantity and its unit of measure
8. Activities

• Go to the “Materials” tab and create the task list (assignment of materials to the phases)
• Your recipe is created, press SAVE button.

Your comments are very valuable for me...

Bill of Materials (BOM) in Production Planning

 

An incorrect BOM can lead to a massive headache, loss of revenue and inventory issues.

Definition:-

Bill of Material (BOM) is part of the Production Planning Master Data. One should have to create a Bill of Material (BOM) for every in-house manufacturing / production material down the level.

BOM can also be used in discrete manufacturing.

An easy definition of a Bill of material (BOM) will be “the components required to manufacture or produce a product with their required quantities as per the “Base Quantity” of product.

Here, Base quantity is very important because requirement and consumption of all components of a BOM are determined as per the Base Quantity of a Bill of Material (BOM).

Bill of Material is also used in standard cost estimation of the products.

There can be multiple alternative BOM for the same product, so that you can consider and use different assessments for the same product. You can also check comparison of cost estimates for same product using different alternative BOM.

BOM Structure:-

For instance, you are creating a Bill of Material (BOM) for a Product “ABCD”

Let’s create a list of details required to create a BOM of “ABCD”:

• Product code (ABCD)
• It’s unit of measure (let say Kilogram “KG”)
• The Base Quantity of Product (consider 10 KG in this case)
• The components (A, B, C & D), components can be of following types.

1. Ingredients (with positive quantities)
2. By-Products (with negative quantities)

• Required quantity of components in unit of measures to produce the Base Quantity of “ABCD” (10 KG)

Following are the specific features used in process industries to create a Bill of Material (BOM).

• The BOM is created and edited directly from within the master recipe for which it is required.
• By creating BOM separately and combine with the master recipe in a Production version. The components of the alternative BOM can then be assigned to the operations or phases of the master recipe.

Steps of creating BOM within the master recipe of “ABCD”:-

• Open a transaction C202 and enter your Material and Plant (you should have Master recipe already defined/created for “ABCD”).
• Go to the “Materials” tab.

• Click on “BOM” button.

• Enter the components with their required quantities.

• Go to the Header. 

• Set the Base Quantity (in this case it is 10 KG)
• Back screen
• Assign phase / operation to each component of BOM

Now you have a BOM of “ABCD” and its assignment with Master Recipe, which will be used in cost estimation and process orders.

Overview to SAP PP Master Data

The more accurate the master data, the more effective the transactions will be.

When I have started to learn and work with SAP, for me it was very difficult to understand it's basic concepts, terms and technical language. So, the purpose of this article is to help and support the beginners who have just started working in SAP Production and Planning.

Behind every transaction and documentation  in SAP there is a Master Data. I would like to say that Efficiency and perfection of all transactions depends upon the accuracy of Master Data. So, to get better results with SAP, we should have to understand and maintain Master Data nearest to the actual.

Master Data for PP

In general, Master Data in Production and Planning consists of:

• Material Master
• Bill of Material (BOM)
• Work Center
• Routing / Recipe
• Production Version

Lets check out the definitions in simple words.

Material Master

The material master contains information of all the materials that a company procures or produces, stores, and sells. It is the company's central source for retrieving material-specific data. This information is stored in individual material master records.

You have to fill in all the required details such as material number (if external number assignment), material type, industry sector, etc. as per company requirements.

We will discuss material master creation process in some other article.

Bill of Material (BOM)

A bill of material (BOM) describes the different components that are required to produce a material/product. Just think of a packet of biscuit, you often see ingredients mentioned on a packet. Bill of material (BOM) is not same but similar to it.

The bill of material contains the item number of each component and it's quantity required in the manufacture of a product and the unit of measure of the item as per the Base quantity. Base quantity is there for the header material. It says that the component quantity mentioned in BOM is required to manufacture "base quantity" of material. This will reflect in the production / process order.

We will discuss Bill of material (BOM) creation process in some other article.

Work Center

A Work Center can be a place or a machine or a labor where production operations/activities are performed. In SAP PP, Work Center is used in routing operations and production orders. It contains data related to scheduling, capacity planning, and production costing. All the manufacturing activities are performed in the work center.

Work centers are also used in other applications (SAP modules) like Plant Maintenance, Project System, and Quality Management.

We will discuss Work Center creation process in some other article.

Routing / Recipe

It is not like a recipe of cooking or baking. In SAP a Routing or Recipe is a description of which operations or list of activities has to be carried out during the production and planning process. It also tells the order or sequence in which the activities/operations needs to be carried out at work centers or machines. There may be several alternative routing / recipes for a product.

We will discuss Routing / Recipe creation process in some other article.

Production Version

The production version is the link between a product BOM (Bill of Material) and the process Routing. It determines which alternative BOM is used together with which routing to produce a material or plan a material. There may be different production versions based on the lot sizes and validity dates.

In a manufacturing environment, we may have different processes or BOM for a same product (with slight changes). To overcome this situation we should have to create alternate BOM and/or routing for the same product. 

For instance we have 2 different BOM (A and B), and 2 Routing/Recipe (X and Y) for the same product. It means we will have to create 4 production versions for this product as below:

• BOM A with Recipe X
• BOM A with Recipe Y
• BOM B with Recipe X
• BOM B with recipe Y

We will discuss Production Version creation process in some other article.

All of the above master data are needed to execute production process as well as to calculate the costs for this production process.

I would like to say again..!

The more accurate the master data, the more effective the transactions will be.

Have you any queries, please comment below. I will reply for sure.