SAP PP Case study by Murali Krishna Nookella

Module : PP (Production
Planning)

The SAP PP business processes uses the following organizational
elements:
– Client
– Company Code
– Plant
– Storage Location
Organizational Elements

Client
A Highest Hierarchical Level in SAP (e.g. a corporation)
Used to Differentiate between a Development, Quality Assurance, and
Production System within SAP R/3
Common Set of Rules
 Common Tables
 Common Master Files
 Common Data Bases
Standardized data across the client
 A vendor number and name is common across the client
 A customer is common across the client
 A material number and description is common across the client

BALANCING / (LEGAL)BALANCING / (LEGAL)
ENTITYENTITY
==
Company Code ****
Assets Liabilities Revenues
- Expenses
Profit/Loss
Company Code
 A company code represents an independent balancing/legal
accounting entity, for example, a company within a corporate
group.
 Balance sheets and profit & loss statements, required by law, can
be created at the company code level.

Plant
 Usually a manufacturing facility, a warehouse, or a location that
stocks , manages, and valuates inventory
 May be a physical site with multiple manufacturing/production lines
 May be multiple manufacturing/production lines at one physical site
 Can be a physical location (cost centers may or may not be
associated to a plant i.e. Administrative vs. Manufacturing cost
centers)
 Links to production (PP), materials management (MM), and sales and
distribution (SD)
 A plant is assigned to a company code
 Purchasing organization are assigned to plants.

Storage Locations
A storage location is the place where stock is physically
kept within a plant
A storage location has the following attributes:
 There may be one or more storage locations within a plant.
 Stocks are managed only on a quantity basis and not on a value
basis at storage location level.
 Physical inventories are carried out at storage location level.
 Storage locations are always created for a plant.

Master Data
List of Master Data in SAP PP Module are:
– Material Master
– Bills Of Material
– Work Centers
– Routings

Material master record is a company's main source of
material-specific data. It is used by all components in
the R/3 Logistics System.
The integration of all material data in a single database
object prevents the problem of data redundancy. Every
area, such as Purchasing, Inventory Management,
Materials Planning, and Invoice Verification can use
the data stored.
Material Master

Since materials are processed by various user
departments within a company and each department
stores different information for the materials, the
material master is subdivided into information grouped
by user departments.
Each user department has a different view of the
material master record and is responsible for
maintaining the data to support its function.
The data maintained within a view may be valid for
more than one organizational level.
Material Master

Base unit: Piece
Box
(unit of issue)
Crate
(order unit)
Pallet
(sales unit)
4
16 72
Material Master – Units of Measure

Production Planning
• Demand Management
• Material Requirement Planning
− Planning of Purchased parts
− Planning of in house assemblies

Planning Process: Process flow
Demand planning cell
PPC
Production
MRP Run
Third Party Log
Vendor
Web site
Demand (Weekly)
Production Requirement (Week wise, Model wise)
Planned Prod.
Confirmed Production
Planned Vendor Schedule
Confirmed
Vendor
Schedule
Dispatch plan
Central marketing office
Dispatch sheet

While doing planning, you need to decide which planning strategy to use when the customer
places their order.
• Make-to-Stock Production
− Make-to-stock production means we build stock in anticipation of customer demand. We
ship the customer order from our stock of finished goods
• Make-to-order Production
− We wait for a customer order before we start production/procurement. i.e. We produce as
per demand from customer
Planning Process: Strategies

Dealer
Territory office
Area Office Area Office Area Office Area Office
Zonal
Central Marketing office
Consolidation of Demand
Territory office
PPC
Dealer Dealer Dealer Dealer Dealer
Planning process: Demand Planning

Demand management is the link between top-level
requirements planning (SOP) and materials planning
(MRP).
Input for the demand program can come from several
sources:
Planning Process: Demand Management

Materials Requirement Planning

Single-item, Multi-Level Planning

Planned New Exception Message Order
Conversion

Material Supply for Production

Planning Process
Plant
Stock
Plant
Stock
MRP
Order
ProposalExternal
Procurement
In-House
Production
SupplySupply
DemandDemand
Planning
Parameters
Planning
Parameters

Production Execution
• Stock transfer to WIP location
• Order Execution
− Production confirmation
− Error handling

Physical Movement
Storage Loc MAINStorage Loc MAINStorage Loc MAINStorage Loc MAIN Storage Loc WIPStorage Loc WIPStorage Loc WIPStorage Loc WIP

Production
Order
BOM
Work Center
Routings
Release Avail check
Goods issue
Production
Goods receipt
Confirmation
TECO
Move
floorstock
Planned Order
Availability Check
Convert Order

Best Practices
Logistics Planning
Make-To-Stock Discrete Manufacturing
Production Subcontracting (External
Processing)
Rework Processing (Stock-Manufactured
Material)
Rework Processing (Work-In-Process)

Logistics Planning
• Purpose
− The purpose of logistics planning is to make sure that future demand can be satisfied
by your company’s available resources and to point out situations where demand
cannot be met in time or in the desired quantities.
• Benefits
− Seamless Integration in complete planning cycle
• CO-PA  SOP  LTP  Demand Planning
• Key process flows covered
− Sales and Operation Planning
− Long Term Planning
Purpose and Benefits:

Logistics Planning
•This process sometimes is called ‘Sales and Operations Planning’. The process usually
takes place in a simulative mode and at an aggregated (usually product group rather than
end-item) level. Once a feasible production plan is found that satisfies demand it can be
used as the basis for operational production planning (MRP and Detailed Capacity
Scheduling).
•The Best Practice scenarios in this section cover the following planning workflow:
 Planning/forecasting of future demand
 Aggregated production planning including capacity check in order to check at product
group level if demand can be satisfied (using the SOP functionality)
 Transfer of results to Long Term Planning (using the LTP module) to enable
simulation of material requirements, based on the production plan (s)
 Planning takes place in separate (simulative) planning versions within LTP
 Review and adjustments of planned requirements as needed
 Once the simulated requirements are accepted, the demand (independent
requirements) is then transferred to active demand management for detailed MRP and
Production Planning / Scheduling in the active version.
Detailed Process Description:

Logistics Planning – Process Flow Diagram
Revenue
Planner
StrategicPlanEvent
Acceptable
Plan
Sales Qty
Budget and
Transfer to
SOP (with CO-
PA), Revenue
Planning
(172)
Operational
Production
Planning &
Control
(Production
scenarios)
SOP Verification
Demand
Verification (Check
Sales Plan)
 Create Rough-Cut
Production Plan
Periodic Sales
and
Operations
Meeting
Operative
Productio
n Data
CO-PA = Profitability Analysis, SOP = Sales and Operations Planning, LTP = Long Term Planning, MRP = Material
Requirements Planning
Transfer Rough
Cut Production
Plan to Inactive
Demand
Management
Copy to Active
Demand
Management
Execute LTP
MRP
Create LTP
Planning
Scenario
No
Yes
Evaluate
Capacity
Planning
Sales Quantity
forecast (179)

Make-To-Stock Production with Discrete
Manufacturing
• Purpose
− This scenario describes a business process, which is typical for companies with lot-size
oriented production.
− The production scenario produces a finished good and all dependent components in make-to-
stock production (MTS).
− Furthermore, the scenario is supported by the main cost object controlling functions required,
such as preliminary costing and period-end closing.
• Benefits
− Production triggered by a production plan
− Serial number and batch management included
− Optional with: quality management, consigned inventory, external processing
− Creating Planned Independent Requirements
− Material Requirements Planning at Plant Level
− In-House Production (subassembly)
− In-House final assembly (Finished Good)
− Capacity Leveling
− Confirming Assembly Activities

Make-To-Stock Production with Discrete Manufacturing
This scenario describes a business process, which is typical for companies with lot size oriented
production. The production scenarios consist of both goods movements (goods issues and receipts)
and confirmation of completion of the production order.
 Furthermore, the scenario is supported by the main cost object controlling functions required, such
as preliminary costing and period-end closing.
 The typical planning process starts with sales quantity planning. The previous period’s actual sales
figures can be used as a basis for future planning.
 In Sales and Operations Planning, you ensure that production stays in line with sales so that you
may create the production plan synchronously to sales. The planning data is transferred from Sales
and Operations Planning to Demand Management. Demand Management generates independent
requirements, which are used in the subsequent Material Requirements Planning (MRP) run.
 In material requirements planning, the bill of materials (BOM) for the top-level material demand gets
exploded and production is planned right down to procured component level. MRP results in
planned orders being generated for the material to be produced.
 If insufficient warehouse stock is available, purchase requisitions are created for the raw materials
required. When the order is created, target costs are calculated for the order lot size (preliminary
costing).
 During the production process, costs incurred are updated on the order, which enables you to keep
track of and compare target costs and actual costs at any time.
 Period-end-closing activities are applied to the order. This includes Work In Progress calculation
and variance calculation.
 After this, Work in Progress is settled to financial accounting and production variances are settled to
management and financial accounting.

Make-to-Stock Production – Discrete Industry – Process Flow Diagram
ManufacturingEventPlant
Control
ler
Period End
Closing “General”
Plant
(181)
Material Requirements
Planning at Plant Level &
Evaluation of Stock /
Requirement List
Beginning of
Planning Cycle
Purchase
Requisition
MRP List
Inventory @
Standard. Cost
ProductionPlanner
Periodic Plan
Revision
Release
Production Order
Capacity
Leveling
Material Staging
for Planned
Orders
Confirming
Assembly
Activities
/ Final
Confirmation
Semi-Finished
Goods Receipt
Goods Issue/
Back flush
Update Capacity
Goods Receipt
Slip
Pick List
Order PrintPlanned
Orders
Capacit
y
Levelin
g O.k.?
Material
Available
?
BuyerWare-
house
Clerk
Goods Receipt
Slip
Procurement of
Stock Material
with QM (127)
Procurement &
Consumption of
Cosigned Inventory
(139)
Strategic
Planner
Creating
Planned
Independent
Requirements
Convert
Planned Order to
Production Order
Inventory
Consumption @
Standard. Cost
Procurement w/o
QM
(130)
Finished Goods
Receipt
MM
Subcontracting
(138)
PP-
Subcontracting
(External
Processing)
(150)
No
Yes
No
Yes
Logistics
Planning
(144)
1

Make-to-Stock Production – Discrete Industry – Process Flow Diagram
Production
Supervisor
1
Review
Operation List
Event

Production Subcontracting (External Processing)
• Purpose
− During the Manufacturing process, when a "Planned Order" for Production is converted to a
"Production Order", the system will check to see if there are any routing/work-center
operations which require external processing. External processing is when you have
individual production steps, that are operations or sub-operations, which are performed
outside of your company by a vendor. This type of processing is particularly important for
subcontracting. It can also provide a company with a feasible alternative to in-house
processing, if capacity bottlenecks occur.
• Benefits
− An outline agreement can specify that a certain operation of the production order is executed
by an external subcontractor on a regular basis
− In the case of capacity bottlenecks, the assembly procedure of the finished product can be
assigned to a subcontractor
− Creating Purchase Order for External Processing
− Goods Receipt for “subcontracting” Purchase Order
− Enter Invoice
− Periodic Payment

Production Subcontracting (External Processing)
•Production Subcontracting (External Processing)
− When a Production Order is scheduled, external operations need to be taken into account. The duration
of an external operation is calculated either by using the planned delivery time or using the standard
values. The system automatically creates a purchase requisition for the operation or sub-operation that
requires external processing. The Production scheduler should inform the buyer they need to check the
workload for requisitions that require external processing.
− When data is maintained for an external activity, a cost element is specified. The cost element determines
how the external activity is to be valuated. A decision needs to be made as to whether an operation or
sub-operation is processed externally via its control key. In the control key, it is determined whether
externally processed operations are scheduled on the basis of their standard values or the planned
delivery time. This information is needed to settle externally processed operations and sub-operations that
have been marked as relevant for costing in their control keys.
− Purchasing should not convert the purchase requisition until the external processing is required. The
reason for this is that any quantity changes on the production order will automatically update the
requisition.
− Once the purchase order is created it is printed and sent to the vendor. The purchase order informs the
vendor which service is required. The buyer/planner/scheduler creates a manual shipping document and
provides the information to the shipping department on what components need to be gathered for the
external processing and ships the components to the vendor.
− When the vendor has completed the external processing, the material is shipped back. The warehouse
clerk receives the externally processed goods back into the warehouse. The vendor service is reflected on
the production order via an operation confirmation. The purchase order and the production order show the
quantity received.
− The goods receipt of an externally processed material causes the status of the operation to be updated:
For a partial delivery of an external process operation, the status is: EOPD (External operation - partial
delivery) and for final delivery of a external process operation the status is: EOFD (External operation -
final delivery).

Production Subcontracting (External Processing) – Process Flow Diagram
PurchaserVendorWarehouse
Clerk
Create PO from
Purchase Req
(Vendor assigned by
Info record)
Vendor Receives
Material and
Performs
External
Services
Ship
Material
to Vendor
Print Purchase
Order
Subcontract
Services
GR/IR
PP = Production Planning, RFQ = Request for Quotation, PO = Purchase Order, GR/IR = Goods Receipt/Invoice Receipt, PPV = Purchase Price
Variance
Ship
External
Material
Back to
Plant
Incoming
Vendor
Invoice
Completion
Confirmatio
n of
Production
Order
Production Order
Generates
Purchase
Requisition for
External Services
Goods Receipt
for
Subcontracting
PO
Deliver
Material
Back to
Shop
Floor
Accounts
Payable
Accountant
Event
Invoice
Receipt
GR/IR PPV
Vendor
Periodic
Payment:
Accounts
Payable (158)
Perform
External
Services
Production
Supervisor
Check Order
Operations

Rework Processing (Work-In-Process)
• Purpose
− Processing of defective material on a production order.
• Benefits
− Scraps at defined operation automatically trigger rework process.
− After rework, additional activity and material consumption can be confirmed.
− Fully integrated in the production process
− Confirming Production Activities
− Confirm Scrap defective material
− Confirm Parent Order at Rework Operation
− Continue Shop floor-Activities

Rework Processing (Work-In-Process)
This scenario focuses on a rework process within production. All required rework
activities are related to the parent production order. For this reason, errors are
recognized and corrections initiated such as insertion of a rework operation within the
same production order. The additional rework operation is confirmed and settled within
the original production order, causing production variances within controlling and price
differences for the dedicated product.

Rework Processing (Work-in-Process) – Process Flow Diagram
ShopFloorEvent
Any
Complaint
Quantity to
Be
Scrapped?
Confirm Scrap
Defective Material
Confirming
Production
Activities
No
End Process
Insert Rework
Operation on
Parent Production
Order
Automatically
Confirm Parent
Production Order
at Rework
Operation for Non-
Defective Quantity
Scrap Defective
Quantity that
Can’t Be
Reworked
Confirm Parent
Production Order for
Reworked Quantity
That Can Proceed to
Subsequent Operations
Continue Shop-Floor-
Activities for Non-
Defective-Quantity
Yes

Rework Processing (Stock-Manufactured Material)
• Purpose
− This process covers the rework of defective manufactured materials that are
found in the warehouse.
• Benefits
− Transparent costs for rework activities
− Use of all standard shop-floor control functionalities is possible
− Create rework production order
− Goods issue for defective material
− Confirmation of rework production activities
− Posting goods receipt for rework production order

Rework Processing (Stock-Manufactured Material)
•Rework Processing (Stock-Manufactured Material)
•For materials that can be reworked, a production order is created for correcting the
defect. The costs associated with the rework production order will be settled to
profitability as a material variance.

Rework Processing (Stock-Manufactured Material) – Process Flow DiagramEventProduction
Planner
Productio
Superviso
Warehouse
Clerk
Create Rework
Production
Order
Identified
Component in
Stock Requires
Changes
End Process
Confirmation
of Rework
Production
Activities
Posting Goods
Receipt for
Rework
Production
Order
Goods Issue for
defective
Material
Shopfloor
Specialist
Review Order
Confirmations
Release Rework
Production
Order

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