Individual Case Study – Production of Bicycles Based on SAP (Vanessa Günther, Alina Sachapow, Hanna Tresselt)

Faculty 3, Department of Economics I
Course: Bachelor of International Business

B25: Information Management 2
Summer Semester 2011

Individual Case Study:
Production of Bicycles Based on SAP (ECC 6.0; IDES system)

Written by: Vanessa Günther
Alina Sachapow
Hanna Tresselt

Berlin, 07.07.2011

Table of Contents

1. Introduction ................................................................................................................................. 2
2. Creating Material Master Records ............................................................................................... 3
2.1. Material Master Record for Bicycle (Finished Product)........................................................ 3
2.2. Creating Material Master Record for Frame (Semi-finished Product) .................................. 8
2.3. Creating Material Master Record for Frame Assembly (Semi-finished Product) ................. 9
2.4. Creating Material Master Record for Wheel (Semi-finished Product) ................................ 10
2.5. Creating Material Master Record for Pedal Assembly (Semi-finished Product) ................ 10
2.6. Creating Material Master Record for Gear Wheel (Semi-finished Product) ....................... 10
2.7. Creating Material Master Record for Drive Chain (Semi-finished Product) ....................... 11
2.8. Creating Material Master Record for Spoke (Raw Material) .............................................. 11
2.9. Creating Material Master Record for Hub (Raw Material) ................................................. 13
2.10. Creating Material Master Record for Rim (Raw Material) ................................................. 14
2.11. Creating Material Master Record for Cover (Raw Material)............................................... 15
3. Creating Required Bills of Materials ......................................................................................... 16
3.1. Creating Bill of Material for Wheel ..................................................................................... 16
3.2. Creating Bill of Material for Frame ..................................................................................... 17
3.3. Creating Bill of Material for Bicycle ................................................................................... 17
4. Creating Routings ...................................................................................................................... 19
4.1. Routing for Wheel ............................................................................................................... 19
4.2. Routing for Frame ................................................................................................................ 24
4.3. Routing for Bicycle .............................................................................................................. 25
5. Testing the Business Process ..................................................................................................... 27
5.1. Calculating Product Costs .................................................................................................... 27
5.2. Updating Prices .................................................................................................................... 29
5.3. Price Release ........................................................................................................................ 30
6. Manufacturing ........................................................................................................................... 31
6.1. Receiving Goods for Required Components ....................................................................... 31
6.2. Creating Production Order ................................................................................................... 32
6.3. Confirming Production Order .............................................................................................. 34
6.4. Displaying Automatic Goods Movement ............................................................................ 35
6.5. Checking Warehouse Stock ................................................................................................. 36
6.6. Calculating Manufacturing Time ......................................................................................... 36
7. Conclusion ................................................................................................................................. 37
8. Bibliography .............................................................................................................................. 38

Individual Case Study: Production of Bicycles
Vanessa Günther, Alina Sachapow, Hanna Tresselt

1. Introduction

IDES system is a motorcycle and bicycle manufacturing company that has recently received a special
order to produce 25 fixed-gear bicycles. These are a type of “a bicycle that has no freewheel, meaning
it cannot coast – the pedals are always in motion when the bicycle is moving”.1 The order was placed
by the Cycle Ball Club Cycle Ball Lovers. The price offered is €599,00. Thus, this case study will try
and create the necessary logistics master data to further use it in a simple manufacturing process. For
that purpose it will apply SAP Enterprise Resource Planning System (ECC 6.0; IDES system). It will
further calculate production costs and manufacturing time using Microsoft Excel.

Each fixed-gear bicycle in question will consist of two identical in the structure front and rear
wheels, one frame and a pedal assembly including a gear wheel and a drive chain + a chain lock. All
wheels will be manufactured by assembling 32 spokes, a rim, a hub and a cover (including a tire and
a valve). At each rear wheel a gear wheel will be drawn up. Thus, the targeted bill of material should
have the following structure:

Bicycle
(finished product)

GEAR WHEEL DRIVE CHAIN
FRAME WHEEL (semi-finished goods) (semi-finished goods)
(semi-finished goods) (semi-finished goods)

FRAME PEDAL GEAR
ASSEMBLY ASSEMBLY WHEEL
SPOKES HUB RIM COVER

The first chapter will create the material master record for the finished and semi-finished products as
well as raw materials. The second chapter will deal with the required bill of materials for the wheel,
the frame and the bicycle. The third chapter will proceed with creating the routings for the wheel, the
frame and the bicycle. The forth chapter will test the generated business process, calculate, update and
release the prices. Finally, the targeted product will be manufactured in the SAP system.

1
Wikipedia, the free encyclopedia (2011), http://en.wikipedia.org/wiki/Fixed-gear_bicycle. Accessed 05.06.2011.

2


2. Creating Material Master Records

2.1. Material Master Record for Bicycle (Finished Product)

To create a material master record for the finished product RGD-BICYCLE732, one should select
Logistics  Materials Management  Material Master  Material  Create (Special) 
Finished Product or just key in transaction code MMF1 in the SAP Easy Access menu. As has
already been mentioned, the material number is ‘RGD-BICYCLE732’. The industry sector is
Mechanical Engineering [M] and the main views that are of interest and have to be activated are
Basic Data 1 and 2, all three Sales entries, all four MRP entries, Work Scheduling, Accounting 1
and 2, and Costing 1 and 2. Thus, the first screenshot looks as follows:

3


Note: Create views selected is activated, too.

The next step is to enter the organizational levels so that the system can create the new material. The
required information includes the production plant in Hamburg [1000], the storage location Lager
0001 Materiallager [0001], the sales organization [1000], which is situated in Frankfurt, Germany and
is responsible for selling and distributing pumps, elevators, lighting, motorcycles, vehicles and high
tech products2, and, finally, distribution channel 10, which is aimed at the final customer (see below):

The first data view for creating the material master record for the final product is Basic Data 1. It
covers the main facts concerning the final product RGD-BICYCLE732, which is measured in units
[PC], has a gross weight of 10,5 kilograms [KG], a net weight of 10 kilograms, a volume of 60 cubic
centimeters [CCM] and is produced cross divisionally [00].

The sales org.1 view specifies the key facts concerning the delivering plant and tax particulars. The
delivering plant for the bicycles is Werk Hamburg [1000], and the product is fully taxed [1] in
Germany. The tax type is VAT or Mehrwertssteuer, which is the output tax for IDES system as they
are going to sell the final product:

2
See SAP Help (2011),
http://help.sap.com/saphelp_ides/helpdata/en/e6/4a6f959e0311d189b70000e829fbbd/content.htm. Accessed 02.07.2011.

4


The Sales: general/plant view describes further sales particulars. It deals with the transportation
details – Lot for Truck [0005] and loading – Manual [0003]. The sales venue is the general plant and
availability check is performed daily [01]. For further details, please, see below:

5


MRP 1 view defines the MRP type as [PD]. The MRP type is a key that controls the MRP
procedure to be used for planning a material. It controls which planning parameters must or can be
entered when maintaining the material master record.3 MRP controller [001] is a disponent who is
responsible for the allocation and supervision of the final product in IDES system. The person can
be contacted under the telephone number 1174. The lot size [EX] is Lot-for-lot order quantity.

MRP 2: The fixed-gear bicycles are planned to be produced in-house [E] and stored in the
production storage location [0001]. The planned in-house production time is 3 days and the
scheduling margin key is [001]:

MRP 3: A total replenishment lead time is 5 days. This is the time that the company needs to order the
required raw materials and semi-finished products, receive them and assemble everything to get the
finished product.4 The period indicator is a month [M] and the availability check is performed daily [01].

3
See sap-img.com (2011), http://www.sap-img.com/production/how-mrp-type-in-mm-mrp-view-1-works.htm. Accessed
02.07.2011.
4
http://help.sap.com/saphelp_46c/helpdata/en/93/744b8a546011d1a7020000e829fd11/content.htm. Accessed 03.07.2011.

6


Accounting 1 view: The fixed-gear bicycles are finished products, thus, valuation class 7920 is
chosen. The material ledger is not active, hence, the two methods of price control that are available
are a standard price and a moving price. Price control S (standard price) is taken because of the
assumption that the price of the final product will not fluctuate too often. The targeted price of
€599,00 per 1 bicycle is specified. This price is relevant for the current period of May 2011 and
there is still no stock at hand:

In the Costing 1 view, Material origin is activated. As the final product shall later be sold to the
Cycle Ball Club Cycle Ball Lovers (a German customer), the necessary entry is created in the
additional data subcategory:

Finally, the material master record for the final product is saved.

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2.2. Creating Material Master Record for Frame (Semi-finished Product)

A material master record for the semi-finished product RGD-FRAME732 is created under Logistics 
Materials Management  Material Master  Material  Create (Special)  Semifinished Product
(transaction code MMB1). The material number is ‘RGD-FRAME732’. The industry sector is
Mechanical Engineering [M]. The views of interest are Basic Data 1 and 2, Purchasing, four MRP
entries, Work Scheduling, Accounting 1 and Costing 1. The Create views selected indicator is activated.

The entries are confirmed by pressing Enter and the Organizational Levels dialog box appears. Here
the main facts for the frame production process are specified. These are: plant Werk Hamburg
[1000] and the storage location [0001].

Basic Data 1 describes the main facts concerning the semi-finished product in question. It is
measured in units [PC], belongs to the area of mechanics – Material group [00104] – and is assigned
to Cross division [00], which implies that the actual manufacturing of this part happens in different
divisions within the company. MRP 1 view defines the MRP type as [PD], MRP controller as [001]
and the lot size as [EX]. This implies Lot-for-lot order quantity and means that the system will
create a procurement element for the exact shortage quantity (e.g. required quantity minus available
stock).5 The next view is MRP 2. As the frames are planned to have both procurement types (in-
house production and external procurement), X is assigned here. This means that the actual
assembly is done by the company’s own workforce in Werk Hamburg but it has to rely on external
suppliers, as far as the delivery of the required semi-finished products (i.e. frame assembly, gear
wheel and pedal assembly) is concerned. The frames are to be stored in the production storage
location [0001] and the storage location for EP (External Procurement) Materiallager is [0001]. The
scheduling margin key is [000] implying that there are no float times planned.

Accounting 1 view: The frames are semi-finished products, thus, valuation class 7900 is assigned to
them. The material ledger is not active, hence, the two methods of price control that are available are a
standard price and a moving price. Price control S (standard price) is taken because of the assumption
that the price of the semi-finished product will not fluctuate too often. The price of €102,00 per 1
frame is specified. This price is relevant for the current period of June 2011. The data are saved.

5
http://help.sap.com/saphelp_40b/helpdata/fr/7d/c275d1454011d182b40000e829fbfe/content.htm. Accessed 03.07.2011.

8


2.3. Creating Material Master Record for Frame Assembly (Semi-finished Product)

A material master record for the semi-finished product RGD-FRAME-ASSEMBLY732 is created
under Logistics  Materials Management  Material Master  Material  Create (Special) 
Semifinished Product (transaction code MMB1). The material number is ‘RGD-FRAM-
ASSEMB732’. The industry sector is Mechanical Engineering [M]. The views of interest are Basic
Data 1 and 2, Purchasing, four MRP entries, Work Scheduling, Accounting 1 and Costing 1. The
Create views selected indicator is activated.

In the Organizational Levels dialog box, the main facts for the frame assembly production are
specified. These are: plant Werk Hamburg [1000] and the storage location [0001].

Basic Data 1 describes the main facts concerning the semi-finished product in question. It is
measured in units [PC], belongs to the area of mechanics – Material group [00104] – and is assigned
to Cross division [00]. MRP 1 view defines the MRP type as [PD], MRP controller as [001] and the
lot size as [EX]. The next view is MRP 2. As the frame assemblies are planned to have both
procurement types (in-house production and external procurement), X is assigned here. They are to
be stored in the production storage location [0001] and the storage location for EP Materiallager is
[0001]. The scheduling margin key is [000] meaning that there are no float times planned.

Accounting 1 view: The frame assemblies are semi-finished products, thus, valuation class 7900 is
assigned to them. The material ledger is not active, hence, the two methods of price control that are
available are a standard price and a moving price. Price control V (moving average price) is taken
because of the intention to value the stocks with the latest price. The price of €75,00 per 1 frame is
specified. This price is relevant for the current period of June 2011. Save is pressed to confirm all
the entries and to be directed to the easy access menu.

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2.4. Creating Material Master Record for Wheel (Semi-finished Product)

As the bicycle wheel is also a semi-finished product, transaction MMB1 is used in order to create its
material master record. The material number here is ‘RGD-WHEEL732’ with the industry sector
Mechanical Engineering [M]. The views of interest are Basic Data 1 and 2, Purchasing, MRP 1 to 4,
Work Scheduling, Accounting 1 and Costing 1. The main facts for production are plant Werk
Hamburg [1000] and the storage location [0001].

Basic Data 1, MRP 1, and MRP 2 repeat the steps explained under the previous semi-finished
products. As far as Accounting 1 view is concerned, the only difference here is the moving average
price of €58,20.

2.5. Creating Material Master Record for Pedal Assembly (Semi-finished Product)

As the pedal assembly is also a semi-finished product, transaction MMB1 is used in order to create
its material master record. The material number here is ‘RGD-PEDAL732’ with the industry sector
Mechanical Engineering [M]. The views of interest are Basic Data 1 and 2, Purchasing, MRP 1 to 4,
Work Scheduling, Accounting 1 and Costing 1. The main facts for production are plant Werk
Hamburg [1000] and the storage location [0001].

Basic Data 1, MRP 1, and MRP 2 repeat the information discussed above. As far as Accounting 1
view is concerned, the only difference here is the moving average price of €10,00.

2.6. Creating Material Master Record for Gear Wheel (Semi-finished Product)

As the bicycle wheel is also a semi-finished product, transaction code MMB1 is used in order to
create its material master record. The material number here is ‘RGD-WHEEL732’ with the industry
sector Mechanical Engineering [M]. The views of interest here are Basic Data 1 and 2, Purchasing,
MRP 1 to 4, Work Scheduling, Accounting 1 and Costing 1. The main facts for production are plant
Werk Hamburg [1000] and the storage location [0001].

10


Basic Data 1, MRP 1, and MRP 2 repeat the information discussed above. As far as Accounting 1
view is concerned, the only difference here is the moving average price of €17,00.

2.7. Creating Material Master Record for Drive Chain (Semi-finished Product)

As the drive chain is one more semi-finished product, the whole process needs to be repeated again.
Therefore, only the differences will be described here. The expression given under the material
number is ‘RGD-CHAIN732’. As far as Accounting 1 view is concerned, the moving average price
for the drive chain is set at €13,00.

2.8. Creating Material Master Record for Spoke (Raw Material)

For the purpose of producing the wheels for the bicycle, it is now necessary to create the material
master record data for all raw materials required in the manufacturing process. The detailed
description of creating all these entries will be given for the spokes. All other raw material entries
(i.e. hub, rim and cover) will be visualized in a table format.

In order to create the material master record for the raw material spoke, the transaction code MMR1
is typed in. The material number is ‘RGD-SPOKE732’. The industry sector is Mechanical
Engineering [M]. The views of interest are Basic Data 1 and 2, Purchasing and all four MRP entries,
as well as Accounting 1 and Costing 1. The Create views selected indicator is activated. In the
Organizational Levels dialog box, the main facts for the raw material are selected. These are: plant
Werk Hamburg [1000] and the storage location [0001].

When accessing the Basic Data 1 view the short text “RGD-SPOKE732” is entered. All raw materials
are measured in units [PC], belong to the area of mechanics – Material group [00104] – and are
available in Cross division [00]. As the supplier of the spokes and the final customer for the finished
product are located in Germany, the necessary entry is created in the additional data subcategory:

11


The Purchasing view is the one that is changed next. Here Frank T.’s purchasing group [012] is
chosen. Frank T. is the company’s manager who is responsible for buying the raw materials that are
needed in the production process of the wheels. He is reachable under telephone number 551-0012
in case urgent issues and problems should arise.

MRP 1 view defines the MRP type as [PD], MRP controller as [001] and the lot size as [EX]. The
next view is MRP 2. Raw materials are to be stored in the production storage location [0001] and
the storage location for EP Materiallager is [0001]. Always Backflush [1] has to be selected in order
to ensure that the goods movement is posted automatically once the production order has been
confirmed. The planned delivery time is two days and, because float times are not allowed, the
scheduling margin key is [000]. To ensure that the availability check is carried out daily, [01] is
chosen in the MRP 3 view.

Accounting 1 view: The spokes are raw materials, thus, valuation class 3000 is assigned to them.
The material ledger is not active, hence, the two methods of price control that are available are a
standard price and a moving price. Price control V (moving price) is taken because of the
assumption that price of externally purchased raw materials can change frequently. The advantage
of such a usage is that the company’s inventory costs will always reflect the current market cost.
The price of €0,10 per 1 spoke is specified. Finally, in the Costing 1 view Material origin is
activated and the data are saved.

12


2.9. Creating Material Master Record for Hub (Raw Material)

Transaction MMR1
Material RGD-HUB732
Industry Sector Mechanical Engineering
Basic Data 1 and 2, Purchasing, MRP 1 to 4,
Views
Accounting 1, Costing 1
Plant [1000] Werk Hamburg
Storage Location [0001] Materiallager
Basic Data
Description RGD-HUB732
Base Unit of Measure [PC] Piece(s)
Material Group [00104] Mechanics
Division [00] Cross-division
Additional Data – Descriptions
Language [DE] German
Material description RGD-NABE732
Purchasing
Purchasing Group [012] Frank, T.
MRP 1
MRP Type [PD] MRP
MRP Controller [001] MRP CONTROLLER 001
MRP Lot Size [EX] Lot-for-lot order quantity
MRP 2
Production Storage Location [0001] Materiallager
Storage loc. for EP [0001] Materiallager
Backflush [1] Always backflush
Planned Delivery Time 2 days
Scheduling Margin Key [000]
Procurement Type [F] External procurement
MRP 3
Availability Check [01] Daily requirements
Accounting 1
Valuation Class [3000] Raw materials 1
Price Control [V] Moving average price
Moving Average Price €15,00
Costing 1
Select indicator Material origin is active

13


2.10. Creating Material Master Record for Rim (Raw Material)

Transaction MMR1
Material RGD-RIM732
Views
Basic Data
Description RGD-RIM732
Material description RGD-RADKRANZ732
Purchasing
Purchasing Group [012] Frank T.
MRP 1
MRP Type [PD] MRP
MRP 2
MRP 3
Accounting 1
Costing 1

14


2.11. Creating Material Master Record for Cover (Raw Material)

Transaction MMR1
Material RGD-COVER732
Views
Basic Data
Description RGD-COVER732
Material description RGD-MANTEL732
Purchasing
Purchasing Group [012] Frank T.
MRP 1
MRP Type [PD] MRP
MRP 2
MRP 3
Accounting 1
Costing 1

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3. Creating Required Bills of Materials

A bill of material (BOM) can be described as a list of all the items that make up a product or an
assembly. The list is complete for its given purpose, has a formal structure, and states the name,
quantity, and unit of measure for each component.6 In the bicycle example, the BOM consists of
several levels and can be considered a multi-level BOM.

3.1. Creating Bill of Material for Wheel

A bill of material for the wheel RGD-WHEEL732 is created under Logistics  Production 
Master Data  Bills of Material  Bill of Material  Material BOM  Create (transaction code
CS01). The description is ‘RGD-WHEEL732’. The storage location is plant [1000] in Hamburg.
Production [1] is specified as the usage. The BOM validity is set to June 1 of the current fiscal year.

The list of raw materials that are required to produce one wheel are created by filling in the active
description fields of the BOM. Thus, for each component the item category [L], the component
name (e.g. RGD-SPOKE732) and the component quantity (i.e. 32 spokes, 1 hub, 1 rim and 1 cover)
are keyed in. When pressing Enter, the system is able to fill in the left blanks by accessing the
necessary information from the material master records. This, for example, includes the information
concerning the unit quantities (pieces) and the validity of all the entries from June 1, 2011 onwards
(see the screenshot below):

6
See Singh (2008), http://www.saptechies.com/bill-of-material-bom/. Accessed 02.07.2011.

16


3.2. Creating Bill of Material for Frame

A bill of material for the frame RGD- FRAME732 is created in the same way as for the wheel RGD-
WHEEL732 under Logistics  Production  Master Data  Bills of Material  Bill of Material
 Material BOM  Create (transaction code CS01). The description is ‘RGD-WHEEL732’. The
storage location is plant [1000] in Hamburg. Production [1] is specified as the usage. The BOM
validity is set to June 1 of the current fiscal year. The three items are needed in order to produce the
frame. These are RGD-PEDAL732, RGD-GEAR732 and RGD-FRAME-ASSEMBLY732, each in
the quantity of 1 piece (see the screenshot below):

3.3. Creating Bill of Material for Bicycle

Finally, the bill of material for the completed bicycle RGD-BICYCLE732 in plant [1000] for
production [1] is created. The same steps are taken again. The semi-finished products required for
production of 1 finished product are 2 wheels, 1 frame, 1 gear wheel and 1 drive chain (see the
screenshot below):

17


The completed BOM can be viewed under Logistics  Production  Master Data  Bills of
Material  Reporting  BOM Explosion  Material BOM  Multilevel BOM (transaction code
CS12). This is a crucial step when checking whether all parts are available in the right quantity,
assembled and allocated to the right components. This should ensure a smooth production process in
the future. In the BOM header the material ‘RGD-BICYCLE732’ is entered together with the plant
[1000] and the bill of material application Production – general [PP01]. F5 (view) is pressed. In the
upcoming Display field group, the Variable list indicator is ticked and F8 is hit to execute the
petitions. The BOM appears in a text format:

To display the BOM as a graphic F5 is chosen. The graphic looks like the targeted structure
visualized on page 2 of this paper.

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4. Creating Routings

The right coordination of the production process is essential in every business in order to maintain
efficiency and to be able to keep costs as low as possible. Thus, routings are used to define the
production process necessary to manufacture materials or to provide services in the production
industry. Additionally, they form a basis for product costing. Since it is necessary to always control
costs, this feature of a routing is of great importance. The detailed description of creating all the
necessary entries for a routing will be given on the example of the wheel. All other routings will be
visualized in a table format.

4.1. Routing for Wheel

A routing for the wheel is created by selecting Logistics  Production  Master Data  Routings
 Routings  Standard Routings  Create (transaction code CA01). The material number is
‘RGD-WHEEL732’, the production location is Werk Hamburg [1000] and the valid date is set at
June 1, 2011. The routing is applied for Production [1] and the status Released (general) [4] is
assigned to it. By selecting “Operations” or F7, a blank table is revealed. In the first line “Operation
0010”, work center [1410] Assembly III is keyed in. The control key is [PP01] In-house production.
The standard text key is [P000001] Material staging. Material staging implies that the material is
shifted from the main store to the production location before the whole manufacturing process
starts.7 By pressing Save the information is confirmed.

In the Operation Details screen (double-click the Description field) the time required for the main
activities is entered. 1 minute is considered to be enough for the setup activity [1422] that is aimed
to prepare materials, systems, machines and devices for the following assembly process. The labor
time (activity [1421]) is 3 minutes (for more details see the screenshot below):

7
See sap-img.com (2011), http://www.sap-img.com/warehouse/what-is-material-staging.htm. Accessed 03.07.2011.

19


After returning to the activity overview the same process is repeated to define “Operation 0020”.
The work center is [1410] Assembly III. The control key is [PP01] In-house production. It is not
necessary to fill in the Standard text key field because there is no predefined text for this activity.
“Assembly Wheel” is the description. The Operation details screen defines the machine time
(activity type [1420]) as 5 minutes and the labor time (activity type [1421]) as 10 minutes (for more
details see the screenshot below):

20


“Operation 0030” is processed in work center [1420] Assembly IV. In the inspection process several
safety aspects of the wheel are tested to ensure the quality standards. Again, the control key is
[PP01] In-house production. The standard text key is Mechanics Inspection [Q000002]. The setup
time (activity [1422]) is defined to be 1 minute; the labor time (activity [1421]) is 3 minutes (for
more details see the screenshot below):

21


The whole routing looks as follows:

a) in a text format

22


b) as a graphical display

The overview of the main transactions is as follows:

Transaction CA01
Material RGD-WHEEL732
Usage [1] Production
Status [4] Released (general)
Operation 0010
Work Center [1410] Assembly III
Control Key [PP01] In-house production
Standard Text Key [P000001] Material staging
Setup Time [1422] 1 minute
Labor Time [1421] 3 minute
Operation 0020
Standard Text Key
Setup Time
Machine Time [1420] 5 minutes
Labor Time [1421] 10 minutes
Operation 0030
Work Center [1420] Assembly IV
Control Key [PP01] In house production
Standard Text Key [Q000002] Mechanics inspection

23


4.2. Routing for Frame

Transaction CA01
Material RGD-FRAME732
Operation 0010
Labor Time [1421] 5 minute
Operation 0020
Standard Text Key
Setup Time
Operation 0030
Control Key [PP01] In house production
Standard Text Key [Q000002] Mechanics inspection


a) in a text format

24


b) as a graphical display

4.3. Routing for Bicycle

Transaction CA01
Material RGD-BICYCLE732
Operation 0010
Setup Time [1422] 4 minutes
Operation 0020
Control Key [PP99] In-house prod. milestone with GR
Standard Text Key
Setup Time [1422] 7 minutes

25



a) in a text format

a) as a graphical display

26


5. Testing the Business Process

Product costs are the sum of all costs that are incurred when producing manufactured goods or
services. Their calculation is necessary because it helps to get an overview of all costs, to choose the
adequate markup and to find a desired price that will also be accepted by customers.

5.1. Calculating Product Costs

Product costing calculates the unit cost of goods manufactured and sold. Products are priced
automatically using bills of materials and routings from Production Planning. The product cost is
calculated under Accounting  Controlling  Product Cost Controlling  Product Cost Planning
 Material Costing  Cost Estimate with Quantity Structure  Create (transaction code CK11N).

The estimation of costs is performed for the bicycle RGD-BICYCLE732. The production location is
[1000] Werk Hamburg. On the Costing Data tab, the Costing Variant [PPC1] Standard Cost Est.
(Mat.), Costing Version [01] and Costing Lot Size 1 are entered. All the entries are confirmed by
pressing Enter. On the Dates tab, the Costing Date From is altered to the current date of June 16,
2011 and is confirmed again. The SAP program calculates the bicycle costs based on the previously
created bills of materials and routings. The result can be viewed below:

27


As one can see, the overall manufacturing cost is €300,37. This figure is essential for many
decision-making processes, especially for determining the product price, which should not be less
than the total calculated costs.

In the itemized list for the bicycle, the system displays the manufacturing and material costs for the
semi-finished products with the production operation costs for each cost center, work center, and
activity type. The prices for the activity types are predefined in the IDES Corp:

The exact cost components can be display under Costs  Display Cost Components.
should be clicked and Layout... should be chosen. Under the Cost Component Groups [1SAP02]
layout the system displays the following table:

28


This table is very helpful in differentiating between the various cost components incurred in the
production of RGD-BICYCLE732.

5.2. Updating Prices

The Price Update function is used to transfer the calculated product cost as a cost estimate to the
material master record. The cost is transferred in two steps: marking and release.

The marking is performed by selecting Logistics  Production  Product Cost Planning 
Material Costing  Price Update (transaction code CK24). It is executed in the current month of
June for the bicycle RGD-BICYCLE732. The company code is [1000] and the plant is [1000]. The
indicator from the Test Run field is removed and the marking is executed by pressing F8. The
system displays that “Of 1 materials, 1 cost estimates were updated successfully” (see below):

29


The marking can also be viewed in the material master record under Logistics  Materials
Management  Material Master  Material  Display  Display Current (transaction code
MM03). The material is ‘RGD-BICYCLE732’, the plant is [1000] and the Costing 2 view is
activated. The system displays the marked future price in the left costing column (see below):

5.3. Price Release

The price is released under Logistics  Production  Product Cost Planning  Material Costing
 Price Update (transaction code CK24). Release is clicked and the current period of June 2011,
company code [1000], plant [1000] and the material RGD-BICYCLE732 are chosen. The Test Run
indicator is removed. After pressing F8 the system releases the price:

The release can be viewed in the material master record under Logistics  Materials Management
 Material Master Material  Display  Display Current (transaction code MM03). The
material is ‘RGD-BICYCLE732’, the Costing 2 view is selected and the plant is [1000] Werk
Hamburg. Now the released planned price is displayed in the middle column:

30


6. Manufacturing

The following section describes the basic process of producing a bicycle. It assumes that enough
semi-finished products are available on stock, so that no production or procurement of components
is necessary. The chapter will deal with the following steps:
 Receive goods for required components
 Create production order
 Confirm production order
 Display automatic goods movement
 Check warehouse stock.

6.1. Receiving Goods for Required Components

A goods receipt is an official document that is given out in order to confirm that certain products
have been received.8 It can be accessed under Logistics  Materials Management  Inventory
Management  Goods Movement  Goods Movement (transaction code MIGO). [A01] Goods
Receipt, [R10] Others, and movement type [501] GI receipt w/o PO are chosen. At this stage it is
important to have the current date as the Document Date. On the lower screen, in the Material tab,
RGD-WHEEL732 is entered. On the next tab, a quantity of 50 pieces [PC] is defined. This specifies
that the company will require 50 wheels to be able to produce 25 bicycles. On the Where tab, plant
[1000] and storage location [0001] are entered. After that the entries are confirmed.

As the bicycle consists of more than two wheels, the Next item on the bottom of the screen is
selected and the following data are entered:

 Material: RGD-FRAME732
 Quantity: [PC] 25 pieces
 Plant: [1000] Hamburg
 Storage Location: [0001] Materiallager

8
See BusinessDictionary.com (2011), http://www.businessdictionary.com/definition/goods-receipt.html. Accessed
03.07.2011.

31


The process is repeated for RGD-GEAR732 and RGD-CHAIN732. These items are also required in
the quantity of 25.

After that the entries are confirmed by pressing Enter and are checked by choosing Check. This
function makes it possible to view the document and to make sure that all information is accurate.
The correctness is indicated by the green circles (see below):

Now the goods receipt document is posted and saved. The material document numbers are:
4900035891 and 400035576. The amount of stock and the entry correctness can further be checked
under Environment  Stock  Stock/Requirements List (transaction MD04) by keying in the right
material and plant [1000]. For example, the system should display a stock quantity of 25 for frames
or 50 pieces for wheels.

6.2. Creating Production Order

A manufacturing order registers all production requirements to make sure that a required quantity
of materials or services is produced or supplied for a certain date. It further specifies the work
center and resources that are utilized in the manufacturing process. A manufacturing order is
subdivided into a production order (also called discrete manufacturing) and a process order (also
called process manufacturing).

The order for RGD-BICYCLE732 is created under Logistics  Production  Shop Floor Control
 Order  Create  With Material (transaction code CO01). The production plant is [1000] and
the order type is [PP01] Standard Production Order (int. number). The information is confirmed by
pressing Enter. On the first screen (Production order Create: Header) an overall amount of 25
bicycles is typed in. As the basic dates for order type PP01 are calculated backwards, the last
working day of June 2011 is chosen as the finish date. All entries are confirmed and the basic dates
are calculated by the system:

32


The “Calculator” is picked and the system determines the planned costs for the order. To view a
copy of the routing master data and the bill of material one should first press F5 and then F6:

33


By clicking the “Flag” or choosing Functions  Release, the order is released. The production order
number assigned by the system is 60003589.

6.3. Confirming Production Order

To speed up the production process, it is assumed that the production order is successfully
completed on the same day. When the material master data were created in the MRP 2 view, the
defined Backflush field made it possible to confirm the order without removing the required
components from the warehouse.

The order is confirmed under Logistics  Production  Shop Floor Control  Confirmation 
Enter  For Order (transaction code CO15). Production order number 60003589 is keyed into the
Order field and confirmed. The system displays the yield to be validated in line with the planned
data (25 pieces of the bicycle RGD-BICYCLE732). The Final confirmation is selected. As
“Operation 0020” was categorized as a milestone operation in the routing, all previous operations
are also automatically confirmed, and the system posts all goods movements into and out of the
warehouse. Goods movements is clicked to display an overview:

After that the entries are saved. The confirmation is carried out successfully and the confirmation
number is 4900036145.

34


6.4. Displaying Automatic Goods Movement

The automatic goods movement document can be displayed under Logistics  Materials
Management  Inventory Management  Material Document  Display (transaction code MB03):

As one can see, at the right end of the document the system displays the movement type and a sign.
This sign indicates whether the goods movement is a receipt (+) or an issue (-). The system has now
officially taken the components for production and moved 25 bicycles to the warehouse.
Furthermore, the relevant accounting document can be viewed by selecting “Accounting
Documents” and double-clicking “Accounting Document”. The system displays the value-based
stock postings at the current moving average:

35


6.5. Checking Warehouse Stock

The warehouse stock of the materials affected by the production of RGD-BICYCLE732 is checked
under Logistics  Production  MRP  Evaluations  Stock/Requirements List (transaction
code MD04). The material number is ‘RGD-BICYCLE732’ and the plant is [1000]. The system
displays the lot of produced earlier 25 pieces as an available amount:

6.6. Calculating Manufacturing Time

The manufacturing time for producing a bicycle, a wheel or a frame can be clearly seen when
creating a production order (Operation Overview). The system estimates the required time by taking
the specified routings into account. A visual display of SAP calculations in terms of manufacturing
time can be found below:

a) RGD-BICYCLE732

36


b) RGD-FRAME732

c) RGD-WHEEL732

The required manufacturing time and the production costs are further calculated using Microsoft
Excel. The spreadsheets are attached separately.

7. Conclusion

The targeted product RGD-BICYCLE732 has been successfully created and manufactured. IDES
system is now ready to deliver the order to Cycle Ball Lovers.

37


8. Bibliography

1. BusinessDictionary.com (2011), “Goods receipt” [Online]. Available at:
http://www.businessdictionary.com/definition/goods-receipt.html. Last accessed 03.07.2011.
2. SAP Help (2011) [Online]. Available at: http://help.sap.com/. Last accessed 07.07.2011.
3. sap-img.com (2011) [Online]. Available at: http://www.sap-img.com/. Last accessed
07.07.2011.
4. Singh, Sh. (2008), “Bill of material (BOM)”, on: SAP Support Portal [Online]. Available at
http://www.saptechies.com/bill-of-material-bom/. Last accessed 02.07.2011.
5. Weidner, S. (2009), “Integration Case Study PP: SAP ERP 6.0”, for: SAP University
Competence Center [Online]. Available at: http://moodle.htw-
berlin.de/moodle/mod/resource/view.php?inpopup=true&id=18353. Last accessed 05.06.2011.
6. Wikipedia, the free encyclopedia (2011), “Fixed-gear bicycle” [Online], (last modified
2 June 2011 at 12:24). Available at: http://en.wikipedia.org/wiki/Fixed-gear_bicycle. Last
accessed 05.06.2011.

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Individual Case Study – Production of Bicycles Based on SAP (Vanessa Günther, Alina Sachapow, Hanna Tresselt)

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