The Production Process

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Introduction Production is both a SCM function and

an accounting function Simply put, the process involves turning

raw materials into finished goods

YOUR BOOK DOES A VERY GOOD JOB WITH THIS TOPIC

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Production Steps

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Types of Production (1) Discrete manufacturing

The result is an individual unit (or many of them) such as a bicycle

The finished good “could” be decomposed back into its raw materials

Production lines are set up and torn down to make batches of different materials

Hewlett Packard

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Types of Production (2) Repetitive manufacturing

Similar to discrete manufacturing The same finished good is produced over

time on the same production line The production line is not changed to

make different products Used when production lines are very

expensive Intel (Chips) Seagate (Disks)

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Types of Production (3) Process manufacturing Products are made by means of a recipe Categories

Continuous (flow) Gasoline

Batch Soda and beer

We will not work with these

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Means of Production Triggers cause production runs to be

executed Make to stock

Make a batch resulting from MRP or other production trigger

Make to order Make a unit(s) as a result of a customer

order Dell

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Production Master Data Bill of materials (BOM) contains

components that make up a product or assembly

Work centers are locations within a plant where production operations are performed

Product routings list the activities involved in producing the product defined by the BOM

Product groups are used in planning to aggregate planning activities

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Bill of Materials (Overview) In general, the components needed to

produce semi-finished goods or finished goods

In the case of process manufacturing, we call a BOM a formula or recipe We will focus on discrete manufacturing

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Bill of Materials (SAP) SAP implements BOM as a flat structure Hierarchical BOMs can be created using

“component” materials (assemblies) The BOM structure should mimic the

manufacturing process See the BOMs in Figure 6-4 on page 184

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Bill of Materials (Organization) A BOM applies to a “plant”

Different plants might make the same finished good using a different BOM

A material can have “alternate” BOMs These might be used for different

processes having different lot sizes This is more common in process

manufacturing We will not work with alternate BOMS

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Bill of Materials (Organization) Header section

Applicable to the finished good List the plant and BOM number The purpose of the BOM (production,

engineering, plant maintenance) Base quantity Minimum and maximum lot size

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Bill of Materials (Organization) BOM Header

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BOM Usage (+must, .can, -cannot)

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Bill of Materials (Organization) Items section The raw materials that go into making

the finished good Item type Item Item quantity

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Bill of Materials (Organization)

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Bill of Materials (Organization)

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Bill of Material (Item Categories) Inventory is maintained for stock items (L) Inventory is not maintained for non-stock

items (N) Variable sized items (R) are available in

different dimensions (quantities) Lumber, for example

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Bill of Material (Item Categories) Document items (D) represent applicable

documentation Manuals, for example

Class Items (K) are used in variant (configurable) BOMs

Different paint colors perhaps

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BOM Complexity A 747-400 contains

6.5 million parts Countless assemblies

The process requires that many parts are inspected before, during, and after installation

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Bill of Materials (Navigation) Logistics / Production / Master Data /

Bills of Material / Bill of Material / Material BOM CS01 – Create CS02 – Change CS03 – Display

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Work Center (Introduction) “A resource used to produce a material”

It can be a machine, a group of machines, or an entire production line

It can be a person or group of people (labor)

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Work Center (Introduction) Work centers can be arranged

hierarchically Work centers have capacities

They can produce finite outputs given a set of constraints

People work 8 hours a day

Machines can perform at some speed

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Work Center (Global Bike) We have work centers for

Bike Assembly Inspection Packaging

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Work Center Hiererchy

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Work Centers (SAP) A work center belongs to a plant Work centers have a category that

describes the work center Machine / Labor / Production line / Etc..

A work center has a standard value key These are activities that consume time

Setup Processing Teardown

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Work Center Categories

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Work Center Standard Value Key Execution time and costs are calculated

in operations using formulas and standard values

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Work Centers (Control Keys) Control keys define how an operation

is processed based on a set of indicators Scheduling – Enables scheduling on the

operation in Quality Management and Production Planning

Capacity – Enables capacity planning for the work center

Indicators to print time tickets and shop papers

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Work Centers (Control Keys) Control keys are managed in the IMG

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Work Centers (SAP) Default values containing wage data

can be associated with a work center

Note that work centers are associated with cost centers. This is how we allocate production costs

See Figure 6-7 page 189

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Work Center (Navigation) Logistics / Production / Master Data /

Work Centers CR01 – Create CR02 – Change CR03 – Display

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Work Center (Basic Data) Every work center belongs to a work

center category (i.e. Labor) And has a standard value key for a

dimension (time in this case)

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Work Center (Basic Data) The Assembly work center has

execution time for setup, machine, and labor

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Work Center (Scheduling) A work center has a capacity category

usually to indicate machine or labor capacity

Formulas that calculate the setup, processing, and teardown time for the work center Formulas are a subject in themselves

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Work Center (Scheduling) Formula use “special” variables to

calculate the dimensional value (time)

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Work Center (Costing) Here, we allocate the costs of the work

center to a cost center The cost center must exist and belong to

the plant’s controlling area All costs from a work center must be

applied to the same cost center Costs are allocated based on a formula

key Same as scheduling

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Work Center (Costing)

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Work Center Costing

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Routings (Introduction) These are the detailed operations

performed by (at) one or more work centers to produce a finished good Think of the detailed operations required

for an assembly line to run Routing Sequences Have

Operations that get performed Material(s) required

Routings apply to a material and plant

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Routing (Header) Task / Usage

(production / plant maintenance / …) Validity information Inspection (QA / QC) information

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Routing (Sequences) Routing sequences

Using sequences, you can create standard and parallel sequences

Remember a parallel fork Sequences are performed “in-order” Alternate sequences might be performed

in place of standard sequences Different steps based on the number of

workers

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Routing (Sequences) We have only one routing sequence

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Routing (Operations) The tasks we perform to manufacture Data

The time it takes to perform the task How many items are processed per

interval of time Setup, labor, machine

Steps in a routing operation are performed in a work center

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Production Routing for (DXTR1000) (Operations)

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Production Routing (Materials) The materials needed to produce the

good This information comes from the BOM

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Production Routing for (DXTR1000) (Materials)

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Routing (Navigation Path) Logistics / Production / Master Data /

Routings / Routings / Standard Routings CA01 Create / CA02 Change / CA03

Display

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Production Capacity Production has a capacity that relies on

A factory calendar describing workdays and holidays

A capacity for people and machines Some number of shifts that workers work Look at page 195 in your text.

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Production Capacity (Factory Calendar) Multiple calendars describe

Public holidays and the current The calendar used by the factory The assignment of a calendar to a plant

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Production Capacity (Factory Calendar) Holiday calendar

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Maintaining Capacities Each work center in a plant has a

capacity A capacity name (SHIFT for example) A capacity category (machine or person

for example)

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Maintaining Capacities Capacity header describes available

capacity

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Maintaining Capacities Global Bike runs 1 shift with 1 hours of

breaks per shift

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The Production Process (Overview) Request production Authorize production Release production order Goods issue to production order Actual production Production confirmation Goods receipt into inventory

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Request Production Production is typically requested

because of a trigger A customer order (make-to-order)

An MRP Manual creation

In the end, a production order gets generated

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Authorize Production This is the actual commitment to

produce Production (machine / people) time is

allocated for specific dates Authorization might be created from

planned or unplanned orders

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Authorize Production (SAP) Production might be authorized because

of Planned production / a sales order / for a

material (finished good) We get preliminary estimates of cost

Logistics / Production / Shop Floor Control / Order / create C001

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Production Order (Illustration)

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Release Production Order This is where the authorized order is

actually released to production Production starts the manufacturing

process at a given date and time RTP might happen manually or

automatically Shop papers are generated

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Goods Issue Raw materials are removed from

storage triggered by the production order release

Material staging takes place

Backflushing

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Goods Issue (2) Raw material inventory is updated Inventory accounts are updated Material costs are added to the

production order See the GL transactions on page 208

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Actual Production We make the material and record

production times

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Production Confirmation Accounting finalizes the production run Production costs are recorded

Here the produced goods are transferred from production to goods storage

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Goods Receipt Here, the goods are released into

inventory Inventory Held for a particular customer Held for QA or other reason

Slide 67

Introduction to Planning