Introduction
As opposed to make-to-stock production, which is geared towards stocking finished products to meet a forecasted demand by customers, make-to-order production is driven by the receipt of a specific sales order from the customer. In make-to-order production, customized finish products are assembled using more or less predefined production processing. Make-to-order business processes cover the middle ground between the two extreme cases of production - make-to-stock and engineer-to-order. The demand to the plant floor for the finished product in the case of a make-to-order product indicates the general production area, where various variants of the product are made.
In case of make-to-stock, the same finished product is created repeatedly using exactly the same sequence of steps. Automotive manufacturing is an example of repetitive / make-to-stock production. On the other hand, engineer-to-order production represents a case where each finished product follows significantly different production/assembly processes. More than likely, the company is making the exact product for the first time with a lot of attention to detail required. The construction of a turbine or a new aircraft is an example of an engineer-to-order production. In the middle, make-to-order represents the form of production that uses similar procedures to produce the finished product each time, however, the exact steps are not known ahead. A company like Dell, selling custom configurations of computers or an aerospace tooling supplier is an example of make-to-order production situations.
It is possible to process the different manufacturing scenarios using different sets of business processes and transaction sequences in SAP. The sections below provide an overview of the assembly processing business scenario in SAP using Project Systems (SAP PS) to complete make-to-order production. The explanation is specifically aimed at using a network order to complete the physical assembly of the finished product, together with a Work Breakdown Structure (WBS) for measuring profitability of the project (sales order) as a whole.
Procedure
The process starts with the entry of a sales order in the system upon receiving a PO from the customer to deliver a certain quantity of the finished product. The following is a checklist of the things that must be set up in the system before the process could work:
Business Benefits
Once the above set up (configuration and master data set up) is complete, a new sales order created using the material master and/or the item category to derive the correct requirements type result in the automatic creation of a network order that is assigned to the project/WBS structure. When this process is complete and the sales order to project/network link is established, the following are some of the business benefits that can be realized:
It can be clearly noted that the above explanation leaves out a good deal of technical content in terms of configurations, user-exits and minute details. However, the idea is to highlight the business benefits of the process than to provide all the technical details. If you have questions or want me to expand on specific areas, please do leave your comments or send me an email: lanka5255@gmail.com.
As opposed to make-to-stock production, which is geared towards stocking finished products to meet a forecasted demand by customers, make-to-order production is driven by the receipt of a specific sales order from the customer. In make-to-order production, customized finish products are assembled using more or less predefined production processing. Make-to-order business processes cover the middle ground between the two extreme cases of production - make-to-stock and engineer-to-order. The demand to the plant floor for the finished product in the case of a make-to-order product indicates the general production area, where various variants of the product are made.
In case of make-to-stock, the same finished product is created repeatedly using exactly the same sequence of steps. Automotive manufacturing is an example of repetitive / make-to-stock production. On the other hand, engineer-to-order production represents a case where each finished product follows significantly different production/assembly processes. More than likely, the company is making the exact product for the first time with a lot of attention to detail required. The construction of a turbine or a new aircraft is an example of an engineer-to-order production. In the middle, make-to-order represents the form of production that uses similar procedures to produce the finished product each time, however, the exact steps are not known ahead. A company like Dell, selling custom configurations of computers or an aerospace tooling supplier is an example of make-to-order production situations.
It is possible to process the different manufacturing scenarios using different sets of business processes and transaction sequences in SAP. The sections below provide an overview of the assembly processing business scenario in SAP using Project Systems (SAP PS) to complete make-to-order production. The explanation is specifically aimed at using a network order to complete the physical assembly of the finished product, together with a Work Breakdown Structure (WBS) for measuring profitability of the project (sales order) as a whole.
Procedure
The process starts with the entry of a sales order in the system upon receiving a PO from the customer to deliver a certain quantity of the finished product. The following is a checklist of the things that must be set up in the system before the process could work:
1. A standard
network template: the network template forms the basis for planning network
activities in the operative project once it is created. Careful thought must be
given in the creation of this template to make sure that the template covers
the most common variant of the processes to assemble the finished product. The
template should also include a standard BOM of the material components that
make up the finished product. Note that material components cannot be assigned
directly to network activities in a standard template – they can only be
assigned by means of creating a standard BOM and then transferring materials to
the appropriate network activities.
NOTE: If needed, create multiple standard templates covering each
of the known variants of the finished product.
2. Material
Master: The material master representing the finished product is used in the creation
of the sales order item, which triggers the automatic creation of the network
order along with the project/WBS structure. Additionally, there are settings in
the material master that must exist in order to indicate to the system that a
network order should be created to assemble the finished product. This
indication is driven by the “requirements type”, which is determined in the sales
order in one of the two ways: a) the system first looks to find the
requirements type through the MRP group and strategy group assigned in the
material master MRP views; b) if it is not found using option a, then the
system tries to find it using the combination of the item category group in the
material’s sales view and the MRP type.
3. Requirements
Type and Requirements Class: The requirements type determined in the previous
step is assigned to a requirements class. The requirements class has the
settings that control the creation of a network order of a specific order type,
along with the management of special stock (project stock), etc…
4. Assignment of
the material master to the standard network template: the final step in the
process is to assign the material master for the finished product to the
standard network template created above in a mapping table (transaction CN08).
Also, assign the standard WBS that should be used in the creation of the
operative project structure associated with the network order.
Business Benefits
Once the above set up (configuration and master data set up) is complete, a new sales order created using the material master and/or the item category to derive the correct requirements type result in the automatic creation of a network order that is assigned to the project/WBS structure. When this process is complete and the sales order to project/network link is established, the following are some of the business benefits that can be realized:
1. With the
strong integration of the various parts of the order – such as order processing
(SD) and order execution (PS), changes in one area can be immediately seen in
the other. For example, if the customer required delivery date is changed, the network
order is immediately updated with the change. Similarly, if the project
delivery date cannot be met because of capacity bottlenecks, the resulting new
proposed delivery date can be immediately seen in the sales order. This will
help a great deal in terms of reacting to the result proactively to take
corrective actions on either end.
2. If the cost
management is left to the project (project valuation), the cost control and
evaluation can be managed at a more detailed and complex level.
3. Since the
sales order value and billing flow into the project WBS element, the costs in the
project can be easily compared with the revenue flows to determine
profitability of each delivery to the customer on an individual or collective
basis.
4. Further
processing such as the calculation of POC (percentage of completion) is built
into the SAP system through the usage of Results Analysis and subsequent
settlement to FI/CO.
5. Profitability
Analysis can be performed on all customer orders by additional settlement of
the RA values to CO-PA. Based on configuration, very insightful reports can be
developed to evaluate profitability by order, customer, sales area, etc…
It can be clearly noted that the above explanation leaves out a good deal of technical content in terms of configurations, user-exits and minute details. However, the idea is to highlight the business benefits of the process than to provide all the technical details. If you have questions or want me to expand on specific areas, please do leave your comments or send me an email: lanka5255@gmail.com.
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