Organizational Elements

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
Organizational Elements
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.

Company Code ****

BALANCING / (LEGAL)
ENTITY AssetsLiabilitiesRevenues

= - Expenses

Profit/Loss
Organizational Elements
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.

Organizational Elements
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
Master Data
Material Master
Material Master
Material Master

 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
Material Master
Material Master
Material Master
Material Master
Material Master
Material Master – Units of Measure

Base unit: Piece

16 72
4

Box Crate Pallet

(unit of issue) (order unit) (sales unit)
Material Master
Material Master
Master Data
Bills Of Material
Bills Of Material
Bills Of Material
Bills Of Material
Bills Of Material
Bills Of Material
Bills Of Material
Bills Of Material
Bills Of Material
Bills Of Material
Bills Of Material
Bills Of Material
Bills Of Material
Bills Of Material
Bills Of Material
Bills Of Material
Bills Of Material
Master Data
Work Centers
Work Center
Work Center
Work Center
Work Center
Work Center
Work Center
Work Center
Work Center
Work Center
Work Center
Work Center
Work Center
Work Center
Work Center
Work Center
Work Center
Work Center
Work Center
Master Data
Routings
Routing
Routings - Components
Routing - Components
Routings
Routing - Group
Routing - Group
Material Allocation
PRT Assignments
Sequences in Routing
Parallel Sequences
Scheduling in PP
Scheduling
Sub Operations in Routing
Scheduling
Production Planning
• Demand Management
• Material Requirement Planning
− Planning of Purchased parts
− Planning of in house assemblies
Planning Process: Process flow
Central marketing office

Demand (Weekly)

Dispatch plan
Demand planning cell

Production Requirement (Week wise, Model wise)

Planned Prod.
Confirmed PPC MRP Run
Vendor
Schedule Planned Vendor Schedule

Vendor
Web site
Dispatch sheet
Confirmed Production Production

Third Party Log

Planning Process: Strategies

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: Demand
Planning

Dealer Dealer Dealer Dealer Dealer Dealer

Territory office Territory office

Area Office Area Office Area Office Area Office

Zonal Consolidation of Demand

Central Marketing office

PPC
Planning Process: Demand
Management

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:
Materials Requirement Planning
MRP Overview
Uses of MRP
MRP Functions
MRP Prerequisites
Planning Run
Planning Run - Types
MRP - Control Parameters
Net Change Planning
Planning in Planning Horizon
Planning Run - Single Item
Single-item, Multi-Level Planning
Single-Level MRP
Multi-Level MRP
Total Planning
MRP Procedure
MRP Control Parameters
MRP Control Parameters
MRP Control Parameters
MRP Control Parameters
MRP Control Parameters
MRP Control Parameters
Net Requirements Calculation
Requirement Quantities
Safety Stock
Safety Time
Safety Time in Production
Lot Size Calculation
Lot Sizing - Overview
Static Lot Sizing
Period Lot - Sizing Procedure
Optimum Lot Sizing
Long Term Lot Sizing
Other Lot Sizing Features
Lot Size Rounding Profiles
Layout of MRP List
Stock Req. List - Layout
MRP List - Collective Display
MRP List - Functions
Exception Messages
Rescheduling Checks
Old / New Exception Message
Planned New Exception Message
Order Conversion
Material Supply for Production
Collective Display
Search in Individual List
Current List - Functions
Pegged Requirements
Order Report
Planning Time Fence
Planning Time Fence
Scheduling in PP
Scheduling - Basic Dates
Scheduling - Production Time
Planning Process
Supply
Plant Demand
Stock

MRP Planning
Planning
Parameters
Parameters

Order
External Proposal In-House
Procurement Production
Planning Process
Production Execution

• Stock transfer to WIP location

• Order Execution
− Production confirmation
− Error handling
Planning Process
Planning Process
Production Execution

Physical Movement
Storage Loc MAIN Storage Loc WIP
Production Execution
Planned Order

Availability Check

Convert Order

BOM
Production
Routings Move
Order
floorstock
Work Center

Release Avail check

Goods issue

Production

Confirmation
Goods receipt
TECO
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 and Benefits:

• 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
Logistics Planning
Detailed Process Description:
•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.
Logistics Planning – Process Flow Diagram

Periodic Operational
Sales and Production
Operations Planning &
Meeting Control
(Production
Event

scenarios)

Sales Qty
Budget and Sales
Transfer to
Revenue

SOP (with CO- Quantity

Planner

PA), Revenue forecast

Planning (179)
(172)

SOP Verification Transfer

Demand Rough Cut
Verification (Check Production Create LTP Execute LTP Evaluate
Sales Plan) Plan to Planning MRP Capacity
 Create Rough-Cut Inactive Scenario Planning
Production Plan Demand
Management
Strategic Planner

Operativ
e
Producti
on Data

Copy to
Acceptab Active
No le Plan Demand
Management

Yes

CO-PA = Profitability Analysis, SOP = Sales and Operations Planning, LTP = Long Term Planning, MRP = Material
Requirements Planning
Make-To-Stock Production with Discrete
Manufacturing
Purpose and Benefits:
• 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
• Key process flows covered
− 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

Detailed Process Description:

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
Beginning of
Strategic Event
Periodic Plan
Planning Revision
Cycle

Creating
Planner

Planned Logistics
Independent Planning
Requirement (144)
s

No Capaci
Material Requirements
Planning at Plant Level & Update ty
Evaluation of Stock / Capacity Levelin 1
Production Planner

Requirement List g O.k.?

Yes
MRP List

Convert Material Release Order Print

Purchase Planned Availabl Yes Capacity Production
Planned Order to Leveling
Requisition Orders Production Order e? Order

No
Confirming
Material Assembly Inventory @
Manufacturing

Pick List Staging for Activities Semi-Finished

Goods Receipt Standard. Cost
Planned / Final
Orders Confirmation

Inventory
Consumption Goods Issue/ Goods Receipt
@ Standard. Back flush Slip
Cost

Goods Receipt
house

Finished Goods
Ware-
Clerk

Slip Receipt

Period End
Contr
Plant

Closing
oller

“General” Plant
(181)

Procurement PP-
Procurement Procurement &
Buyer

of Stock MM Subcontracting
w/o QM Consumption of Subcontracting (External
(130) Material with Cosigned
QM (127) (138) Processing)
Inventory (139) (150)
Make-to-Stock Production – Discrete Industry – Process Flow Diagram
Event
Production
Supervisor

Review
1 Operation List
Processing)

Purpose and Benefits:

• 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
• Key process flows covered
− Creating Purchase Order for External Processing
− Goods Receipt for “subcontracting” Purchase Order
− Enter Invoice
− Periodic Payment
 Production Subcontracting (External
Processing)

Detailed Process Description:

•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
Vendor Ship
Receives Perform External Incoming
Vendor

Material and External Material Vendor

Performs Services Back to Invoice
External Plant
Services

Production
Order Generates Completion
Purchase Confirmatio
Requisition for n of
Event

External Production
Services Order
Production
Supervisor

Check Order
Operations

Create PO from Print Purchase

Purchase Req
Purchaser

(Vendor assigned Order

by Info record)
Warehouse

Ship Subcontract Deliver

Goods Material
Material Services Receipt for
to GR/IR Back to
Subcontracti Shop
Clerk

Vendor ng PO Floor
Accountant

Periodic
Accounts

Payment: GR/IR PPV Invoice

Payable

Accounts Vendor
Receipt
Payable (158)

PP = Production Planning, RFQ = Request for Quotation, PO = Purchase Order, GR/IR = Goods Receipt/Invoice Receipt, PPV = Purchase
Price Variance
 Rework Processing (Work-In-Process)

Purpose and Benefits:

• 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
• Key process flows covered
− Confirming Production Activities
− Confirm Scrap defective material
− Confirm Parent Order at Rework Operation
− Continue Shop floor-Activities
 Rework Processing (Work-In-Process)

Detailed Process Description:

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

Confirming
Production End Process
Activities
Event

Confirm Parent
Confirm Scrap Production Order for Continue Shop-
Defective Reworked Quantity Floor-Activities for
Material That Can Proceed to Non-Defective-
Subsequent Quantity
Operations

No
Shop Floor Specialist

Confirm Parent Any

Insert Rework Production Order
Operation on at Rework Complaint
Parent Operation for Quantity
Production Order Non-Defective to Be
Automatically Quantity Scrapped?

Scrap
Defective
Quantity that
Can’t Be
Yes Reworked
 Rework Processing (Stock-Manufactured Material)

Purpose and Benefits:

• 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
• Key process flows covered
− 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)

Detailed Process Description:

•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 Diagram

Identified
Component in End
Stock Requires
Event

Process
Changes
Production

Create Rework Release

Rework
Planner

Production Production
Order Order
Shop floor
Specialist

Confirmation
of Rework
Production
Activities

Posting
Warehouse

Goods
Goods Issue for Receipt for
defective Rework
Material Production
Order
Clerk
Production
Supervisor

Review Order
Confirmations