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Course Goals and Objectives

This course will enable you to

Explain the manufacturing organizational structures used
by R/3
Describe the basic PP master data
Perform MRP using various repetitive and make-to-order
production strategies
Execute the plans using production orders, repetitive
manufacturing and KANBAN production techniques
Interpret the results of the discrete manufacturing planning
and execution processes

SAP AG 1999

SAP AG LO050 1-1

0.2
Main Business Scenario (1)

The Precision Pumps Company:

Manufactures standard pumps for commercial and
consumer markets
Forecasts annual sales
Derives the production plan from the forecast
Sells most of their products from stock
Manufactures some pumps to order for selected
customers
Uses production orders in the shop floor area

SAP AG 1999

The Precision Pumps Company has been in business since 1971 and produces a large selection of
standard pumps (repetitive and made-to-order). Their pump models include container, centrifugal,
rotary, and diaphragm pumps. Clients range from the consumer market to mining and construction
firms, as well as municipalities.
The company forecasts annual sales. Some forecasts are for specific pump models, like those used
for the consumer market. Other forecasts are for product families, like those used in construction.
Production plans are derived from the forecasts. In order to be as responsive as possible to customer
requirements, many pump models are kept in stock. Others are manufactured only when a sales order
is taken. The company uses standard sub-assemblies for these orders when possible. Machine and
labor capacity is sometimes a problem, especially in a few key work centers.
Precision Pumps uses production orders in the shop floor area. They would like to optimize reporting
for activity accounting, production material consumption/goods receipt processes. The company has
recently been certified by ISO.

SAP AG LO050 1-2

0.3
Main Business Scenario (2)

Maxitec Computers
Assembles PCs for specific sales orders
Uses standard assemblies where possible
Forms these standard assemblies in make-to-order
production
Uses repetitive manufacturing techniques to build these
standard assemblies
Uses KANBAN techniques to procure components of
the standard assemblies

SAP AG 1999

Maxitec Computers, Limited was established in 1992. The company delivers PCs that are assembled
specifically for each sales order.
In order to keep delivery times short, Maxitec produces sub-assemblies on the basis of a forecast and
places them in stock. When a sales order is entered, the company assembles the computer and ships
it to the customer. It uses this method because final assembly is the most important value-added step
in the overall production process.
The sub-assemblies usually have simple routings and long manufacturing processes. Maxitec,
therefore, uses repetitive manufacturing techniques for these items.
Maxitec also uses KANBAN processing to replenish the purchased components.

SAP AG LO050 1-3

0.4
Manufacturing Planning and Execution

SD
SD

Sales and Demand Long-term

Operations management planning
Planning
Master Production
production planning
scheduling

MRP

Period planning/ Project-related

Discrete Process
manufacturing manufacturing
production manufacturing

KANBAN
SAP AG 1999

The complete manufacturing planning and execution process is illustrated above.

Sales and Operations planning allows data to be taken from many different external and internal
sources and used as the basis for setting realistic operating targets. Sales and production plans are
created in SOP.
In production planning, decisions are made that influence production plans. Demand management,
for example, stores the independent requirements used by master production scheduling (MPS) and
MRP. By means of system settings, demand management also determines the effect a sales order will
have on forecast consumption. In MPS, items can be planned, which have a considerable influence
on profits or require critical resources. Alternative plans can be simulated in long-term planning.
MRP helps assure the right material is available at the right time in the right quantity.
Execution methods are shown at the bottom. Period planning/manufacturing allows rate-based
production to be implemented, for example in pieces per day. Repetitive manufacturing is an
example of this method. Discrete manufacturing is used for lot-size production, that is, production
orders. Project-based and process manufacturing are additional methods and will not be discussed in
this course. KANBAN is a simplified approach to the planning and execution process.

SAP AG LO050 1-4

0.5
Planning Levels

CO/PA
Profitability Region 1 Region 2
SIS Forecast
analysis

Feedback / Corrections
SOP
Sales & operations
Product group
planning

Demand Product 1 Product 2

management

MPS
Master production Long-term
scheduling planning
Production planning

MRP
Assembly Assembly
Material
requirements ..
planning
Part
.
SAP AG 1999

In Profitability Analysis (CO/PA), the highest planning level, sales volume aims are set and budgets
defined to achieve them.
Using the Sales Information System (SIS), you can display sales information in either graphic or
tabular form. The sales quantities are forecast on the basis of historical values.
In Sales and Operations Planning (SOP), medium to long-term sales quantities are determined and
the measures required to achieve these quantities are outlined (rough feasibility estimate of these
plans).
In production planning, you make decisions regarding the effective use of production resources.
In Demand Management, the planning and production strategy is selected (make-to-stock
production, make-to-order production, production by lot size for sales and stock orders). The
requirement quantities and delivery dates are also determined.
In MPS, the parts or products that have a considerable influence on company profits or that take up
critical resources are carefully planned.
In long-term planning, the effects of the long-term demand program are simulated so that you can
check capacities and the budget required to purchase parts. You can also check the planning for cost
center activity types.
The main task of MRP is to ensure material availability, that is, to procure the required materials in
the correct quantities at the right time.

SAP AG LO050 1-5

0.6
Discrete and Repetitive Manufacturing in R/3

Master
production
scheduling
Long-term Material reqmts
planning planning

Production
Demand Capacity
Capacity Stock
Stock control
management

Sales and
operations Settlement
planning

Controlling
Controlling
SAP AG 1999

The planning and execution elements of R/3 manufacturing dealt with in this course are shown
above.
Within production control production orders, repetitive manufacturing, and KANBAN will be
discussed.

SAP AG LO050 1-6