Using Make-to-Order Production (MTO) for Sales Orders

Frequent changes to the product to be manufactured is a characteristic of discrete manufacturing. The products are manufactured in lots that are defined individually, with successive work center sequences. Costs are calculated based on orders and individual lots. In repetitive manufacturing, products are changed less frequently and are not manufactured in individual lots. Instead, a product is manufactured for a particular time period at a particular rate and yields are counted at the end of a period.

There can be waiting times between the different operative processes. You can frequently place semi-finished products in temporary storage before further processing.

In discrete manufacturing, component materials are staged with a specific reference to the individual production lots.

Product Cost by Sales Order or sales order controlling is recommended for complex scenarios in MTO production in the following situations:

• When manufacturing in-house for a sales order

• When purchasing products for a sales order and reselling them to your customers

• When providing services for a sales order

• Calculate and analyze the planned costs and the actual costs by sales order item

• Calculate and analyze the planned revenues and the actual revenues by sales order item

• Calculate the value of your inventory of finished and semi-finished products

• Create reserves automatically

• Transfer data to Financial Accounting (FI)

• Transfer data to Profitability Analysis (CO-PA)

• Transfer data to Profit Center Accounting (PCA)

  Note

  In SAP S/4HANA, data for finance and controlling, profit center and margin analysis is stored in the ACDOCA table.

You can create a production order for a sales order if, for example, a product is manufactured using Bills Of Material (BOMs) and routings.

The figure shows the relationship between Controlling by Sales Order, Controlling by Order, and Controlling by Period.

Complex MTO production can involve order-specific changes or even complete product redesign. Detailed planning and monitoring is essential for the costs and revenues of such products.

For advanced MTO production, the following methods are offered:

• MTO:

  Tracking costs directly on the sales order item

• Engineer-To-Order (ETO):

  Using projects for complex production, such as in-plant engineering

The inventories can be assigned to sales orders or projects. The costs of a sales order or a Work Breakdown Structure (WBS) element are not generated with the goods receipt for an order or a production order. For valuated inventories, the system generates the cost of a sales order or a WBS with material utilization (for example, a production order or a collective order).

Sales order costing contains the costing details. For example, unit costing. The cost object displays only the cost of goods sold at cost element level.

The system calculates the overhead for sales and administration using the pricing procedure of the requirement class.

The system also calculates the overhead for materials and manufacturing costs using the pricing procedure of the valuation variant and the costing variant.

You can cost the subassemblies before the sales order BOM is complete. You can use this costing data to evaluate the inventory for these subassemblies.

Choose Accounting→Controlling→Cost Object Controlling→Product Cost by Sales Order→Cost Estimate→Order BOM Cost Estimate→Create (CK51N) to cost a subassembly.

You can use the costing sales order BOM function only with valuated sales order stock.

You can transfer the planned costs, which are already calculated for the subassemblies, to the sales order cost estimate for the finished good. This improves performance significantly.

A requirement indicator determines whether the individual and the collective requirements are allowed for the dependent requirements of a material.

In individual requirements, the requirement quantities of the dependent material are listed individually.

In collective requirements, the requirement quantities of the dependent material are listed collectively.

An individual or the collective requirement indicator also applies to all the lower level BOM components.

For each in-house component with individual requirements, a separate order with specific lot sizes is created, which means orders created for different sales orders cannot be grouped.

• In the material master record.

• In Customizing for production, chooseBasic Data→Bill of Material→Item Data→Define Explosion Types→Change View Explosion Types to define explosion types for BOM items.

The setting for the explosion type overrides the explosion type defined in the material master record.

Response

Pricing is carried out in the Sales and Distribution (Sales Order Management) component and generates the sales price in a price determination schema, based on the predefined prices and the costing results.

Pricing takes into consideration various factors such as article-specific or customer-specific surcharges and discounts as well as scaled calculations.

The price determination schema operates on the basis of Conditions.

The pricing procedure lists all the condition types permitted in pricing.

You determine how the system can use conditions by specifying requirements for each condition and by determining the sequence in which the system accesses conditions in the business document.

The reference level provides a method for specifying a different basis for the condition type calculation and for the grouping conditions for subtotals. The pricing procedure may contain any number of subtotals between the gross and the net price.

You can choose one of the following use cases as a condition type:

• Mandatory condition

• Manually entered condition

• For statistical purposes only

The definition of the condition type per requirement class allows you to determine different condition types for the different items of a sales and distribution order.

For example, you perform pricing for one item based on a pricing procedure when forwarding the sales order pricing value to another item in the same document only for statistical purposes. The sales order costing refers to the sales order item.

If you do not store a condition type in the requirements class, the condition type is determined using the sales document type. In this case, the condition type is valid for all the sales document items of the sales document.

In the standard version of the SD component, the following condition types are provided for the cost transfer of order items:

• EK01:

  If you choose this condition type, the system displays the result of the sales order cost estimate first on the pricing screen for an item. The value can be used as the basis for price calculation.

• EK02:

  If you choose this condition type, the result of sales order costing is purely a statistical value, which you can compare with the price.

Within customizing the requirement class, you can set which preliminary costing is to be used by the SD condition of the sales order. This is possible for assembly type 2 (production order, network, or service statistical processing).