An MRP run was performed for the ordered bikes in The Bike Company. The planned order that was created from the MRP run needs to be converted into a manufacturing order using the Monitor External Requirements app. This is the fourth step in the MTO process.
Note
In The Bike Company scenario, the planned order is converted into a production order. Therefore, for the remainder of this scenario, we will refer to production orders only and not process orders.
Note
A production order does not have to be created from a planned order. It is also possible to create a production order from a sales order using the Production Order with Sales Order – Create app.
In general, production orders include data relevant to logistics, manufacturing, and management accounting. They feature an order header with multiple tabs, granting access to all information and settings. Furthermore, production orders provide the user with detailed views of components, operations, and cost analysis.
Once a production order has been created, the system transfers the necessary quantity structure from the planned order to the production order. This includes a Bill of Material (BOM) listing the input materials (components) and a routing with detailed information on production activities (operations) required for production.
Note
The most important settings in a production order from a management accounting perspective are detailed in the learning journey: Evaluating Production Accounting in Make-to-Stock Scenarios in SAP S/4HANA.
In this course, we will only discuss the topic briefly.
As highlighted in green in the figure above, the Control tab on the order header contains various settings and keys that affect the costing of the production order.
The most important settings are summarized as follows:
When creating a production order, an order type is entered, which defines the order’s purpose and contains a range of parameters affecting the way it is processed in the system.
This includes, for example, order status management or parameters for planning, budgeting, and settlement. For the MTO scenario this may be the order type YBM3 or YBM4.
Different costing variants for planned and actual costs (here PYR1 and PYR2) are assigned, which define how the costing for planned and actual costs is performed.
A costing variant includes additional settings, such as a valuation variant. This variant determines the prices, surcharges, and cost rates that are used to valuate materials and activities.
Although the valuation variant is not displayed in the figure above, it plays a crucial role in calculating planned and actual cost.
A costing sheet contains various settings that determine how overhead costs are calculated. The correct sheet is also determined by the valuation variant.
The overhead key can be used to determine order-specific or material-related overhead rates.
In event-based production accounting, the event-based processing key (see the EB Procg Key field) is used to activate event-based WIP and variance posting at the order type level.
The event-based posting checkmark is set automatically if the event-based processing key has been assigned.
When a production order is created, it has the status CRTD. To be able to post production costs to the production order, it must be released.
Additionally, in the production order header, in the settlement rule, a posting rule is maintained. It is assigned automatically when the production order is created, based on the distribution rule assigned to the production order type. In product cost by order, the distribution rule PP1 is normally used.
The posting rule determines where costs are posted once event-based settlement occurs. With distribution rule PPC1, the posting rule specifies that one hundred percent of the production costs are posted to the individual requirements material manufactured with the production order. Moreover, the posting type is set to full settlement, which means that settlement takes place once when the order status is either finally delivered or technically complete.
Note
This course does not provide configuration details or a review of the settings and keys for a production order in an MTO scenario.
Summary
A planned order can be converted to a production order.
Data relevant to management accounting in the production order includes the order type, the order status, settings relevant for the creation of the preliminary cost estimate, the costing sheet, the overhead key, settings relevant for event-based postings, and the settlement rule.
A production order includes data relevant to logistics, manufacturing, and management accounting.