Releasing a Production Order

Objective

After completing this lesson, you will be able to release a production order

Production Order Release

In The Bike Company, a production order has been created to manufacture the ordered bikes. Now, it needs to be released using the Manage Production Orders app. Releasing a production order is the fifth step in the MTO process.

When a production order is released, production can commence. Actual costs, such as those resulting from goods issue and activity confirmation, can be posted to the production order.

The figure shows that the release the production order step is the third step in the production order creation section of the process overview for sales-order-related production. By releasing a production order, the status changes from CTRD to REL.

Preliminary Cost Estimate

In The Bike Company, when a production order in the MTO process is released, a preliminary cost estimate for the production order is created and saved automatically. This happens due to settings in the production order’s production order type.

The preliminary cost estimate is calculated based on the quantities to be produced, the quantity structure (transferred from the planning order to the production order), and the costing variant for planned costs assigned to the production order. The calculation of the preliminary cost estimate is done as follows:

All BOM items and operations in the routing of the bike (quantity structure) is valuated using their prices, surcharges, and cost rates (value structure).
The correct value structure is selected by the valuation variant assigned to the costing variant for planned costs.

To ensure that all components and operations are accurately costed, it is essential to set the Relevant to Costing flag in the respective BOM and routing of the product.

Note

For more information on the basics of product cost planning and cost estimates, see the following learning journey: Introducing Product Cost Planning and Production Accounting in SAP S/HANA.

The figure outlines the valuation variant’s effects on the costing of the production order. In the present case, this comprises the selection of material prices, cost rates, and the costing sheet to calculate material overhead costs, as well as production overhead costs.

You can check a production order’s preliminary cost estimate via the menu in the production order or directly using the Order Cost Details – Event-Based app. The costs from the preliminary cost estimate are displayed in the Planned Costs column.

In the MTO scenario, a production order’s preliminary cost estimate can be used to determine the standard costs of the individual requirements material manufactured with the production order.

Summary

To start production and post actual costs to it, a production order needs to be released.
When a production order is released, a preliminary cost estimate can be calculated.
The preliminary cost estimate is created based on the costing variant for planned costs assigned to the production order.
In the MTO scenario, a production order’s preliminary cost estimate can be used to determine the standard costs of the individual requirements material manufactured.

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