Outlining Make-to-Order Production

In this lesson, you will learn about sales order-related planning strategies. Take a look at the following image, which illustrates different planning strategies. You may notice that some of the make-to-order planning strategies have similar names to the make-to-stock planning strategies. While the names may appear similar, it is important to understand that these strategies have distinct purposes and are designed to cater to different production scenarios.

In make-to-order production, for example, planning strategy 20, the production planning is initiated only when a sales order is received. PIRs are not used in this strategy.

Using the planning strategy 50 – assigned to the final product – it is possible to produce/procure sub components in advance.

Make-to-order production is a planning and inventory management approach that focuses on producing or procuring materials specifically for certain sales order items. Instead of producing or stocking items in advance, make-to-order considers individual customer orders before initiating the production process. This approach helps to minimize excess inventory and reduce the risk of carrying unsold products.

Let’s take a closer look at the steps of planning strategy 20:

Imagine that the Bike Company receives 2 sales orders. With planning strategy 20, each sales order is planned separately. The system does not perform a net requirements calculation between individual sales orders or with the make-to-stock warehouse stock. In make-to-order production, lot-for-lot order quantity is used as the default lot-sizing procedure, independent from the setting in the material master.

In material requirements planning (MRP) in SAP S/4HANA, the Bike Company has to procure or produce each material separately. You will learn more about individual or collective indicator settings in the next section.

The produced bikes for one sales order cannot be exchanged or used for another sales order. Each sales order has its own separate stock, which is managed directly within the corresponding sales order.

The sales order stock and the requirement are reduced by a goods issue to the sales order.

Make-to-order makes sense on the following conditions:

• If it is difficult to forecast the finished product (strategy 70)

• If you need the ability to reserve material for certain sales orders

As mentioned previously, the Bike Company can either produce each material individually, or they can consolidate the requirements for multiple sales orders that use the same material. In SAP S/4HANA, this is controlled by the individual or collective indicator settings. Watch the following video to learn more:

Note

Using the individual/collective indicator in the material master, you can allow make-to-order production at any level of the BOM structure.