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Outlining Planning Strategies in SAP S/4HANA

<div id="content"><div class="parentsection"><div class="section"><p tabindex="0">Trent’s initial order at <strong>Rapid Riders</strong> is now entering the stage of the Plan-to-Produce process. The Plan-to-Produce process involves the following process steps:</p><table cellpadding="5" cellspacing="0" class="table" border="1"><colgroup><col /><col /></colgroup><tbody><tr><td><img tabindex="0" src="/service/media/topic/ef9d2b6c-88fb-42a7-a73d-435adc202963/S4H00_26_en-US_media/S4H00_26_en-US_inline/299060_legend_blue.png" class="inline no-zoom" alt="" /></td><td><strong>1. Demand Planning</strong></td></tr><tr><td><img tabindex="0" src="/service/media/topic/ef9d2b6c-88fb-42a7-a73d-435adc202963/S4H00_26_en-US_media/S4H00_26_en-US_inline/301105_database-2_blue.png" class="inline no-zoom" alt="" /></td><td><strong>2. Material Requirements Planning (MRP)</strong></td></tr><tr><td><img tabindex="0" src="/service/media/topic/ef9d2b6c-88fb-42a7-a73d-435adc202963/S4H00_26_en-US_media/S4H00_26_en-US_inline/299217_detail-view_blue.png" class="inline no-zoom" alt="" /></td><td><strong>3. Procurement</strong></td></tr><tr><td><img tabindex="0" src="/service/media/topic/ef9d2b6c-88fb-42a7-a73d-435adc202963/S4H00_26_en-US_media/S4H00_26_en-US_inline/299075_machine_blue.png" class="inline no-zoom" alt="" /></td><td><strong>4. Production Execution</strong></td></tr></tbody></table></div></div></div>

Introducing the Plan-to-Produce Process

<div id="content"><div class="parentsection"><div class="section"><img tabindex="0" src="/service/media/topic/c29f19bf-13cb-463b-8f18-d98573f60afd/S4H00_26_en-US_media/S4H00_26_en-US_inline/299060_legend_blue.png" class="inline no-zoom" alt="" /><p tabindex="0">Motivated to learn about the first step of Plan-to-Produce, Trent decides to visit Billie, a skilled Production Planner at the <i>Bike Company</i>. His goal? To plunge into the depths of Demand Planning.</p><div class="kalturaVideoLessonWrapper"><div id="1_3kahnnh7" data-testid="video" class="kalturaVideoLessonContainer" aria-label=""></div></div></div></div></div>

Demand Planning

Executing Basic ERP Processes with SAP S/4HANA

Learn about make-to-order and make-to-stock production strategies in this video. Understand the advantages and disadvantages of each approach and how they impact customer satisfaction and inventory management.<br><br># This description was auto-generated #

Hi Trent, nice to meet you. I am Billy, production planner at the bike company. I plan and monitor production schedules, ensuring optimal resource utilization, and timely product delivery. My constant endeavor is to align production with market demands and driving efficiency and profitability for our business. Let me tell you a little more about demand management. Demand management serves as the starting point of production planning and as input for material requirements planning. It consists of the management of planned independent requirements and actual customer requirements. Let's start by looking at your sales order, which triggers the so-called make-to-order scenario. In your case, we only started to manufacture your bicycle after we've received the sales order from Rapid Riders. That's why Rapid Riders is now waiting for your bike to be built before they receive it. Depending on our current production workload at the bike company and the availability of components, the building process might require some time. But why does your bike fall into the category of make-to-order planning? Usually, this planning strategy is used for highly individualized or expensive products that you cannot pre-produce because you only know what to produce after you've received a detailed customer specification. As you ordered a bike with several personalized components, like special handlebars and mudguards, production started after you placed the order. Make-to-order production is a planning approach that focuses on producing 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. The advantage of Make-to-Order manufacturing lies in its ability to cater to individual customer preferences and requirements, offering customization and personalization that can differentiate a product in the market. This approach helps to minimize excess inventory and reduce the risk of carrying unsold products. However, make-to-order production typically involves longer lead times compared to make-to-stock production, as products are produced only after receiving customer orders. This can lead to delays in fulfilling customer requests, especially for complex or highly customized products that require extensive production processes or specialized components. Another scenario would have taken place if you had purchased a standard bike. In this case, the preference of rapid riders would for sure have been to receive the bike shortly after placing their order, rather than having to wait for several weeks. If we solely relied on building bicycles after we've received a customer order, we would be unable to meet the immediate demands of our customers. If we use make-to-stock planning strategies, we already start production before we receive an order from a customer. To minimize waiting time, we can produce bicycles and store them in our warehouse. After receiving a customer order, we will ship the bike from the warehouse to the customer who will receive the bike within a few days after placing the order instead of having to wait several weeks until the bike has been produced. In the bike company we use past sales order quantities to predict the future demand of, for example, 200 bikes per week. Market intelligence and events like trade fairs also contribute to our forecast. Requirements for certain material in a certain plant can also be created manually. Based on the demand plan, PIR are created, which trigger procurement and production. These are stock requirements that can be used to create warehouse stock in advance. Sales orders can be fulfilled using this stock without having to wait that the requested product is manufactured. Therefore, a short delivery time can be ensured. With make-to-stock production, it is also possible to keep the production process as constant as possible, regardless of current demand. This is because items are manufactured based on anticipated demand rather than specific customer orders. This enables manufacturers to establish a regular production schedule, with predetermined quantities and timelines for producing goods. Usually, this planning strategy is used for standard products for which you assume that there will be enough demand soon so that you can be sure to sell what you've got in stock.

	1. Demand Planning
	2. Material Requirements Planning (MRP)
	3. Procurement
	4. Production Execution