Outlining Make-to-Stock Production

In the last lesson, you learned about planning strategy 10. SAP S/4HANA Enterprise Management offers some more plannings strategies for make-to stock production, for example, 40 and 70. These planning strategies provide different approaches to make-to-stock production, allowing companies to choose the one that best suits their business requirements.

Make-to-stock production strategies can be executed based on planned independent requirements (PIRs) both on finished product level (for example, strategies 10 and 40) as well as an assembly level, including their final assembly (strategy 70). The PIRs itself are a result of a previous forecast process considering sales order items in previous periods and/or can be created manually. These PIRs represent expected future sales order items – it's a kind of temporary placeholder for them. Depending on the used strategy, sales orders can consume PIRs on header level (strategy 40), on assembly level (strategy 70), or will not affect them (strategy 10).

Make-to-stock production strategies are typically used to ensure a smooth and well-balanced production plan (strategy 10). Deviation on the demand side will be covered by warehouse stock.

With planning strategy 10, sales orders do not directly impact the planning situation. This image illustrates the process of planning strategy 10:

Imagine that the Bike Company plans to produce 50 bikes. This planning is done at the finished product level using PIRs. Now, if a sales order for 10 bikes is received, the PIRs are not immediately consumed. Instead, the 10 bikes are delivered from the existing stock in the warehouse. The reduction of PIRs occurs at the moment of the goods issue.

The Bike Company can choose planning strategy 10 when they have a continuous demand for their bikes. This strategy doesn't automatically start production in case the sales demands are higher than the forecast. In this case, the planner at the Bike Company must manually adjust the forecast.

Planning strategy 10 is one basic strategy for make-to-stock production. Let's take a closer look at how this strategy works:

Planning with final assembly is one of the most common planning strategies in make-to-stock production. It's similar to planning strategy 10 but with a key difference: Sales orders are relevant for planning and can consume planned independent requirements (PIRs):

In our scenario, the Bike Company has planned the production of 50 bikes per month. If we receive a sales order for 55 bikes, a shortage of five bikes occurs. In this case, using planning strategy 40, the system automatically triggers the planning of the additional five bikes to eliminate the shortage.

Planning strategy 40 allows you to focus on flexible, automated, and fast reaction to customer demand. This strategy allows for flexibility, automation, and a rapid reaction to customer orders. The Bike Company can apply planning strategy 40 to their assembled bikes, ensuring that they can meet customer demands.

Planning Strategy 40 is one of the most often used planning strategies. Let's take a look how this works:

Watch this video to view a system demonstration how make-to-stock planning with planning strategy 40 works.

With planning strategy 70, the Bike Company can handle the production planning of variants, for example, of bike variants with different bicycle gears.

In this strategy, the Bike Company procures the necessary bike assemblies, excluding the gear variants, without waiting for specific sales orders. When a customer places an order for a particular variant, the final assembly process is carried out using the already stocked assemblies.

Planning strategy 70 is typically used in scenarios where products have configurable or customizable features.

You've learned that with planning strategy 40, sales orders can consume planned independent requirements. Next, let’s discover how exactly consumption is performed. The Bike Company can choose between different consumption modes. Watch the following video to learn more about them:

As you have seen in the video, consumption is an interaction between customer requirements and PIRs. In this strategy, PIRs are only seen as placeholders for future sales orders. Using consumption periods, you can limit the consumption. In case a customer demand is lying outside this consumption period, the consumption will not take place.

Consumption mode Consumption mode

The consumption mode determines the direction on the time axis in which the incoming sales orders are to consume the PIR.