Process Order Definition
A process order generally defines which material is to be produced in which quantity, at which time, and in which way.
In our business example, process orders are used to initiate and control the production of the bicycle paint in our bicycle company. The individual process orders define the following information:
Which type of bicycle paint is to be produced?
Which quantities are to be produced for which batch?
When will the paint be produced to meet the requirement dates (for example production orders for bikes)?
Which material components and which batch are required?
Which phases are to be carried out at which resources?
Integration of Process Orders
Process orders can either derive from planned independent requirements, or from sales orders. Watch the next video to learn more about these 2 possibilities and the overall integration of process orders:
Process orders are pivotal in the production process of materials. The in-house production begins with the definition of a demand program. There are two fundamental planning strategies: Make-to-stock production and make-to-order production. For make-to-stock production, we create planned independent requirements based on forecasts. For make-to-order production, the sales representative create sales orders. Our company primarily focuses on make-to-stock production, given that the monthly paint consumption remains relatively constant.
We regularly review the stock and requirements situation for materials in material requirements planning (MRP). When shortages arise, we create planned orders to meet both the planned independent requirements and sales orders. Typically, our company conducts an MRP run daily. As production time approaches, we convert these planned orders into process orders. While planned orders represent the dynamic receipts of MRP, adjustable through regular planning runs, process orders provide detailed production instructions and are immune to automatic MRP adjustments. In our operations, we convert due planned orders into process orders daily via background processing. Order execution includes steps like staging the necessary material components and confirming the completed phases. The receipt of finished products in inventory management finalizes the production order processing.
Maintain Planned Independent Requirements and Execute MRP
As outlined above, the demand program for a material can arise from specific sales orders, forecasts based on previous sales cycles, requirements from other production/process orders, or a mix of these sources. In this training, we focus solely on a make-to-stock production scenario for our bike paint. Therefore, the production planner only maintains the demand program using planned independent requirements, without accounting for individual sales orders or other production/process orders.
Note
From a production execution point of view, it does not matter whether process orders are executed in a make-to-stock or make-to-order scenario.After maintaining the planned independent requirements, the MRP run processes them. The system evaluates requirements against stock over time to determine if they are covered. If existing stock, planned orders, or process orders already meet the requirements, the MRP run won't create additional planned orders. However, if the requirements are unmet, the MRP run creates planned orders. These can then be converted into process orders to produce the missing quantities, such as red bike paint in cans.
In the following demonstration, you will see how the Production Planner maintains planned independent requirements and how they execute an MRP run. Then, you will see the planning result.
Note
If you have access to a training system, you can execute the exercises Assign your Area of Responsibility and Create Planned Independent Requirements and Run MRP.