Introducing SAP S/4HANA Cloud Public Edition – Manufacturing

In this course, we will learn the business processes for realizing in-house production with SAP S/4HANA Cloud Public Edition. Starting with the creation of requirements up to the goods receipt of the finished product, all the fundamental process steps and options in production planning and manufacturing execution are presented in the following units.   

The business processes of in-house production are illustrated using an example company, Bike Company. Bike Company manufactures bicycles and the assemblies required for production using various planning strategies and production types. Depending on the respective production requirements, both the planning strategy make-to-stock production and the planning strategy make-to-order production are used. Bicycles with a relatively constant, predictable sales volume are produced in make-to-stock production, while more expensive special bicycles that require a more complex production process are produced in make-to-order production. Depending on the product and the production environment, manufacturing execution is controlled in discrete manufacturing using production orders, in process manufacturing using process orders or in repetitive manufacturing using planned orders. For example, production orders are used for the production of bicycles, process orders are used for the production of bike paints and repetitive manufacturing is used for the production of wheels. 

The in-house production process starts with the definition of a demand program for the materials to be produced. There are two basic planning strategies: make-to-stock production and make-to-order production. In the case of make-to-stock production, planned independent requirements are created based on forecasts; in the case of make-to-order production, sales orders are created in Sales. As already mentioned, both planning strategies are used in our bicycle company. Standard bicycles are produced in make-to-stock production, while special bicycles are produced in make-to-order production.

The stock and requirements situation for the products, for example bicycles, and for the material components required for production, for example bike paint or wheels, is regularly checked in material requirements planning (MRP). In case of shortage situations, planned orders are created to cover the planned independent requirements and sales orders for the products and the dependent requirements for the material components. In our bicycle company, an MRP run is usually carried out once a day.

In the case of in-house production, close to the time of production, the planned orders are then converted into production orders or process orders or loaded onto the production lines for repetitive manufacturing. Which production type, discrete manufacturing, process manufacturing or repetitive manufacturing, is chosen for which material depends on the respective production process. As already mentioned, our bike company uses production orders for the manufacture of bicycles, process orders for the production of bike paints and repetitive manufacturing for the manufacture of wheels.

Order execution includes steps such as staging the required material components and confirming the processed operations. The goods receipts of the finished products in inventory management complete the order processing for production.

Depending on the manufacturing process, product complexity, stability of production, and other criteria, a company has various requirements with regards to shop floor control. For this reason, SAP S/4HANA Cloud Public Edition, supports the different production types. They are briefly outlined below. You will find more detailed information in the following units, depending on the context.

• Production Orders for Discrete Industries

  A production order is usually used to plan and execute manufacturing processes in discrete manufacturing industries. It is primarily designed for engineering, automotive and plant engineering, consumer goods, construction, wood-working, electronics industry, aerospace and defense, and so on. From a management perspective, you want to track and analyze each order individually, for example, with respect to order status and costs.

• Process Orders for Process Industries

  A process order provides an integrated tool for planning and execution in (usually batch-oriented) process manufacturing industries. It is primarily designed for the chemical, pharmaceutical, food and beverage industries, as well as the batch-oriented electronics industry. From a management perspective, you want to track and analyze each order individually, for example, with respect to order status and costs.

• Repetitive Manufacturing

  Repetitive manufacturing in SAP S/4HANA Cloud Public Edition, can be used for production planning and execution in a repetitive manufacturing environment. You can use repetitive manufacturing for either make-to-stock or make-to-order processes, such as in the automotive industry, for example. In contrast to manufacturing with production or process orders, you want to manufacture certain product quantities on a period basis and are therefore not interested in the individual details of each order.

In general, you can distinguish between order-related production, which is used in discrete industries and process industries, and repetitive manufacturing, which is mainly used in discrete industries. In the following units, you will learn more about the different production types and how to apply them in the production processes of our example enterprise Bike Company. The bike is manufactured in various steps, starting from the assembly of raw materials (for example rims, tubes, and so on), through the modification of semi-finished goods (for example, painting of assembled tubes), until the finished product, the bike, is assembled. The entire bike production can be modeled using repetitive manufacturing, process manufacturing, and discrete manufacturing processes, respectively.

Let us start with the final assembly of a bike: This manufacturing process is a typical production process that can be modeled and executed using discrete production orders. In the figure, the typical flow of a production lot though the production process is displayed:

Starting from either a customer order or a make-to-stock order, a production order for a production lot of 100 bikes is created. To assemble the bikes, the production operators must execute various steps (for example, pre-assembly, assembly, quality inspection, packaging, and so on), and assemble various semi-finished components in each step. Each step is modeled in manufacturing master data as operations in a routing. The list of semi-finished components that are required to manufacture a bike is modeled as a bill of material.

Each operation is executed by one production operator at a work center, which is assigned to the manufacturing operation in the routing. The work center can, for example, correspond to an automated assembly robot or a manual assembly station operated by a worker. When a manufacturing operation is finished, the assembly robot or the operator submits relevant data to the SAP S/4HANA Cloud Public Edition, system (for example, production yield, scrap, rework, and production time efforts). Then, the production lot is transferred to the work center assigned to the next operation in the routing where this manufacturing operation is executed by a worker or a machine. This process is repeated until, finally, the last operation of the routing is executed, and the bike is completely assembled. Usually, after the last step of a production order is executed, the goods receipt of the manufactured goods is posted in the SAP S/4HANA Cloud Public Edition, system to update inventory records.

As indicated previously, semi-finished components are required to assemble the finished good ‘bike’. An example of a semi-finished component is a frame. Since the bike will be available in various colors, the frame must be painted. Let’s imagine we need red bikes and require 1500 l red paint so that the next bike production lot can be painted. For the sake of illustration, we assume that the bike manufacturing company also produces the required paint by mixing the required components (for example, solvents, basic paint, and pigment). To fulfill this demand, a process order for the respective quantity is created. In the following video, a typical flow of a process order is illustrated:

From a master data perspective, each step is modeled in manufacturing master data as operations in a recipe. The list of semi-finished or raw components that are required to manufacture the red paint is modeled as a bill of material. Each reaction vessel is modeled as a resource in the SAP S/4HANA Cloud Public Edition system.

As in the discrete production process, when a step is finished, the operator (or vessel, if the process is automated) submits relevant data to the SAP S/4HANA Cloud Public Edition system (for example, production yield, scrap, rework, and production time efforts) such that the order status can be easily tracked at each point during production. Usually, after the last step of a process order is executed, the goods receipt of the manufactured goods is posted in the SAP S/4HANA Cloud Public Edition system to update inventory records.

Now, let's move on to the bicycle tires. The Bike Company needs tires for all their new bikes and for bike service. Therefore, this item is regularly needed in large quantities. In our Bike Company, tires are manufactured by assembling rims and spokes.

In contrast to order-related production, repetitive manufacturing focuses on the period and quantity-oriented production of highly standardized products (for example, electronic devices, car parts, and so on). The manufacturing process (which is usually highly automated) is executed on, for example, an automated production line.

From a master data perspective, the production line corresponds to one work center. Since the assembly process is automated, the detailed assembly steps don’t need to be specified in the routing. Instead, the routing used in repetitive manufacturing usually contains one single manufacturing operation, for example, ‘assembly’. As in the previous examples, the required list of components is modeled in a bill of material.

From a management and analytic perspective, you are not interested anymore in tracking and analyzing individual orders. Instead, you want to know which quantity is manufactured in which time period. From a technical point of view, SAP S/4HANA Cloud Public Edition, uses planned orders to execute and monitor repetitive manufacturing processes.

In order to be able to use the planning and execution functions and to create orders, various master data must have been created beforehand.

• for discrete and repetitive manufacturing:
  • Materials
  • Bills of material (BOM)
  • Routings
  • Work centers
  • Production versions
• for process manufacturing:
  • Materials
  • Bills of material (BOM)
  • Master recipes
  • Resources
  • Production versions

The manufacturing master data are briefly outlined below. You will find more detailed information in the following units, depending on the context.

Material master records must be created for the materials that are produced and procured in a company. In our bicycle company, for example, material master records were created for the finished bicycles, for the required assemblies that are produced in-house, such as frames or wheels, and for raw materials to be procured via purchasing, such as chains or metal tubes. In the material master records, planning data, procurement data, execution-relevant data, and so on, are maintained.

The material components required for finished products and assemblies are to be defined via bills of materials (BOMs). The bill of material for a bicycle can, for example, consist of the material components frame, wheel, chain, and further components. Assemblies, such as the frame of a bicycle, themselves have a BOM, which results in multi-level BOM structures. You furthermore define in a BOM how many components are required to assemble a product. For example, one bike requires the assembly of two wheels, front and rear wheel, respectively.

Routings in discrete and repetitive manufacturing define in detail the operations to be carried out to manufacture a finished product or an assembly. For example, a routing for the production of a bicycle can consist of the operations Pre-assembly, Assembly, and Quality Inspection.

A work center is assigned to each operation to define the physical location where this operation is to be processed. By assigning a work center, you also specify costing- and planning-relevant parameters for the individual operations since the master record of a work center contains essential information that is used for capacity planning, scheduling, and costing of planned and production orders. In our example, the "pre-assembly" of the bike is executed at work center assembly I, the operation "assembly" is executed at work center assembly II, and so on.

Master recipes in process manufacturing define in detail the operations and phases to be carried out to produce a finished product or a semi-finished material.

A resource is assigned to each operation to define the machine, the plant section, or the physical location where this operation is to be processed. By assigning a resource, you also specify costing- and planning-relevant parameters for the individual phases since the master record of a resource contains essential information that is used for capacity planning, scheduling, and costing of process orders.

A planned order, production order, or process order is always created with reference to a production version of the corresponding material. A production version defines which routing or master recipe is to be used in combination with which bill of materials for the planned order, production order or process order. A suitable production version is automatically selected when the order is created according to criteria such as production quantity and production time.