Outlining Program Planning

To illustrate the production processes in a company, we use the example of the Bike Company. The company produces its own bicycles and maps the production processes in SAP S/4HANA Cloud Public Edition.

The planning process in SAP S/4HANA Cloud Public Edition Cloud is divided in two major steps: Demand Management (Program Planning) and Material Requirement Planning (MRP).

The main task of Demand Management is to identify current requirements and to predict future relevant requirements (planned independent requirements). Planned Independent Requirements are calculated by forecast procedures in SAP IBP based on historical demand. After calculation they are transferred to Demand Management as planned independent requirements. In addition to these requirements, sales orders could (already) exist for the same material in the same plant. It is possible that sales orders from the area of Sales&Distribution consume the planned independent requirements from the forecast (depending on the planning strategy).

In case the independent requirements (including the sales orders) are not completely covered by the existing stock or existing planning elements, a shortage situation occurs. This would be the starting point for Material Requirement Planning (MRP). The main task of MRP is the creation of suitable planning elements in time, like Planned Orders, Purchase Requisitions or Stock-Transfer-Orders.

You may be wondering why production planning is necessary. Consider a scenario where the Bike Company simply manufactures bicycles based on incoming orders. However, customers generally prefer to receive their bikes promptly, rather than waiting for weeks. If the company solely relied on this approach, it would be unable to meet the immediate demands of its customers. This is where production planning in time becomes crucial.

To get an introduction to the topic, watch the following video:

By implementing effective production planning strategies, the Bike Company can anticipate customer needs, forecast demand, and optimize its manufacturing processes accordingly. The production planning process involves four main steps: forecasting, demand management, material requirements planning, and capacity planning. Let's delve into an example to illustrate how these steps are executed and interact:

1. Forecasting

   Based on sales figures from previous periods and market observations, the Bike Company determines that it will need 200 bicycles of a specific model in the upcoming period.

2. Demand Management

   Planned independent requirements (PIRs) are the result of the forecasting phase. They act as placeholders for future customer orders.

3. Material Requirements Planning (MRP)

   During this step, the exact quantities of materials required for production are calculated based on the PIRs, existing stock levels, and long-term sales orders. In our example, the Bike Company has 100 bikes in stock, but the demand is for 200 bikes. The material requirements planning (MRP) system takes this information into account and determines that additional 100 bikes need to be produced.

4. Capacity Planning

   Capacity planning ensures that production can be executed within the available resources and timeline. It considers machine capacities, labor capacities, and production lead times. For example, capacity planning checks whether the work centers responsible for painting the bicycles are available on the requested dates.

In conclusion, the combination of forecasting, demand management, material requirements planning, and capacity planning in SAP S/4HANA Cloud Public Edition empowers the Bike Company to streamline its production operations. It enables the company to meet the expected demand, minimize stock shortages, and maximize production efficiency, ultimately leading to customer satisfaction and business success.

In addition to SAP Integrated Business Planning, for sales and operations (SOP) planning tasks SAP S/4HANA Cloud Public Editionoffers the following planning tools:

• Flexible Planning
• Standard SOP

However, it is important to note that these tools are not strategic for SAP S/4HANA Cloud Public Edition and have their successor in the functionality of SAP IBP.

Demand Management is the management of independent requirements and sales orders. Based on these, you can use the MRP.

Finally, sales orders can be created in the Sales and Distribution (SD) module.

Forecasting is one aspect of supply chain planning. Requirements from the past sales order quantities provide the basis to forecast future demands. Start the video to see the integration of these and other processes into the demand planning cycle.

In the Bike Company example, past sales order quantities are used to predict the future demand of 200 bikes. Market intelligence and events like trade fairs also contribute to the forecast. The demand plan is then derived into planned independent requirements, which guide procurement and production planning. These requirements can be consumed by current sales orders. By integrating forecasting into the demand planning cycle, the Bike Company can efficiently meet customer needs.

Demand Management is the management of planned independent requirements and their interaction with real customer requirements. The demand program serves as input for material requirements planning.

The effects of independent requirements, whether they are planned independent requirements or sales orders, on material requirements planning are determined by their requirement types derived from the planning strategy defined in customizing.

In the context of the Bike Company's make-to-stock production, there may be situations where you need to start procurement of materials without waiting for specific customer requirements, such as sales orders. In these cases, you can use planned independent requirements, resulting in reduced delivery times. Moreover, you can use forecast planning to spread the burden evenly across your production resources. You can even trigger production without any customer requirement.

The following methods are available for including customer requirements into planning:

• Make-to-Order Production: Various make-to-order planning strategies support producing specifically for a sales order item, ensuring the production aligns with customer demands.
• Make-to-Stock Production: Make-to-stock production facilitates combining planned independent requirements and sales orders into a consolidated total requirement.
• Dynamic Consumption: In several planning strategies, it is possible to dynamically consume planned independent requirements with sales orders.

Material Requirements Planning (MRP) is the first step of detailed production planning within a short-term horizon.

It involves determining the procurement dates for the necessary assemblies and components based on the requirement dates for the finished product. For example, these requirement dates could be derived from a sales order.

Watch the video to learn more.

Scheduling of procurement for in-house products is derived from work centers and routing. To ensure smooth operations, it is essential to calculate the duration of each operation accurately. This is done using formulas that consider standard values and planned quantities.

The assemblies, given in the Bills of Materials (BOMs) of the finished product, must be available when the assembly of the finished product is started. To achieve this, it is necessary to initiate the procurement of these assemblies well in advance. For example, the Bike Company needs spokes and rims to assemble the tires.

In a first approach, the order dates of the assemblies are determined in backward scheduling using the in-house production time or the planned delivery time, taking the dependent requirements date as the desired availability date.

In simpler terms, backward scheduling works by starting from the desired availability date of the finished product and working backward to determine when the assemblies need to be procured. By doing so, the production process can be organized efficiently, ensuring that the required assemblies are available when needed.

You use MRP planning procedures to specify which planning action the system executes for each product.

You use the production planning run to execute heuristics, detailed scheduling functions, or optimization for many objects online or as a background job. During the production planning run, several heuristics or functions can be executed one after the other. In a production planning run, you execute procurement planning in particular for products with planning file entries (net change planning).

You can use interactive planning for important products that you wish to plan manually or to solve any planning problems that have arisen during automatic planning. Various tools are available for interactive planning, such as the detailed scheduling planning board or the product planning table.

Detailed scheduling automates the scheduling of orders on resources, taking into account multiple planning conditions like component or resource availability.

The solution PP/DS can be executed, including the Optimizer. With this, you can improve the resource scheduling according to certain criteria, such as setup times and setup costs, to improve the planning situation and solve particular detailed scheduling problems.

Capacity requirements planning (CRP) involves evaluating the available capacity of work centers or resources and matching it with the production requirements. It ensures that the necessary resources, such as equipment, labor, and time, are adequately allocated to meet the production schedule and fulfill customer demand. Watch the video to learn more about capacity requirements planning.

Let’s use the example of painting bicycles in the Bike Company to illustrate the steps of capacity requirements planning. In material requirements planning, you can use the routing to determine the capacity needed for painting bicycles. This helps in planning the required resources for the painting process, which is a crucial step before capacity requirements planning.

To ensure the feasibility of the plan, it is important to check if the work centers responsible for painting the bicycles are available on the requested dates. This verification is done through capacity requirements planning. capacity requirements planning focuses on a specific work center, often the bottleneck resource, to ensure that the capacity is sufficient to meet the production requirements.

The goal of capacity planning is to schedule all the operations involved in painting the bicycles, considering the planned or manufacturing orders. This ensures that the production plan can be successfully executed, and the bikes can be painted according to the required schedule.