Detailing a Production Order

In the Bike Company, when producing the semi-finished framesets for your different bike models on the shop floor, you need to create a lot-based production order. You want to guarantee that the production will meet all the requirements for the specific context of your organizational unit: the Bikes plant in Hamburg (Germany).

Before delving into the details, let’s apply this to your bike frameset’s production order:

• The order header contains the material number of the bike frameset to be produced and the order quantity.
• The list of operations contains a list of operations that must be executed to transform the individual components into a frameset bike, such as the assembly step, for example. Usually, the steps are executed sequentially.
• The list of components contains all the required components of the frameset and their respective quantity. Here, for example, two pedals, one frame, and one set of driving components. Usually, the list of components and the list of operations are connected, since some components are assembled in the first operation, whereas other components can be assembled in the second operation, and so on.

In the example, the first production operation (assembly) is executed where the frame is consumed, and the pedals and the driving component set are attached to the frame. Then, the partially assembled framesets move to the next operation, if there is one in the list.

The materials are produced in lots as the products can change quite frequently.

The production order information derives from the selected routing and BOM. Routing operations provide valuation details (Control Key, Work Center), while BOM elements specify required data (materials, item category, quantities).

Initiated by the production team, the production order is available through the Create Production order or Manage Production Order apps. These apps provide a lot of information to specify how to produce and valuate the material (for example, operation details, system status, user status, planned cost, actual cost, component overview, and operations overview, and so on). There are also lots of functions available, like release, cost, availability check, capacity planning, reading production master data, technical close of the production order, and so on. From these apps, you can also display goods movement, cost analysis, confirmation details, and so on.

To have an overview on the production orders you need to follow, you can use the Production Cost Overview - Event-Based app.

When creating a production order, the order type is a key element.

From a production perspective, the order type’s setting and its selection determine a production order in SAP S/4HANA Cloud.

The order type defines parameters that influence how the order is executed, such as the criteria that are used to select a routing or a BOM or how the order costs are to be calculated.

With reference to this order type, various business processes, such as scheduling, availability checks, and confirmations, are monitored after some prerequisite configuration activities (covered in the course Detailing Production Accounting by Order). Therefore, different order types exist for different business processes. For example, here, to produce our finished goods, an order type can be used for make-to-stock (MTS) production (YBM1).

From a production accounting perspective, the order type also derives various valuation settings.

So, production orders, among other options, can collect production costs in the manufacturing of semi-finished goods or finished products. It fits perfectly with the production of your framesets in the Bikes company and your need for analysis.

The order type determines the valuation variant, mapped during configuration. This variant gives the details of how the materials and activities are valuated:

• The price in the material master or in the purchasing info record that is used to cost material in the BOM
• The planned or actual price that is used for the internal activities
• The costing sheet that is used to calculate overhead costs to include in the production costs, if some
• Whether, and to what extent, a BOM item or an operation in the routing is relevant to costing

So, in this product cost by order method, the cost of production is settled at the order level. The settlement receiver is usually a material for make-to-stock production as well as margin analysis’ profitability segments.

When activities are confirmed, the order is automatically debited through internal activity allocation. The price used to value the activities is determined by means of the valuation variant linked to the order through the costing variant for simultaneous costing.

The system uses the valuation variant that is assigned to the costing variant specified in the Costing variant actual field in the manufacturing order.

Based on the order type, the system derives or requests the selection of a production version. The production version defines which routing in combination with which bill of material is to be used for the production order.

On the production order, in the details of the associated BOM and routing, you can see details that will determine future costing relevancy (respectively, the BOM item details screen and the operation control key on the operation details screen).

From a production accounting perspective, you are interested in product cost by order method. The main reason is that you want to analyze costs at the level of manufacturing orders and use the orders as cost objects. You can use this method in make-to-stock but also in sales-order-related or engineer-to-order production environments.

To implement the method and have then a cumulative view of the different production orders, production orders will adopt the settlement rule type FULL (full settlement). This rule is inherited from the order type through the default distribution rule PP1 (Production Material Full Settlement) as defined in the configuration activity Define Order-Type-Dependent Parameters for Production Order.

In the event-based cost posting context, the Display Posting Rules—Event-Based app allows you to check the implemented options for specific orders. This app can also check details such as the distribution method used and the allocation of costs per receiver.