Posting Goods Issues for Production Orders

As already stated above, the components required for the assembly of the manufactured product might not always be available in the required quantity at the production storage location. SAP S/4HANA offers various methods to organize the transfer of components from one storage location to another one. This process is called Material Staging.

The figure shows two different storage locations in one plant: The central storage location on the left side, 101A in our example, and the production storage location on the right side, 101B in our example. After purchasing and delivery from the supplier, raw materials are stored in a warehouse which is modeled as central storage location in the system. Furthermore, semi-finished components which were manufactured in other production facilities might also be stored here. For organizational reasons, the shop floor is modeled as a separate storage location. Therefore, before the production operators can consume the components, the latter must be staged from the central warehouse to the production storage location. SAP S/4HANA offers several approaches, for example:

• Stock transfer using the Pull List

  The pull list controls the internal flow of material to supply production. It is assumed that the components required for production have already been produced in-house or procured externally and now merely need to be moved from their current storage location (101A) to the production storage location (101B). The pull list supports various replenishment strategies, for example, direct stock transfer (one step process) or triggering replenishment via stock transfer reservations (two-step process).

  You can, for example, execute the pull list on one day to trigger material staging of all components that are required on the shop floor on the following day. First, the system calculates the shortfall quantities at the receiving storage location. Then the system creates a replenishment proposal for the shortfall quantities. In our example, a replenishment proposal for a missing component corresponds to a direct stock transfer of a component from the central to the production storage location. In the last step, you accept the replenishment proposals and trigger staging. In the case of direct stock transfer, the system posts the stock transfer, that is, the goods issue for the components from the central to the production storage location. The physical stock transfer, however, is not executed in the system.

• Classic Kanban stock transfer

  Kanban is a procedure for controlling production and material flow based on the physical material stock in production. Material that is required on a regular basis is continually kept available in small quantities in production. With Kanban, the replenishment or production of a material is triggered only when a certain quantity of the material has been consumed.

In the classic Kanban production control method, the demand source (for example, a production work center), the supply source (for example, a central storage location), and the procedure to be used to replenish the material (for example, direct stock transfer or stock transfer with reservation) are defined in the control cycle which is displayed in the figure above. In addition, the number of Kanban containers that circulate between the supply source and the demand source, and the quantity per container are defined in the control cycle.

Each Kanban container contains the quantity of material that work center personnel need for a certain period of time. When executing the Kanban process, the Kanban container circles between the demand and supply source: As soon as a container is emptied by the demand source, a replenishment signal is triggered (for example, by scanning a barcode). The signal is received by the supply source for the required material (for example, warehouse) and replenishment is started. After the now full again container is transferred back, that is, from the supply source to the demand source, the latter acknowledges the receipt of the container (for example, by scanning another barcode), which completes the Kanban cycle for one container.

Similar to the Pull List approach, Kanban in SAP S/4HANA supports various replenishment strategies for stock transfer:

• The simplest replenishment strategy is a replenishment using direct transfer posting: You use this function if you want to transfer components without any previous reservation. Setting the Kanban to empty automatically triggers a transfer posting.
• If you prefer a two-step procedure, you can use the replenishment using reservationsapproach: Setting the Kanban container to "Empty" generates a reservation from the supplying to the receiving storage location. The material is transferred with reference to the reservation and moved to the receiving storage location. The transfer posting automatically sets the Kanban container status to "Full" or, on the other hand, the change of status to "Full" automatically triggers the transfer posting.
• And so on.

For each material component in a production order, a default issue storage location can be determined at order creation based on master data settings. Note that the automatic determination of the issue storage location is not mandatory: When manually posting the goods issue, you can use, for example, stock determination or batch determination to automatically determine the storage location of the component. If you do not want to use an automatic approach at all, you can always manually specify the goods issue storage location in the respective app.

When automatically posting goods issue, it is mandatory to maintain the goods issue storage location in the production order as the automated goods movement fails if no storage location is maintained as the system does not know in this case from which physical location the component was taken.

As stated above, when the order is created, the system checks the master data to determine the goods issue storage location for each component. Since you can maintain the issuing storage location in different master data elements, it is important to understand the processing sequence used by the system:

1. The manual assignment of a goods issue storage location to the component in the order is always considered with highest priority. In a consequence, you can always manually override the proposed storage location if required.
2. Work center → production supply area → storage location: When defining production supply areas, you can assign the former to a storage location. Furthermore, you can assign work centers to production supply areas. If this is the case, the system determines the goods issue storage location of a component via the following sequence: Assignment of component to production operation → assigned work center → assigned production supply area → assigned storage location
3. BOM item: During BOM maintenance, you can assign a storage location to each BOM item. If you alternatively assign a production supply area (PSA) in the BOM item and the PSA is assigned to a storage location, the latter is automatically entered in the BOM item.
4. Material master: During material maintenance, you can assign a storage location to the component (field Production Storage Location on the MRP 2 view of the material master).

To automatically post the goods issue for a component together with the order or operation confirmation, the backflush indicator must be set for the respective component. The system offers the following options:

• You can set the backflush indicator in the routing (Component Overview tab). If you set the indicator in the routing, it applies irrespective of what you have defined in the material master record.
• You can set the backflush indicator in the material master (MRP view). If the indicator is set to 'always backflush', the backflush indicator is set in the production order for the respective component. If the indicator is empty, you must manually post goods issues for the respective component. As a third option, you can let the work center decide whether a component is backflushed or not.
• You can set the backflush indicator in the work center (Basic Data tab). If the indicator is set, the backflush indicator is set in the production order for the respective component.
• You can set the backflush indicator directly in the production order (Component Overview tab). Note that this usually only done in exceptional cases.

From a business perspective, SAP recommends to set the backflush indicator in the material master if the material consumption is always automatically posted, for example, in automated manufacturing environments. If the same component is assembled at different work centers (some might be able to automatically assemble components, some not), you can decide on work center level whether a component posting is executed automatically or not.

If, for organizational reasons, goods issues are posted before the corresponding goods receipts, but the material already physically exists in the storage location, you can choose between the following procedures:

• Allow negative stocks

  This scenario is displayed in the left side of the figure: Assume a current stock of 50 PC of a component, for example, wheels. Together with the operation consumption, you post a goods issue to the production order since the respective component is set up as a backflushed component. After goods issue posting, the current stock is -50 PC in the system. In the next step, you post the component replenishment of 120 PC, for example, by executing a stock transfer from the central to the production storage location using the pull list or a Kanban signal. After the stock transfer posting, the current stock is 70 PC in the system.

  Negative stocks are possible in inventory management. When you are working with negative stocks, you must make sure that you have no negative stocks on the balance sheet key date and at the time of taking physical inventory. When you run the month end closing program, there must be no negative stocks from the previous month.

  Note

  Note that, although the system might display negative stock quantities, this usually does not correspond to any physically existing situation since stock cannot be less than zero. Having negative stock quantities at one storage location usually results from the fact that the physical stock transfer already took place, but the respective system transaction (for example, the stock transfer booking) is missing.

  You set the indicator determining the permissibility of negative stocks in the material master.

• Postprocess the error records from automatic goods movements

  This scenario is displayed on the right side of the figure: Assume a current stock of 50 PC of a component, for example, wheels. Together with the operation consumption, you post a goods issue to the production order since the respective component is set up as a backflushed component. Since you configured the system such that the stock transfer does not fail in case of missing stock, the system creates a backlog list entry. The stock quantity is still 50 PC. In the next step, you post the component replenishment of 120 PC, for example, by executing a stock transfer from the central to the production storage location using the pull list or a Kanban signal and the stock quantity temporarily increases to 170 PC. Now you post process the backlog list entry and the previous goods issue is executed, resulting in a new stock quantity of 70 PC.