Companies today realize how critical production planning practices are when it comes to achieving operational efficiency. Effective production planning has become a critical differentiator. However, when companies remain tethered to antique legacy systems, depending on manual processes, this results in costly inefficiencies, inaccurate forecasts and frustrated Production planners.
Here comes SAP S/4HANA, a revolutionary Enterprise Resource Planning (ERP) solution designed to optimise and transform end-to-end business processes. Having SAP S/4HANA in your company gives you complete visibility of all the operations on your shop floor with real-time data and intelligent planning functionalities like Material Requirements Planning (MRP), Master Planning Strategy (MPS), and Demand-Driven Replenishment to plan materials effectively.
Let’s take a look into how these functionalities streamline your production processes and how SAP S/4HANA eliminates production planning headaches
Some Common Production Planning Headaches in the Manufacturing Industry
The wheels of manufacturing come to a halt when plagued by production planning headaches. From inaccurate forecasts that leave shelves empty or idle inventory, to inefficient processes that eat into profits, these challenges can be the difference between a thriving factory and a struggling one.
Let’s take a look into some of the most common production planning nightmares that manufacturers face daily.
Numerous manufacturers currently encounter the challenge of predicting future demand due to a lack of advanced reporting tools. The absence of accurate estimations leads to inadequate product supply, resulting in a fall in sales.
Increasing Efficiency in Manufacturing Plants
Traditionally, manufacturers seek ways to enhance efficiency and cut costs, only compromising the product quality hence increasing the number of dissatisfied customers.
Effective inventory management remains a prevalent challenge, particularly for small manufacturers relying on manual methods. Automation tools simplify the time-consuming inventory tracking process, reducing errors and preventing shortages, and overstock.
Manufacturers want to boost the Return on Investment (ROI) by either artificially inflating sales or raising product prices. These strategies lack sustainability, especially in developing countries with reduced consumer purchasing power.
Managing Sales Leads
When Manufacturers lack inadequate handling of leads leads to unsatisfied customers, lost opportunities due to slow responses, and missed chances to capitalize on promising leads.
Coping with the Digital Transformation
Manufacturers struggle to keep pace with constant technological advancements, such as IoT, AI, and RPA. Balancing investment costs and the potential (ROI) becomes challenging, forcing manufacturers to make difficult decisions just to stay in business.
Whether we talk about nurturing your sales leads, forecasting your material requirements with precision, keeping an accurate track of your inventory or nurturing your leads, SAP S/4HANA does it all. Let’s take a look at how VC ERP the best SAP implementation partner helps you solve all your headaches and achieve the best digital transformation through its process.
How Is Production Planning Done in SAP S/4HANA?
SAP S/4HANA offers a variety of capabilities to simplify the production process and tackle the typical challenges encountered during production planning. These capabilities include Sales & Operations Planning, Master Planning Strategy, Material Requirements Planning, and Demand-Driven Replenishment. With real-time data and intelligent planning capabilities, SAP S/4HANA is the best ERP solution for manufacturing industries seeking to achieve digital transformation and operational efficiency.
Sales & Operations Planning
Sales & Operations Planning (SOP) is a tool that enables you to forecast and plan sales, production and other supply chain targets based on historical, existing, and estimated future data. You can also use SOP to determine the amount of capacity and resources needed to meet these targets through rough-cut planning.
Using SOP, you can optimize your company’s sales and production operations, particularly for long- and medium-term planning. You can then share the SOP plans with Demand Management in the form of independent requirements. This data is then passed on to Master Production Scheduling and Material Requirements Planning.
In Addition, SAP offers an interface for Profitability Analysis (CO-PA), which you can use as the basis for sales planning in SOP. Using this interface you can process your planning data from any organizational unit’s standpoint.
Integrated Master Data
Bills of Material (BOMs) and Routings are important pieces of master data for materials management and production control. During the product design phase, drawings and a list of required parts are created to ensure that the product can be produced and used as intended. This list is known as the Bill of Material.
Routings on the other hand are used to plan the production of materials (products). They are a template for production orders and run schedules, as well as a basis for product costing. The Routing includes:
- The work steps (operations) to be performed during production
- The activities performed during the operations, which determine dates, capacity requirements, and costs
- The materials used during production
- The work centers used
- The quality checks performed during production.
Powerful Capacity Planning
The objective of every company is to economically utilize resources. Component Capacity Planning is a tool that can help companies achieve this objective by supporting planning in all its phases:
- long-term rough-cut planning,
- medium-term planning,
- short-term detailed planning.
Capacity planning consists of two crucial parts, capacity evaluation and capacity levelling. SAP S/4HANA offers capacity evaluations that help you analyze the capacity loads within your company. These analyses can be customized for each user based on their planning level, planning horizon, and area of responsibility. Along with this comes capacity levelling capabilities, these help the system balance workloads, optimize machines, production lines, and select appropriate resources through capacity leveling.
Intelligent Material Requirements Planning
The Materials requirement planning functionality in SAP S/4HANA ensures that the necessary materials are available when needed. This planning takes place to procure or produce the required amounts on time, both for internal use and for sales and distribution.
This process involves keeping track of inventory levels and automatically generating procurement proposals for purchasing and production. MRP attempts to strike the best possible balance between factors such as inventory levels, production costs, delivery times etc.
The MRP component or PP-MRP is a tool that helps MRP controllers in their work. An MRP controller’s job is to determine the type, quantity, and timing of materials needed for production. Moreover you can easily calculate when orders have to be placed to cover those requirements.
SAP S/4HANA offers various material planning methods to help organizations manage their inventory levels effectively which are the following:Material Requirements Planning
Involves using current and future sales figures to determine the required quantities for materials. This triggers the net requirements calculation for both planned and exact quantities.Master Production Scheduling
Is a planning process that focuses on finished products and important assemblies, known as master schedule items. Only these items are planned in this process. The system then creates dependent requirements for the BOM level directly below the planning level, without planning levels below that.Consumption-based Planning
Uses historical data such as past consumption to calculate future requirements. This is done through material forecast or statistical planning procedures. The net requirements calculation is not triggered by an independent or dependent requirement, but rather by falling stock levels below a reorder point or forecasted requirements.Demand-driven Replenishment
Is a strategy that helps to plan and manage supply chains based on customer demand rather than traditional MRP procedures. This is achieved by decoupling material flows strategically, protecting the flow through dynamically managed buffer (stock) levels for relevant products, and becoming less vulnerable to disruptions in the supply chain.
Each of these methods has its unique features and benefits, and organizations can choose the one that best suits their business requirements.
Production Lot Planning
SAP S/4HANA enables you to perform Production lot planning, it is a process of grouping products and producing them in batches. It involves planning and producing a specific production lot of an assembly, and calculating both the planned and actual costs for the production.
In industries such as mechanical engineering and electronics, production lots are created to plan finished products and important semi-finished parts. Production lot planning allows you to determine the costs for a product at a certain stage of planning, even before receiving the sales order. This is crucial due to the increasingly shorter product life cycles.
Previously, separate cost determination for changes to a product managed with Engineering change Management was not possible without production lots.
Costs can be determined using both evaluated and non-valuated individual stock. This can be achieved by defining production lots. During this process, every production lot is given a unique number, which is used to link all receipt and issue elements of the pegged requirements.
It is also possible to create a bill of material and a routing concerning a production lot.
In fact, it is also practical to use production lots for a finished product or an important assembly if you have to procure special components for a particular production lot or if numerous expensive components are to be built into a product that is not usually used.
This way, you can procure components specifically for a particular production lot and avoid high inventories and storage costs.
Additionally with this the user-friendly interface of SAP S/4HANA, SAP Fiori, allows you to fully utilize its capabilities, giving each user a customized, role-based experience. SAP Fiori comes with its intuitive user experience and streamlined interface, Fiori complements SAP S/4HANA and enables you to get the most out of your production planning processes.
Let’s explore some of the benefits of SAP Fiori with SAP S/4HANA.
The Perks of SAP Fiori With SAP S/4HANA
As Cherry on top of your S/4HANA experience comes SAP Fiori! With SAP Fiori, you get Role-based dashboards that let you access critical data instantly.
SAP S/4HANA comes with a variety of powerful analytical applications that are crucial for making timely decisions, providing every team member in the production planning department with powerful insights. Let’s take a closer look at some of these analytical apps.
The Material Scrap application enables you to compare the actual scrap figures recorded in the production confirmations with the expected scrap defined for the material being produced. It allows you to update the expected scrap percentage in the material by implementing a feedback loop. The app displays the materials where the expected scrap percentage differs the most from the actual scrap percentage.
With this app, you can compare the actual scrap figures recorded in the production confirmations with the expected scrap defined in the order operation. It allows you to update the expected scrap percentage in the order operation by implementing a feedback loop. The app displays the work centres where the expected scrap percentage differs the most from the actual scrap percentage.
At the end of any production operation, companies need Key Performance Indicators (KPIs) to measure how efficient the execution was. With this app, you can now receive alerts on KPIs and perform step-by-step data analysis from different perspectives to identify the root causes of scrap in your production process.
The KPIs provide you with information on the distribution of actual scrap recorded in production confirmations in the dimensions of time, work centre, material, plant, and reason for the variance. As a production engineer, you can analyze this confirmed scrap and rework. Analyzing the reasons or root causes of the greatest loss of production will help prevent problems in the future.
Excess Component Consumption
Compare the expected component scrap percentage defined in the BOM item with the actual excess consumption recorded in the production confirmation. You can analyze the problems that created the largest excess component consumption in the past and search for means to prevent these problems in the future. Excess component consumption puts the component supply at risk but can be lowered by this app.
You can perform a step-by-step analysis for a specific period and uncover numerous insights to improve your planning and take other appropriate actions to achieve a more reliable component supply for production.
Production Execution Duration
The production execution duration Fiori app allows you to compare the planned and actual operation durations required for execution. The planned operation durations are defined in the manufacturing order and are calculated using the durations defined in the routing or master recipe.
The time required for execution is recorded in the production confirmations. Using this app, you can easily compare these values. You can perform a step-by-step analysis for a specific time and continuously fine-tune the production facility.
We have summarized that SAP S/4HANA comes as a comprehensive solution to all businesses but it’s equally important to choose the right implementation partner to ensure a smooth and successful implementation.
With VC ERP, you can rest assured that your SAP S/4HANA implementation will be handled by experienced professionals who are dedicated to delivering solutions that meet your unique business needs.
Choose VC ERP as the Best SAP S/4HANA Implementation Partner
SAP S/4HANA is an ideal solution for production planning headaches, as it offers a range of intelligent capabilities that streamline your production processes
From Sales and Operations Planning to Material Requirements Planning and Powerful Capacity Planning, SAP S/4HANA addresses the most common production planning challenges with ease.
VC ERP is a trusted implementation partner with deep expertise in SAP S/4HANA and can help you achieve the best digital transformation through its process.
If you’re looking to optimize your production planning processes, contact VC ERP for a quick free consultation or to learn more about their SAP S/4HANA production planning solutions. With SAP S/4HANA and VC ERP, you can take your production planning to the next level and achieve operational efficiency like never before.