SAP Sales and Operations Planning Tutorial

By this point you should have completed the first task of your SAP internship: the 2005 sales forecast. In this tutorial you will learn about SAP’s built in Sales and Operations Planning (SOP) tool. This planning tool will allow you to formulate a rough-cut production plan based on the sales data you have created. It is important to note that the rough-cut plan is just that, only a plan. When you create the plan you are not scheduling production in the system. SAP separates the action of planning from production scheduling to allow different plans to be created and analyzed before they are actually used in production. This process allows a company to run a few different plans to see which is best. Following the creation of the rough-cut plan you will learn how to transfer this data to the demand management function. Demand management is the link between the rough-cut plan and production scheduling. While SAP wanted companies to have the ability to check several different plans without actually scheduling production, it was still necessary to allow the rough-cut plan to be turned into a production schedule. Not only is this a very fast and easy way to create a production schedule based on the rough-cut plan, but it keeps the planning data secure from human data entry errors. Next, you will activate the material requisition planning (MRP) run for the SOS Inc. Beach cruiser model LX (BC-LX). Finally, you will convert the planned production order for the Beach Cruiser LX into and actual production order.

Part 1: Display Stock/Requirements List

Before we create our rough-cut sales and operations plan, let’s take a look at the current production for the SOS Beach Cruisers. This data is displayed on the stock/requirements list screen. The stock requirements SAP SOP BA301 1

list screen displays pretty much what the name implies; the stock level and future requirements for a material. Every material used in Beach Cruiser production has one of these screens. In the case of a finished good (BC-S, BC-LX) the requirements will be derived from production orders. If there is a production order for 50 BC-LXs, then a requirement of 50 will appear on the BC-LX stock/requirements page for that production date. In the case of raw materials and semi-finished materials used in the production of Beach Cruisers, the requirement is derived from the production order for the finished good and the bill of material (BOM) for that finished good. If a production order is created for 50 BC-LXs and the BOM for the BC-LX calls for 2 steering controllers (part BP-01), then the stock/requirements list screen for steering controllers will show a requirement of 100 for that production date. It is important to understand that the SAP system automatically determines the quantity of materials needed to build the number of finished goods listed in the production order. All the production scheduler needs to do is create the production order for the finished goods, and the system calculates the rest. To display the stock/requirements list for the BC-LX complete the following navigation.

From the SAP Easy Access User menu: Logistics Production MRP Evaluations

Double click on Stock/Requirements list to access the initial screen. Enter BC-LX in the material box. Your plant should already appear in the Plant box. Click the enter button to display the stock/requirements list. As it stands right now, you should see that you have a stock of 20 Beach Cruisers model LX (Available qty). The rest of the screen should be empty, due to the fact that you have not created any planned orders or production orders for your plant. Now let’s start looking at the process of creating your rough-cut plan. Return to your SAP Easy Access User menu.

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Part 2: Display Product Group

As mentioned in the introduction, the rough-cut plan is a tool used to determine the best way to schedule production. The rough-cut plan takes into account dates, projected sales, and inventory to produce the best possible production plan. Through the use of the SAP shared database structure, the rough-cut plan tool already knows how many production employees are available, how many hours these employees work, and how many workdays are available during the specific planning periods (in our case, number of workdays per month). As you will see, this makes creating a plan much easier, and accurate.

In SAP, the rough-cut plan can be formulated using two different methods. A plan can be formed to include a single product, or, the plan can be created using a predefined product group. Many companies, SOS included, manufacture and sell several closely related products. For this reason it usually becomes necessary to create a production plan using aggregate sales. For example, through marketing analysis, SOS has predicted that 80% of future Beach Cruiser sales will come from the S model, while 20% of sales will be derived from the LX model. Instead of completing two separate operations plans, one can be created. This is due to the fact that the company does not expect total Beach Cruiser demand to rise simply due to the introduction of the LX model. Instead, SOS expects 20% of those customers in the market for a Beach Cruiser to select the LX model over the S model. As the LX and S model Beach Cruisers share total consumer demand numbers, it makes sense to complete a single sales and operations plan. Instead of creating an aggregate plan, and then calculating how many of each individual Beach Cruiser model to produce, the SAP product group will automatically complete the calculation for you. Now let’s take a look at the SOS Beach Cruiser product group.

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From the SAP Easy Access Menu: Logistics Production SOP Product Group Display

On the Display Product Group Initial Screen, enter BCPG (short for Beach Cruiser Product Group) in the Product group box. Your plant should already be filled in. Click the enter button to display the product group. As you can see, the Beach Cruiser product group consists of two products, the Beach Cruiser S and the Beach Cruiser LX. If you look at the Proportion Column, you will see that 20% of the product group will consist of the LX model, and 80% will consist of the S model. It is also important to note that the Aggr. fact (aggregation factor) is set at 1 for both products. This means that during the planning forecast, the system will schedule 2 LX models to be made every time 8 S models are scheduled. This may sound pretty basic, but what if we are running short of supplies and wanted to make sure we had enough materials to create 80 S models (since they sell better) before scheduling the creation of the 20 LX models? In this case, we could simply set the Aggr. fact to 80 for the Beach Cruiser S. The system would then complete the planning for 80 model S Beach Cruisers before scheduling the LX models (actually, if the LX Aggr. fact were left at 1, the system would schedule 1 LX and 80 S out of the first 81 cruisers scheduled, then schedule the remaining 19 LX models if enough supplies remain). By using this function, we could make sure that enough of either model is built to meet demand before the other model is scheduled. Return to your SAP Easy Access User menu.

Part 3: Creating the Rough-cut Plan

Now that you have examined the product group for SOS Beach Cruisers, it’s time to create the rough-cut plan.

From the SAP Easy Access Menu: Logistics Production SOP Planning For Product Group Create

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You should now be at the Create Plan: Initial Screen. Enter BCPG for Product Group. Your plant should already be filled in. Click the enter button. A Define Version box will appear on your screen. SAP allows for multiple plan versions to be created and saved. This allows several different plans to be created, which improves a company’s ability to quickly adjust production due to unforeseen circumstances in the future. You should see a three digit number in the Version box. Write this number down where you will not forget it, then click enter. Upon entering the Create Rough-Cut Plan screen, you will notice that the planning time frame begins with the current month. To help avoid potential user error due to attempting to schedule production in the past, the system will only allow scheduling to take place during the current or future periods. Examine the screen for a moment. Notice that there are areas for you to enter the projected sales, projected production, target stock level, and target day’s supply. We will be concentrating on the entries for sales and production. Notice that there are a few boxes grayed out. These are the fields which SAP will automatically calculate once you have entered your sales and production numbers. Before the sales and production numbers are entered, we must consider the impact of beginning inventory (called opening stock in SAP). As SAP is going to automatically calculate your stock level according to the sales and production numbers you insert, we have to enter the opening stock level in the system. Click on Goto on the menu at the top of the screen. Now select Opening stock level. Enter your beginning inventory of 100 in the Stock level box, and click the enter button. You should see your beginning inventory number displayed for each month in the Stock level row. So, how many LX models, and S models are currently in your inventory? It is important to remember that we are dealing with a product group on this screen. Your current inventory is comprised of 20% of the LX model and 80% of the S model. You therefore have 80 BC-S and 20 BC-LX in your inventory.

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Now let’s start creating our rough-cut plan. Before we start entering our sales and production numbers, we need to change the view of our screen. SOS Inc. uses a daily schedule. However, your screen currently shows a monthly breakdown. To change the view, Click on Edit, then select Period Splitting. Next select Total, and then click on Days. You should now see a daily schedule on your screen, starting with the first day of the current month. To page ahead to the next month, click the double arrow at the bottom of the screen which is facing to the right. To advance one day at a time, click the single arrows at the bottom of the screen. Advance your schedule to the start of the month which you wish to schedule. We now need to determine how many Beach Cruisers to schedule for production. According to the sales report homework you completed earlier, SOS Inc. can expect to sell 385 Beach Cruisers in March, and 512 in April. To determine how many Beach Cruisers to schedule, simply count the number of days in the month you wish to schedule by advancing your on screen schedule one day at a time. Now divide the number of Beach Cruisers from your monthly sales total by the number of days listed for that month to get your daily requirement. For example, the SAP scheduling screen shows that March has 21 workdays (notice that weekends are not included on the schedule). To find the number we need to schedule per day, divide 385 by 21. This gives us a result of 18.33 Beach Cruisers per day. Since we cannot make part of a Beach Cruiser, we will simply round this number to 19 (having a couple extra sitting around is often better than having none to sell).

To complete the rough-cut plan for March, enter 19 in the sales and production rows for each day in March. Next, click the enter button to see the result. The system will automatically display your stock level as it changes due to production and sales. In addition, the system will tell you how many days worth of sales you have on hand (Day’s supply). To calculate this number, SAP determines the average daily sales from the numbers you entered, and divides the amount of stock you have on hand during that period. We will not be concentrating on day’s supply, but it

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is used in many organizations for planning, especially if the company is trying to build up a specific amount of supply based on historic sales data.

For your assignment, complete a Rough-cut plan for April using the same steps as you did for the March, keeping in mind your daily numbers will be different. Remember to write down your Version number as instructed above, and make sure you SAVE your Rough-cut plan before exiting SAP.

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Demand Management and MRP Tutorial

Now that you have successfully created your rough-cut plan, we will continue forward with demand management and MRP.

Part 4: Transfer Rough-Cut Plan to Demand Management

As mentioned in the introduction to the Sales and Operations Planning Tutorial, the demand management function is the link between sales and operations planning and the actual production planning system. Assuming that the rough-cut plan you created is appropriate, SOS will decide to use the plan for scheduling production. To avoid the possibility of a production scheduler entering your production numbers incorrectly (can you imagine the problems an extra zero could cause?), SAP allows the plan data to be transferred to production scheduling automatically.

From the SAP Easy Access Menu: Logistics Production SOP Planning For Product Group Transfer Product Group to Planning

The product group, and plant should already be filled in. Click in the empty Version box, and enter your version number from your April schedule from Part 3 above. In the Transfer strategy and period, make sure Prod. Plan for mat. or PG members as proportion of PG is selected. This is telling the system that we want to create a production plan from our rough-cut plan data while taking the product group proportions into consideration. Make sure the Invisible transfer box is checked, and click the Transfer now button. You will probably see a yellow message flash across the bottom of the screen telling you that the plan version you are trying to transfer is not the current version. This is just a warning. Click the enter button to continue. After a moment, the sales and operations data will be transferred, and individual requirements (as opposed to product group requirements) for the Beach Cruisers will be

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created. Now let’s take a look at the effect of transferring the sales and operations data to demand management. Return to the SAP Easy Access User menu, and navigate to the stock/requirements list initial screen.

From the SAP Easy Access User menu: Logistics Production MRP Evaluations Stock/Requirements List

Just as you did in part 1, display the stock/requirements list for BC-LX. As you can see, independent requirements (IndReq) have been created. Look at the Rec./reqd. qty (received/required quantity) column for October. Notice that the number listed is 20% of the total aggregate production you entered on the sales and operations plan. At this point, no production plan has actually been created, only a requirement for the Beach Cruisers. To create the production plans, we need to run the material requirements planning function for the Beach Cruisers. Return to your SAP Easy Access User menu.

Part 5: MRP

By running the MRP function for the Beach Cruisers, the system goes through the process of accessing the bill of material (BOM) for the Beach Cruiser, and calculates what will be necessary as part of the production plan. Before we run the MRP however, let’s take a quick look at the BOM for the Beach Cruiser LX.

From the SAP Easy Access User menu: Logistics Production Master Data Bills of Material Bill of Material Material BOM Display

Enter BC-LX for Material, and 1 for BOM usage. Your plant should already be filled in. Click the enter button enter to display the BOM. As you can see, there are 17 different materials which go into one LX model

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Beach Cruiser. You can also see that more than one of some materials are necessary for each Beach Cruiser. For example, 3 of material WHSA are required. WHSA stands for wheel sub-assembly. These are the wheels and hubs for the Beach Cruisers, and are assembled in Nogales, Mexico. The last three materials listed in the BOM (Battery, CD player, and GPS) are what makes the BC-LX different from the BC-S. If you would like, you can look at the BOM for BC-S by returning to the initial BOM display screen and entering BC-S for material. Now that you have seen the BOM, let’s run the MRP for the LX Beach Cruisers.

From the SAP Easy Access User menu: Logistics Production MRP Planning

Double click on Single Item, Multi-Level. This is telling SAP that you wish to run the MRP function so that is takes into account all those materials you saw in the BOM. Enter BC-LX for material (leave all other boxes as is), and click the enter button. A yellow warning message will flash across the bottom of the screen asking you to check the input parameters. Click the enter button again to continue. After a short delay (during which the system is locating all the necessary BOM data and applying it to the planning process) the run report will be displayed. You do not need to be concerned with the actual report as it just shows the amount of time it took the system to run all of the BOM data. Let’s take a look at the result of the MRP run in the stock/requirements list.

In the same manner as before, display the stock/requirements list for the BC-LX. Upon examination, you will notice that there are now planned production orders (PlOrd.) listed with the independent requirements. Make a note of the number of BC-LX which will be built in the first planned production order (the number in the Rec./reqd. qty column). To really see the effect of the MRP run, change the material from BC-LX to LX-02 (the material number for the CD player), and click enter. During the MRP run, the system used the BOM to determine that 1 CD player is necessary to

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build each Beach Cruiser. The system then automatically created a dependent requirement (DepR) equal to one CD player for every BC-LX in the individual planned production orders. Notice that the dependent requirement number for the first entry is the same as the number of BC-LXs in the first planned production order. This is how SAP keeps all stock levels in control, and keeps all ordering and manufacturing completely accurate at all times. You will notice that there was never a time when the incorrect number of CD players could be calculated or entered for the planned production plans.

Now that we have created the production plan for our LX Beach Cruisers, we need to convert the planned production orders into solid production orders. At this point the production runs are only planned, and could be changed without problem. When the plans are converted into solid production orders, the production is actually scheduled making the data available to the system as an actual event.

Part 6: Converting the Planned Production Order

Your last step in this tutorial will be to create a solid production order. Since the SAP system already contains all of the necessary information, this step becomes very simple. If you are not already there, navigate to the stock/requirements list screen, and display the stock requirements list for the Beach Cruiser LX (BC-LX). Locate the planned production order for 4/26/2005 (PlOrd), and click on the small magnifying glass directly to the left of that line. At the bottom of the small screen which appears, you will see a button reading -> Prod.ord. This button, when pressed, will tell the system that you agree with the information contained in the planned production order, and you would like to concert it into a solid production order. Click the button now. After a moment you will be taken to the Production order create screen, and a message will flash across the bottom of the screen telling you that the

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release has been carried out. This message confirms that the planned order data has been released and transferred into a production plan. Click the save button to save the production order. Now click the green back button to return to the stock/requirements screen. Once you are back to the stock/requirements screen, click the refresh button, and you will see the planned production order become a production order (PrdOrd). You have now successfully created a production order for the Beach Cruiser LX. Click on the magnifying glass button to the left of your Production Order line and record the production order number in the upper left part of the pop up screen at the bottom of this page.

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