Often in supply chain, we talk about breaking down the silos and working across functional areas. However, there is one place where we want to still respect the division of responsibilities and that is the data between master data and transactional data. Master data should be heavily governed and does not typically change that often. Transactional data is the data resulting from the day to day happenings in the supply chain.
At the intermediate term of planning, the sales and operations planning (S&OP) cycle encompass inputs and output of demand management. Distribution planning and resource/rough cut capacity planning derives a master schedule that leads to organizational near-term planning.
The master schedule is still an aggregated plan which needs to be exploded down through material requirements planning (MRP). This is where master data comes into play for production planning as master data drives the explosion into calculated quantities based upon these settings.
Within SAP production planning modules there are five key master data elements to be maintained: Material Master, BOM, Work Center, Routing, and Production Version.
Production Planning Master Data Elements
The Material Master is the central repository of information related to several functional areas (Sales, Accounting, Purchasing, MRP, etc.) for each material. The Bill of Material (BOM) is a list containing the item number of each component and the related quantity and Units of Measurements (UOM) required to produce the product. The Work Center is a place, machine, or labor where production operations are performed. The routing is a specific sequence of operations performed during the production and planning process, including machine time, labor, etc. for the execution of operations. The Production Version is a pairing of a BOM and routing for production processing. Although some companies choose not to use production versions, it is mandatory in S/4HANA, so you may want to plan your path while you are still in ECC.
During the MRP run, the system also checks for the availability of various materials used for production at different stages. The system uses master data such as BOM and current available or planned supply. In the case of insufficient inventory, purchase requisitions are created for materials which are externally procured, and planned orders are created for in-house produced materials. These purchase requisitions and planned orders initiate the procurement cycle and the execution cycle of production to which we will focus on the execution cycle for this blog.
Keep the Planned Master Data Separate from the Execution Transaction Data
Production execution is the final part of the production planning process. The planned orders generated from MRP are typically converted to production orders and are scheduled as per the master data elements previously discussed. However, as we all know, we plan one way and things happen that result in us executing differently. This is where it is becomes vital to keep the “planning master data” separate from the “execution transaction data.”
As production orders are being created or being prepared to be released, we often perform material availability checks to ensure we have enough components to complete production. Where we have shortages, it is possible we have alternate components to which we can substitute. This is when we should update the transactional data of the components within the production order vs making a change to master data for a one time or short-term variation. The same principle should be applied if production capacity is exceeded and alternate work centers can perform the same operations; update the operations within the production order vs changing master data.
This may seem like a lot of work to align transactional data within a production order that may be completed within the next few days or even hours. There are a couple of reasons why we want to keep the system accurate at this level, mainly to drive proper signals throughout your supply chain. The proper signal of which inventory will be consumed, which resource will be utilized, and their corresponding cost must be captured to record this transactional variation. If you find that you are updating production orders quite often with the same BOM changes or work center changes, these are great examples of when master data (production version) should be created to help drive more efficient execution.
Read from the beginning of this series, Supply Chain Planning and Execution to learn how to meet customer needs by supply chain manufacturing and distribution!