Given the highly competitive and dynamic nature of the manufacturing industry, it is crucial for businesses in the industry to develop integrated solutions that enhance efficiency, increase sales and profitability, slash costs and most importantly, support the business to make informed, accurate and strategic decisions. An Enterprise Resource Planning is the solution to this problem because it integrates resources and operations as well as monitoring, reporting and finance functions through a single database thus enabling businesses to run smoothly. One of the ERP solutions, Systems Applications and Products (SAP), is a German software company that provides solution that allows manufacturers to track customer and business interactions especially with regard to ERP and data management. SAP utilizes routing, work center, product version, master material and bill of materials master data in product planning and execution to give businesses benefits such as automation of business processes, quicker responses to market changes and insight into informed strategic decision-making.
SAP in Production Planning At a basic level, an ERP in the manufacturing industry integrates production, inventory, accounting, order management, marketing and human resources functions to streamline these processes and make information more accessible throughout the company. production planning refers to the process of aligning demand with manufacturing capacity develop production and procurement schedules for component materials and finished products. Particularly, the SAP ERP module in production planning tracks and records manufacturing process flows, that is, the planned goods and actual costs (Hwang and Min, p 541) (Guru99). This module also tracks the movements in conversion of raw materials into semi-finished goods.
Organization structure of a SAP PP One of the requirements of SAP PP is the availability of the locations of manufacturing plants because all production master data is created and planning activities performed at the plant level. Also, confirmation of the product process and material movements take place in the plant and storage locations. For manufacturing plants, most of the static data is static and hardly changes. Nonetheless, the production planning module maintains five types of master data namely routing, work center, product version, master material and bill of materials.
• Master Material data This type of master data has all information on the materials that a firm buys, produces and sells;
information identified by a unique number on the material master record.
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information identified by a unique number on the material master record. Materials that share the same characteristics are placed in the same group and labeled as raw materials or finished items. master material data is used to buy materials, conduct good movement and physical inventory postings, verify invoices for posting, sales and order fulfillment and in production planning for for material requirement planning, scheduling and confirmation of production.
• Bill Of Materials (BOM) A BOM is a list of components and their quantities needed to create a product. it is used for product costing and material requirement planning. for manufactures creating products with variants, it is possible to create alternative BOMs for a product by having all types of components included in the BOM and selecting the component that satisfies characteristics specified in the sales order. For instance, a product cycle of frames may include components of the different sizes and colors. However, the manufacturer will select the specified color and size from the BOM to meet the sales order.
• Work Center Master work center data entails information on scheduling, capacity and costing of machines where operations are performed.
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• Work Center Master work center data entails information on scheduling, capacity and costing of machines where operations are performed.
This data is used for task list operations.
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This data is used for task list operations. • Routing Routing is categorization of operations conducted in the work center and data collected includes labor and machine times for operations executed in the work centers. Routing data is used to schedule operation and develop a standard costing for a given product.
• Product Version Production version is made up routing and BOM data and acts the linkage between the two. it is possible to have multiple versions of a production process in creating a product.
(Guru99) Production Planning Cycle There are two main processes in production, planning and execution. i. Planning Production planning begins from the budgeted sales plan and it is aimed at meeting the sales requirement as per the given production cycle.
In a SAP PP, the demand management department enters demand for a product as Planned Independent Requirement (PIR) and eventually becomes input for Material Requirement Planning (MRP).
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In a SAP PP, the demand management department enters demand for a product as Planned Independent Requirement (PIR) and eventually becomes input for Material Requirement Planning (MRP). MRP checks for the availability of raw materials used at different stages of production using BOM data as well as quantity of materials in production plants’ inventory. When there is a shortage of raw materials, purchase requisitions are developed and used for procuring the materials externally while planned orders are created for in-house materials.
Planned orders and purchase requisitions start the execution of production and procurement cycles respectively(Guru99).
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Planned orders and purchase requisitions start the execution of production and procurement cycles respectively(Guru99). to avoid capacity drawbacks, it is important for the MRP to have capacity leveling since it works with infinite capacities.
ii. Execution at this stage, planned orders are converted to production orders which are then scheduled according to production time allocated using routings master data. the production supervisor releases production orders and conducts material availability checks to establish if there are any missing components. Production operations are made as per the activities identified in routing data and work check master data is placed alongside each operation in the routing. When production is finished, orders are confirmed and movement and receipt of finished products is posted against the orders.
At this point, the order obtains delivered status (DVL) and the materials received is placed in the desired storage locations (Guru99).
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At this point, the order obtains delivered status (DVL) and the materials received is placed in the desired storage locations (Guru99). At the end of the month, a production order is normally set at completed status to allow for calculation of production variances and thus facilitate the order settlement process.
Production Planning Cycle (Guru99) Modules in the Production Planning Process • Demand Management The main function of the demand management module is to approximate quantities of raw materials and delivery dates of finished items by use of PIR and customer requirements. Made-to-stock and made-to-order are the two planning strategies that represent the methods of planning and manufacturing. The made-to-stock method entails production without a sales order, that is, the product is produced independently of orders. On the other hand made-to-order strategy is applicable for production of material for a specific order.
• Material Requirement Planning MPR identifies shortages and creates the necessary procurement procedures by calculating requirements and generating planned orders for in-house produced materials and requisition of raw materials sourced externally.
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• Material Requirement Planning MPR identifies shortages and creates the necessary procurement procedures by calculating requirements and generating planned orders for in-house produced materials and requisition of raw materials sourced externally.
MRP also initiates times scheduling, estimates production dates of planned orders, explodes BOMs and generates procurement proposals at each BOM level.
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MRP also initiates times scheduling, estimates production dates of planned orders, explodes BOMs and generates procurement proposals at each BOM level.
• Capacity Planning And Leveling Capacity planning entails an analysis of capacity overloads at the work centers and shifting orders accordingly to prevent any capacity bottlenecks.
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• Capacity Planning And Leveling Capacity planning entails an analysis of capacity overloads at the work centers and shifting orders accordingly to prevent any capacity bottlenecks. MRP on work centers generates capacity requirements and since it plans everything without considering capacity constraints. However planning tables necessitate capacity leveling to develop a constraint production plan.
• Production Orders The final output of the MRP is planned orders which are later converted into production orders in the execution stage.
The difference between production and planned orders is that unlike a planned order, a production order is not affected when the MRP runs.
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The difference between production and planned orders is that unlike a planned order, a production order is not affected when the MRP runs. A production order specifies the materials and the quantity to be produced and contains routing operation and BOM components data from the work center. Also, when a production is released, material availability checks are conducted to investigate if any component is missing.
• Product Order Confirmation After production, component materials are consumed automatically through flush mechanisms whereas receipt of goods is automatically performed via operation control key in routing. Manual Goods Issue and receipt is separately performed from confirmation and labor and machine activity costs are updated. This is when an order gets a confirmed (CNF) or delivered (DLV) status.
• Production Order Close After the delivery of production order, it is technically closed and thus further executions on the order cannot be made. The order gets the technically completed (TECO) status and is deleted from the requirement list and thus no longer part of the MRP run.
(Guru99, 2) Implementation of SAP PP a. Qualimer Before using SAP in its production processes, Qualimer used local accounting software and Microsoft Excel to manage its business and consequently suffered from production delays, information breakdown and unfulfilled sales orders. These challenges led to the decision of installing a SAP ERP application to solve business challenges in a sustainable way and interconnect Qualimer’s processes on a single platform. Currently, Qualimer has the production capacity of over 14,000 metric tons of chemical products such as acrylic resin, amino resin, polyuthane, emulsion resin, polyester resin and non-polyester resin; materials that are used by shoe-sole, pain and fiberglass industry segments. Using SAP solutions has helped Qualimier to discard redundant business process and improve information flow that facilitates real time decision making.
As a result, the company has increased its warehouse space optimization by 12.5% through just in time inventory management, reduced packaging stock by 25%, and attained 50% faster financial close cycle.
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As a result, the company has increased its warehouse space optimization by 12.5% through just in time inventory management, reduced packaging stock by 25%, and attained 50% faster financial close cycle.
The main objectives of implementing SAP solutions into Qualimer’s business processes was to create clear working responsibilities, gain accurate and real time data for decision making, and enable a seamless information flow system that is integrated throughout the organization. As a result of implementing SAP solutions, the company has transformed the role of IT from technical to strategic and thus gained visibility into standard product cost allowed the sales department to propose prices better (SAP ERP). SAP solutions have transformed the accounting department’s role from tactical to compliance and control and with real time inventory information, delivered better cash optimization (SAP Business Transformation Study, 2).
b. Royal Can Industries Company Limited Royal Can Industries Co. Ltd. in Thailand is a company that cans fruits and vegetables for export and is an industry innovator as it was the first to penetrate the Japanese market. However, as business grew, the company replaced its standalone platform to support informed decision making. Royal Can Industries used SAP ERP as it major platform that would help the company to maintain appropriate stock levels and fulfill orders in time.
Consequently, SAP ERP has helped royal can industries to gain critical information that informs decision making processes and gained visibility into product costs.
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Consequently, SAP ERP has helped royal can industries to gain critical information that informs decision making processes and gained visibility into product costs.
Royal can ltd.’s objective was to gain visibility into detailed product costs, handle overstock and under stock of material with accurate data, and replace its multiple software system with an integrated platform.
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Royal can ltd.’s objective was to gain visibility into detailed product costs, handle overstock and under stock of material with accurate data, and replace its multiple software system with an integrated platform. The company chose SAP ERP because the application has the functionality to support costing and production processes. As a result, the company avoided customization and adopted the best practices advanced SAP. Consequently, the company became more competitive in the market as a result of gaining visibility into the cost and reduced 5% of its costs. SAP ERP has allowed Royal Can Ltd to improve inventory accuracy and empowered employees with analytical software resulting in 90% reduction in lead time for month end closings and 99% reduction in trace back lead time (SAP Business Transformation Study, 3).
Benefits Of SAP ERP i. Automation and streamlining of processes More manufacturing companies are using ERP solutions because they automate and streamline business processes with greater adaptability. ERP systems allow for availability of data from a centralized location and provide visibility in development, design, inventory, procurement and production functionalities. ERP allow employees to monitor production status in real time without dependence on a particular team. For example, a product design employee can check the progress of production and give updates on requirements of additional raw materials to the finance department (Aloini, 171). Automation of such process creates efficiency, improves productivity, minimizes errors and ensures that the company maintains its customer commitments while at the same time significantly increasing profitability.
ii. Quicker response to market conditions Also, ERP systems provide real data analysis on various functions thus enabling businesses to estimate, plan and respond to changing market requirements better. Regular reports generated by ERP systems help decision makers to understand the diverse market demands and capitalize on opportunities presented (Aloini, 173). A holistic perspective on the market requirements and detailed insights reduce the possibilities of making forecasting eras.
iii. Strategic decision making ERP solutions provide insights and visibility into the company’s business processes thus improving the decision making process by ensuring the decision makers make spot on, fast and informed decisions. Particularly, manufacturing businesses use performance metrics such as sales margins to remain aligned to goals. Visibility of internal processes allows for optimization of day to day operations.
iv. Minimizing costs ERP software makes it possible for manufacturing companies to reduce operational costs since the automated and streamlined processes with real time information replace the time-consuming and manual processes thus increasing worker productivity (Aloini, 174). In addition, ERP solutions minimize labor expenses, lower error rates and enhance precision; all which curtail losses. Particularly, the ability of the inventory management ERP to accurately identify inventory and integrate inventory management with production planning eliminates warehouse and excess inventory costs.
v. Better customer satisfaction More control over inventory, accurate production planning and streamlined process scheduling allows manufactures to improve on time delivery of products to their customers thus maintain customer satisfaction (Aloini, 176). ERP solutions offer data in real time and hence allow decision makers to take note of inventory levels at any given time.
Conclusion SAP ERP is a software solution that enhances and accelerates a firm’s manufacturing operation from production planning, scheduling, execution and analysis. SAP ERP applications achieve this objective by facilitating real time insight into production performance indicators, automating procurement processes and integrating them with resource planning, optimizing asset use and time resources, and allow on-premise deployment of resources. Consequently a business is able to respond to market volatility in real time SAP ERP assists the business to improve response time and speed up production planning to match the market dynamics and the changing consumer demands. SAP ERPs assist in identification of delivery delays and wastes even before they happen through real time tracking and analysis thus making a company more proactive and less reactive with regard to fixing issues (Annamalai and Ramayah, P 495). Also, SAP ERPs help manufacturers to cut costs while at the same time maintaining product quality and regulatory compliance.
Works cited Aloini, Davide, et al. “Benefits and barriers of social/collaborative ERP systems:

Works cited Aloini, Davide, et al. “Benefits and barriers of social/collaborative ERP systems:
a state of the art and research agenda.” Strengthening Information and Control Systems. Springer, Cham, 2016. 171-176.

a state of the art and research agenda.” Strengthening Information and Control Systems. Springer, Cham, 2016. 171-176.
Annamalai, C., and T. Ramayah. “Enterprise resource planning (ERP) benefits survey of Indian manufacturing firms:
An empirical analysis of SAP versus Oracle package.” Business Process Management Journal 17.3 (2011):
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An empirical analysis of SAP versus Oracle package.” Business Process Management Journal 17.3 (2011): 495-509. Guru99“Introduction to SAP PP (Production Planning).” Meet Guru99 – Free Training Tutorials & Video for IT Courses, (2018)www.guru99.com/introduction-sap-pp.html.
Hwang, David, and Hokey Min. “Identifying the drivers of enterprise resource planning and assessing its impacts on supply chain performances.” Industrial Management & Data Systems 115.3 (2015): 541-569. SAP Business Transformation Study, ISS Consulting , “SAP ERP | Enterprise Resource Planning Software | Plan to Product.” SAP, www.sap.com/africa/products/enterprise-management-erp/features/manufacturing-module.html#pdf-asset=ba822e15-947c-0010-82c7-eda71af511fa&page=2.(2018)

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