Production Optimization Using TOC

In This Session …
OVERVIEW

Purpose

Production Optimization Versus
Throughput Optimization — A
Systematic Approach to Improving
Production Effectiveness using TOC

Author

Pino Villa
Independent Consultant

1

In This Session …
OVERVIEW

Discussion Point Features

1 This session explores how the Theory of Constraints business philosophy can be applied
Explore to the SAP Production Planning and Detailed Scheduled processes to better understand
and optimize organizational throughput (on-time delivery).

Understand how production throughput, which focuses on optimizing production
2
effectiveness, differs from more cost-focused organizational throughput measures
Understand (maximizing production capacity, batch-size).

3 Learn how to leverage capabilities found in SAP Production Planning to apply the Theory of
Learn Constraints to maximize production effectiveness, increase on-time product delivery, and
reduce costly inventory levels.

4 Hear best practices for introducing Theory of Constraints to your organization and learn
Best Practice how to avoid common pitfalls you may encounter along the way.

5 Come away from this session armed with the information you need to assess whether your
Benefits organization will benefit from an enhanced focus on organizational throughput.

2

What We’ll Cover …
• Manufacturing throughput
• Theory of Constraints (TOC) methodology
• Explanation of Drum, Buffer, Rope (DBR) technique
• A Theory of Constraint case study
• Applying the Theory of Constraint technique within SAP
• Applying the Theory of Constraint technique within SAP PPDS
• Wrap-up

3

Our Key Objective
Throughput (Sales – Material Costs) is what is provided across the supply chain

OEM Manufacturer Distributor Dealer Retail
OVERVIEW

In adopting the Theory of
Constraint approach in managing
throughput we try to:

 Maximize Throughput
 Reduce Inventory
 Reduce Operating Costs

By achieving the above we
maximize productivity and
profitability

Theory of Constraint (TOC)
OVERVIEW

Throughput is based on satisfying
customer demand.
In order to achieve this, all
manufacturing sites have to plan,
source raw materials and
components, manufacture, and
finally deliver.
The processes are governed by:
• Inputs, raw materials
components, money, etc.
• Mechanisms (resources such as
facilities, people, machines, etc.
• Constraints: company policy,
equipment constraints (capacity)
• Outputs, semi finished, finished
product.

THEORY OF CONSTRAINTS METHODOLY

By adopting the Theory of Constraint methodology/technique for the above
processes, throughput objectives can be achieved.

Value Chain

VALUE CHAIN

The value chain is based on system (facilities, human resources, manufacturing resources and IT systems) capability
and key constraints (Company policy, financial resources) to generate throughput.
The fundamental consideration is to maximize throughput with available resources and constraints.

Maximize Throughput Using TOC

TOC METHODOLY

TOC Methodology is used to maximize throughput of the value chain.
TOC is not just only a methodology (not file 13) but also a strategic management approach that the organization will
apply.

Manufacturing Throughput
PURPOSE

The key benefit of applying this
methodology is that it provides
purpose with respect to a
fundamental optimization project.
The tangible benefits are
measurable and impact the
profitability of the organization

The TOC focus should be part of
the tactical layer of the
organization while the DBR focus
should be part of the operational
level.

TOC is not once off; it becomes a
way of life.
THEORY OF CONSTRAINTS METHODOLY

The TOC methodology is supported by Drum, Buffer and Rope
(DBR) planning technique as well as buffer management in order to
achieve TOC objectives.
DBR is critical to ensure all is synchronized to the production
capacity of the Constrained Manufacturing resource.

Realizing Real Business Benefits
BACKGROUND TO MANUFACTURING SYSTEM IMPLEMENTATION
Discussion Point Features

1 There are many situations whereby real business benefits where not achieved because
BUSINESS they were focused on IT. Extensive IT investment did not lead to bottom line benefit.
BENEFITS

Some IT departments have underestimated the complexity, resulting a in a poorly built
2
solution. This is caused by both customer and partner; partner using low skilled resources.
COMPLEXITY

In many cases project is governed by old habits and old ways of working, which might not
3
be ideal. This is a major problem with multi-national organizations where acquisitions
HABITS
played a big role in building up their current organization.

4 There are ample cases studies documenting project failure, finger pointed at vendor. This
PROJECT FAILURE normally is caused not so much by vendor but rather by poor project management by both
customer and consulting partner. Sometimes vendor over sells business benefits leading to
disappointments.

5 In business we have many different methodologies for improvements, Business Process
ACRONYMS Re-engineering (BPR), Business Process Modeling (BPM), SCOR, etc. But do they actually
result in business benefit; is throughput and productivity increased?

9

• Wrap-up

10

Step 1: Identify the Constraint
KEY POINTS WITH RESPECT TO THEORY OF CONSTRAINED OPTIMIZATION TECHNIQUE

Find the one element of the manufacturing system which limits the system's ability to achieve its goal. In most manufacturing,
identify what limits the system performance.
Very important to consider that a process is governed by:
I; Input; components/raw materials
C; Control; policy, methods, shift, set-up requirements; tooling
M; Mechanism; the actual manufacturing machine that has a rated capacity
O: Output; the manufactured item (semi or finished product)
System constraints can be either physical or policy. Physical constraints are relatively easy to identify and relatively
straightforward to break. Policy constraints are usually more difficult to identify and break, but they normally result in a larger
degree of system improvement that the elimination of a physical constraint.

IDENTIFY THE
CONSTRAINT

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Step 2: Decide How to Exploit the Constraint

Understand how to exploit the constraint. That means squeezing the most out of the manufacturing constraint in order to
attain maximum performance. Therefore consider all aspects around the process:
•Policy and procedure
•Tooling, set-up equipment, set-up matrix
•Planning and execution system; ERP, APS, etc.
This must be done without major system changes or capital improvements with the primary objective of eliminating
inefficiency from the constraint

DECIDE HOW TO EXPLOIT
THE CONSTRAINT

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Step 3: Subordinate Everything Else

Take the required steps to synchronize and align the performance of all other elements with the "exploited" constraining
element. This may mean slowing down "faster" parts and speeding up "slower" ones. If your constraint is broken at this point,
go back to Step 1 and start looking for the next constraint (next weakest link in the chain). If not, go on to Step 4.
Fundamentally make effective management of the existing constraint the top priority.

SUBORDINATE EVERYTHING ELSE
TO THE DECISION IN STEP 2

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Step 4: Elevate the Constraint

If the constraining element still remains the reason why the system's performance "tops out"; then “elevate" usually means doing
something to increase the capacity of the constraining element. Obviously, if your constraining element is running at maximum
efficiency (which it should be after Steps 2 & 3), the only way to improve overall system performance is to obtain more of the
constraining element. In a manufacturing environment, this may mean a capital investment in more equipment, or hiring more
people, or increasing working shifts.

ELEVATE THE CONSTRAINT

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Repeat Steps 1-4: Manage Inertia

This is the "repeat Steps 1-4" step. But the warning about "inertia" is important. It's designed to discourage complacency,
thinking that the environment doesn't ever change much over time. Always consider that throughput increase can create other
weaker links that previously were considered secondary.

MANAGE INERTIA – GO BACK TO
STEP 1 IF REQUIRED

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Theory of Constraints: Summary
Typical Process
The TOC methodology allows us to understand
how throughput is generated.
TOC also provides a clear direction on how to
maximize/exploit resources and to
synchronize/subordinate everything around the
critical resources.
TOC provides clear direction on leveraging IT
systems.

TOC PROCESS

IT System to support
above process
16

• Wrap-up

17

Drum, Buffer, Rope (DBR) Technique
SUBORDINATING EVERYTHING ELSE TO DECIDING HOW TO EXPLOIT THE CONSTRAINT

When it comes to subordinating everything to a constraint, its bottlenecks. In a production environment, the
plants constraint must be the driving factor in how it is managed. In production, the productivity of the
constraint is the productivity of the entire plant.
A proven approach to managing production through the constraint is known as "Drum-Buffer-Rope" and
"Buffer Management."

• Drum - The constraints, linked to market demand, is the drumbeat for the entire plant.
• Buffer - Time/inventory that ensures that the constraint is protected from disturbances occurring in the
system.
• Rope - Material release is "tied" to the rate of the constraints.

Drum, buffer, and rope provide the basis for building a production schedule that is highly immune to disruption,
avoids creating excess inventory, and uses small batches to minimize overall lead time.
But even with Drum-Buffer-Rope (DBR), occasional disruptions occur that require special attention. Buffer
Management is used to mitigate and often prevent those disruptions.

The DBR methodology is Theory of Constraints that will be used to maximize production throughput and
inventory reduction based on the constraints (weakest link) being the Drum, the Buffer being the inventory
needed for the constraint and the Rope the timing for releasing the buffer with the main aim of protecting the
weakest link and thus maximizing overall effectiveness.

18

Drum, Buffer, Rope (DBR) Technique (cont.)
DBR EXPLANATION

Raw Material LEGEND
CCR Capacity Constrained Resource
Semi 1 Semi 2 Finished prod.

WC 1 WC2 WC3 WC4
CCR

Buffer
Semi 2

ROPE

Drum. The CCR resource (work-centre 3) Rope: The release of raw materials scheduled to
1
determines the schedule 3 start production at work-centre 1 based on the
schedule determined by the Drum.
2 Buffer. Buffer to protect the CCR - Work-centre 3

In TOC, Subordinate everything else to the CCR Work-centre. This means synchronize all planning activities to
production rate (drum) of resource to ensure that the CCR does not stand ideal. The Buffer in front of the CCR will be the
safety margin. Therefore the planning and scheduling system must now satisfy the DBR requirements.

19

DBR Buffer Management
Semi 2 DBR BUFFER MANAGEMENT

Finished prod. LEGEND
CCR Capacity Constrained Resource

WC2 WC3 WC4
Buffer
CCR
Buffer
With DBR, it is critical to protect the CCR with buffer. By
Semi 2
doing what is supposed to be done in accordance with our
CCR plan we protect the constraint and the system as a whole
ROPE
This buffer is needed so that CCR is not starved due to
delays in production of input components.
It strives to achieve the following:
• Reliable due date performance
• Effective exploitation of the constraint
• Accurate system data for relevant role players.

Buffer is introduced in front of CCR. This buffer
is divided into 3 zones for expediting purposes.
Red zone penetration was also included in KPI.
The buffer zone helps to simplify exception
management and it helps identify possible
creeping CCR. The buffer zone concept was
included in the monitor of CCR in SAP.

• Wrap-up

21

Overview
PROJECT CONTEXT

1 Organization running at maximum capacity 2 Poor on-time delivery, high back-order qty

3 High level of Inventory 4 Extensive IT expenditure with limited success

Company in auto industry component
supplier, supplies all makes, from low
cost to sports cars.
The manufacturing process consists of
3 main stages:
3.Input Semi finished 1
4.Input Semi finished 2
5.Finished product
Both input semi finished 1 and 2 can be
used for multiple finished products
(product families)
The work centre for finished product
takes from 6-8 hours of set-up. Batch
runs can run over multiple days.
Multiple work-centre (machines) for
finished product are available.
Possible number of product code
20000.
Customer orders based on delivery
schedule.

22

TOC Five-Step Analysis
PROJECT CONTEXT

The analysis was based on the five
TOC steps, primarily Steps 1, 2 and 3.

The TOC project also provided an
opportunity to find out what was going
on in production and related areas.

Project team was made up of manufacturing (Industrial engineers) experts (external) as well as
SAP functional and technical consultants.
Project sponsor Financial Manager; critical to avoid hiding problems and internal politics.
Project based on 3 major steps:
1. Analysis
2. Design and build
3. Implementation

The deliverables for the analysis phase must be specific in order to allow quick and effective
implementation. This was critical to avoid a paper exercise.

23

Brief Summary
PLANNING & EXECUTION SYSTEM ANALYSIS
Analysis Identification

1 Current planning tool did not plan
production based on resource capacity
Current (finite scheduling).
planning In certain situations, scheduling was done
in the past.
Set-up date not realistic, not updated
regularly.
Incoming open purchase order did not
2 Raw material reflect realistic dates, resulting in incorrect
supplies planning and poor expediting dates. In
certain instances, raw materials were not
consumed correctly.
3
In certain cases, non-CCR resources were
Non CCR overloaded due to poor planning. System
overload data did not match reality.
Shop floor data updated late (24 hours)
resulting in a poor view of downstream semi
finished production status.

Note: During the analysis phase, there was a clear indication of paradigm constraint; locking the
organization into poor performance due old established habits and lack of willingness to change.

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Identification


No stability in planning, order changed at
4
last minute causing problems in semi-
Production Order finished products planning.
changes & status Recommendation to introduce frozen
period to ensure planning stability.
Too many open production orders, status
not managed correctly.

Due to high set-up (6-8 hours) manufacturing set
5 large batch run resulting in high inventory.
Change this rule based on minimum duration
Batch size plus lot coverage. (i.e., average of next 8 weeks
of demand) and not on historical data.

Demand for semi finished product not planned correctly due to plant responsibility
6 separate per product group, no common objective. Each department planned their
Multi-level machines to maximum capacity without considering global objective.
planning Department for semi finished planned to maximum capacity even without demand.
This resulted in overstock of semi finished and in certain cases no stock for finished
product where customer demand existed.

25

Shop Floor Data Collection
Too many forms, in certain cases forms filled in by operators were illegible. Approved
7
standardization of pre-printed forms with barcode with minimum data input. Also
agreed to introduce simple entry screens with limited default data.
Shop Floor Data Delay in input SFDC into system resulted in inaccurate data specifically around CCR.
Collection

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Summary
SUMMARY OF KEY CONSIDERATION

The analysis for the TOC steps identified a number of issues that covered:
2. Company procedures
3. Organization structure, responsibilities, and objectives
4. Serious Production Planning and execution system weaknesses
5. Poor shop floor control

This is why a TOC project is not just an IT project.

Identify the constraint: We identified the key manufacturing constraints, specifically how they where planned,
1
its set-up effort (tooling etc.), how semi-finished components where planned.

Exploit the constraint: In order to elevate the constraints, company agreed to change organization structure
2 and responsibilities so that everything is focused around throughput. Departments to synchronize their
planning based on CCR demand schedule. More effort to reduce set-up time of CCR and ensure accurate
recording of set-up and tear-down. Set-up became a key KPI.

Subordinate everything to constraining resource: Agreed to introduced DBR planning technique including
3
buffer management within the SAP PP DS. Also agreed to introduce supermarket concept to some semi-
finished products that where common to many subsequent semi-finished items.

Elevate the constraint: In order to understand current CCR loading versus market demand, introduced SOP
4 (in APO) with simulation facility in order to provide marketing and production a tool to understand how to
address additional market demand or reduction.

27

• Wrap-up

28

DBR Planning and Execution Options
SAP PLANNING AND EXECUTION OPTIONS

In order to achieve throughput objectives,
SAP offers a number of planning and
execution solutions.
The focus will be
All of these technically could be suitable, the
selection depends on the complexity of the
on Scenario A and
manufacturing processes and related Scenario D
system relationships.
The following is available:
OPTION A
This is based on planning and execution
using SAP ERP MRP, capacity leveling, and
execution.
OPTION B
Planning in SAP ERP, scheduling in APO
PPDS and execution in ERP.
OPTION C
Planning run 1 and scheduling in APO
PPDS , then in ERP planning (MRP) of other
related aliments (components, bulk,
consumables) and execution in ERP.
OPTION D
Planning and scheduling only in PPDS and
execution in ERP.
OPTION E
This option utilizes CTM (Capable to match) in APO to plan for medium term horizon where planning is executed with
capacity constraints. This plan will create planned orders. These planned orders are then re-planned in short production
horizons including capacity leveling and detailed scheduling. These orders will be firmed production orders. The planned
order (CTM) and firmed production order will then be replicated into ERP which will form dependant demand for other
planning.

DBR Planning and Detailed Scheduling

DBR PLANNING AND DETAILED SCHEDULING

Control Point Features
This section focuses on the
1 • Master Production Schedule Finished Product SAP parts in order to
• Capacity leveling achieve TOC objectives and
Finished Product • Order review and set-up optimization
Planning apply the DBR planning
• Multi-level ATP
method.
• Order release

•Finished product input:
• Planning of semi finished 1 on released production Semi Finished 2
2 orders of finished product (Drum)
•Semi finished 2 input: Semi
Semi Finished 1: • Review of results
• Semi finished level 3 linkage
finished 3
Level 2
(Raw materials ATP) •Semi finished 3 input:
Raw materials

3 • Semi finished 2 planning
Semi Finished 2: • Buffer
Level 3 • Raw materials planning

30

DBR Planning Process

Deletion of
firmed order

CUSTOMER MPS for FIRM PERIOD
ORDERS Finished Items

MPS Process
Review of Planned Orders
planning results Creation of
Production
Orders

DRUM
Production Orders

This is only relevant for finished products:
Short term
capacity
Capacity leveling for the CCR work centre
leveling
Capacity Capacity
SCHEDULED ORDER AND DEP.REQUIR
Leveling Leveling
Review
CYCLE 4: MID-TERM PLAN INCLUDING
PLANNED ORDERS

Medium term capacity
JOB OR MANUAL leveling
EXECUTION OF PROGRAM

31

DBR Planning Process (cont.)
MATERIAL MASTER DATA: 1 - 2 ATTENTION POINTS

1
Finished product MRP1 View: Transaction MM02
The MRP type must be
M0, which plans only MPS
items.
Executing MPS plans only
items identified as MPS.

The opening period is set
to 5 days in order to allow
2 semi finished 2 lead time
Verify the scheduling margin key in MRP2 View: Transaction MM02 and buffer. For slow
moving items where there
is no semi finished 3
buffer, select key with 10
days.
The determination of the
opening period is critical
for confirming production

Source: SAP

32

Buffer Management
FINISHED PRODUCT PLANNING: BUFFER MANAGEMENT

The time buffers are needed to protect the Master Schedule. This buffer is needed for any possible
unexpected deviation to plan. The schedule of the CCR must be protected in order to maximize
efficiency.

Buffer
This is the time buffer
assigned to Finished product. MPS
Therefore the end time of FINISHED GOODS
SEMI-FINISHED 2 must be: MPS (MPS DRUM-BEAT)
MPS Order start - Buffer
MPS

The Semi Finished Input 2
Schedule may have
deviations within the buffer INPUT
zone without impacting the
MPS plan critical to protecting Red zone buffer SEMI-FINISHED 2
the MPS plan at the CCR
penetration

33

Bill of Material
BILL OF MATERIAL … ATTENTION POINTS

Verify the buffer between Finished Product and Input Semi Finished 2:
1
Transaction CS02 For the finished product, a
buffer of 3 days is
assigned against the input
2 semi finished product.

This buffer is used to
determine the date Semi
finished 2 should be ready
by.

Source: SAP

34

Work Centre Data
WORK CENTRE 1-3 ATTENTION POINTS

Maintain Work-centre data : Transaction CR02
1 Scheduling and Capacity
formulas are relevant only
for work centres that
require capacity loading.
Work centres of minor
importance do not require
this information.

Critical capacities require
shift data and relevant
calendar assigned.
Efficiency needs to be
assigned to capacity
utilization field.
Only work centres relevant
to capacity leveling (CCR)
require the finite
scheduling flag set.

Source: SAP

35

Work Centre Data (cont.)

Maintain Shift data. This is needed only if shift change occurs during
2 the week. Shift detail must be
inserted if the work centre
has days whereby number
of working hours differ,
example Saturday and
Sunday.

Each shift has to have
relevant efficiency.

Source: SAP

36

Work Centre Data (cont.)

Maintain grouping rules, this is the number of days we will group
3 orders for set-up optimization and is updated in classification The value of 5 days means
that for this work centre
order with same
characteristics will be
grouped together. If there
is no value then no
grouping

Source: SAP

37

Routing
ROUTING CURRENT PROPOSAL 1:2 ATTENTION POINTS
Only one routing will be
1 created.
Verify the routing: Transaction CA02

The routing will be based
on:
Group counter number;
the smallest number is the
primary
Usage 1 production
Status 5 released

The routing will contain
2 primary work centre
Verify the operations
assigned to operation 0010
and alternate to 001X with
control key GL07 (alternate
work centre). Alternate
work centre will be
allocated to operation
001X where X is next
number, this is critical to
group alternate to primary

Source: SAP

38

Routing (cont.)
ROUTING 2-2 ATTENTION POINTS

3
Verify the manufacturing grouping rules by viewing operation details: The setup groups category
contains major grouping
category; example MPS 1
to 3.
The setup group key
contains manufacturing
characteristics such as
tooling , material, etc.

4 Verify the relationship of the above to the set-up matrix; transaction OPDA

The setup matrix contains
reduction rules with
respect to setup where
production orders are
grouped according to same
characteristics. The setup
in the set-up matrix
replaces the routing setup
data.

Source: SAP

39

Master Production Scheduling
MASTER PRODUCTION SCHEDULING … ATTENTION POINTS
1 Review status of material: MD04
Review current customer
and production orders.

Also review the exception
messages generated by
the system.

Alternate view shows traffic
lights which, in this case,
indicate that orders need to
be brought forward.

Source: SAP

40

Executing MPS
EXCUTING MASTER PRODUCTION SCHEDULING… ATTENTION POINTS
1 Execute Master Production Schedule: Transaction MD40
Scheduling Parameter = 2
This means that dates will
be determined based on
routing data.
To plan single material use
transaction MD42

Select execute

2 MPS generates log of material planned

MPS has planned only
Finished Products
identified as MPS items

Source: SAP

41

Verifying MPS
VERIFICATION MASTER PRODUCTION SCHEDULING… ATTENTION POINTS
1 Verify result of MPS planning for Finished Product: MD04
Planned Order for finished
products created in the
past as per MPS setting.
This is critical for
determining back-log
priority.

Planned order created as
per lot size rule

Source: SAP

42

Verifying MPS (cont.)
2 Verify planned order details by selecting individual order
Production dates are
scheduled as per routing
data.
The opening date is based
on start date minus 5 days
as per scheduling margin
key (working days).

3 Select Detailed Scheduling folder

Scheduling has been
executed on work centre
Z451 based on work
centre scheduling data.
Capacity Requirements
also generated on work
centre

Source: SAP

43

Verifying MPS (cont.)

4 Verify planned order details by selecting individual order
In transaction MD04, from
Environment, select
capacity load to view
capacity load on work-
centre

The capacity requirement
versus available capacity
determines the capacity
load percentage. This view
contains combined load,
therefore all the products
that were planned against
this primary work centre.

Source: SAP

44

Dynamic Order Fixing
DYNAMIC ORDER FIXING

Firm Drum Schedule NOT FIRMED

FIRMED

FIRMED

TODAY +5
FIRMING PERIOD

1 The opening date is date used by planner to firm orders
2 The opening date must allow for buffer time, semi finished 1 lead time
3 The opening date logic can be SKU specific to allow for semi-finished 1 lead-time
4 The planner will firm any planned order where the opening is ≤ today + 5 (flexible)

Order Fixing
ORDER FIXING: WIDE STRIP BUFFER
HOW TO MANAGE ORDER FIXING CONSIDERING THE LEAD TIME OF SEMI FINSIHED AND ENSURING
REALISTIC PLANNING DATA FOR FINISHED PRODUCT

The Semi Finished 1 lead-time must be
included in the opening period for
firming. Semi finished 2 is excluded for
where there is Kanban.

Opening period logic is per material or can be assigned to MRP group

OPENING PERIOD

Converting Planned Orders to Production Orders
CONVERSION OF PLANNED ORDERS TO PRODUCTION ORDERS… ATTENTION POINTS
1 Planned orders are converted to production orders, transaction CO41
Critical to select finished
products according to
opening date criteria.
It is critical that Finished
Products are firmed up to
allow production of Semi
Finished 1 and for where
there is no Semi Finished 2
buffer (Kanban,
supermarket)

The opening date should
be today plus 5 days

List of orders that planner
should convert to
Production order are
proposed

Source: SAP

47

Converting Planned Orders to Production Orders (cont.)
CONVERSION OF PLANNED ORDER TO PRODUCTION ORDERS… ATTENTION POINTS

2 Selection of routing
User must select relevant
routing.
NOTE: this is only relevant
if alternate routings are
managed

3 View Production Orders

Production orders are now
created for planned orders
that fall within planning
horizon of 5-7 days

Source: SAP

48

Capacity Planning Overview
CAPACITY PLANNING OVERVIEW…

Control Point Features
• The purpose of Capacity Planning is to schedule orders as per defined sequence
1
within capacity constraints of a work centre. (Technical name is Dispatching).
Purpose • To carry-out set-up optimization for orders that have same characteristics
• To update orders once scheduled with relevant start and end date
• Allows user to modify production orders; priority, production version

2 • Consists of:
• A work centre view
Structure • Scheduled order (dispatched)
• Orders to be scheduled

3 • Capacity planning is controlled by profiles.
Control • Each profile determines how capacity should be scheduled, how orders are viewed
elements and information provided
• Consists of a scheduling strategy that determines how orders are scheduled

4 • Has links to:
Links • Production order header
• Production operation
• Work centre data
Source: SAP

49

Capacity Planning
EXPLANATION OF CAPACITY PLANNING

1
Work centre view and
scheduled production
orders

2
Material / Production
orders view showing
order dispatched

3
Production orders to
be dispatched

Source: SAP

50

Viewing Capacity Load
VIEW OF CAPACITY LOAD ATTENTION POINTS
1 View the capacity load

This shows percentage
load. Overload is shown in
red.

Source: SAP

51

Viewing Capacity Load (cont.)
VIEW OF CAPACITY LOAD ATTENTION POINTS
2 View the details of the loading capacity details for period
Selecting the individual row
shows the actual
production orders.

It is possible to show
graphic view of load and
available capacity.

Source: SAP

52

Capacity Leveling
CAPACITY LEVELING: MPS CYCLE ATTENTION POINTS
1 Execute capacity leveling to check back-log and re-schedule where
required. Transaction CM25, select Profile A_XX.

View Change time profile
to see dates used

Capacity leveling considers
orders in the last 30 days.
This is critical to show back
log.

Source: SAP

53

Capacity Leveling (cont.)

First action is to prioritize any backlog production orders, this way system
2 Select orders to determine
will schedule these first and will ignore grouping rules.
if really in backlog (could
Select row production order. be delay in updating
system). It is critical that
real back-log orders are re-
scheduled to ensure
correct loading of work-
centre. Orders in back-log
are prioritized by assigning
priority

Then select The table shows key
sequencing data:
Priority
Group category
Group Key
Latest Start date

Source: SAP

54

CAPACITY LEVELING MPS CYCLE ATTENTION POINTS
3 View Planning results with transaction MD04

Production orders
rescheduled.
Orders are not scheduled
in the past. The std SAP
message will provide
relevant messages to user

4 Re-check load on work centre, transaction CM01

No overload with respect to
capacity

Source: SAP

55


5 View the GANTT chart details
The GANTT chart at work
centre view provides the
following data:
Production Order number
Material description
Set-up in blue
Execution time in red

The order view shows as
same GANTT as work
centre view, but detailed by
order number

Source: SAP

56


6 View the impact of changing production order
The system automatically
re-schedules order
according to set-up time
and execution time defined
in routing for alternate
capacity

It will automatically change
the group category and
group key with what was
defined in alternate
routing.

Note: Just changing the
work centre does not re-
determine operation data
such as set-up, execution,
and grouping

Source: SAP

57

CAPACITY LEVELING: SET-UP OPTIMIZATION ATTENTION POINTS
1
Carry-out set-up optimization. Transaction CM25 select Profile
A_BUMAN03.

Select orders

Note the set-up group
category and set-up key.
These two conditions are
used for optimization.

Source: SAP

58

2 Carry-out optimization by selecting from menu

The system will
automatically replace set-
up time as per matrix

Save

3 Re-enter with same profile to display result

The set-up optimization
considers the set-up group
category and
Set-up group key

Source: SAP

59

4 View the GANTT chart details

These production orders
have their set-up reduced
as per matrix.

5 View operation details

Operation data
automatically updated.

Production orders modified
automatically

Source: SAP

60

Modifying the Order
MODIFICATION TO ORDER ATTENTION POINTS
1 On a regular basis, the planner will have to re-plan order specifically for back-
log or priorities. Assign priority to backlog orders.
STEP 1: Verify scheduling Transaction CM25 Profile A_BUMAN04 (Order view) Planning must be aligned
with current date;
therefore, all orders in
back-log must be re-
scheduled accordingly.
Therefore user must:
Change priority of
backlog order operation to
1 in sequence number field
De-allocate orders

Select row and click orders
Once we have done this
and we re-schedule, it will
sort in capacity leveling
according to:
1 Sequence Number
Click on 2 Group Category
3 Group Key
Insert value 2 in 4 Start Date
priority

Source: SAP

61

Modifying the Order (cont.)
2 Carry-out rescheduling of orders.

STEP 2: Verify scheduling Transaction CM25 Profile A_BUMAN04 (Order view)

The user manually
dispatches the order by
using drag and drop
functionality.

The order will be
dispatched exactly as
requested by planner.

Source: SAP

62

Modifying the Order (cont.)
3 Manual Maintenance of Production Order.

Transaction CO02, change production order
Changes to order dates
can be carried-out only if
order is de-allocated.

Qty changes require re-
scheduling as well as
manual dates changes.

The re-scheduling will then
require capacity leveling
Select menu ‘Functions’

Change Scheduling to
forwards and then insert
new Start date

Then select re-
schedule

Source: SAP

63

The Role of the Drum

The scheduling of the Drum
based on CCR accurately
determines the start and finish
time. The start date minus the BUFFER
buffer determines the end time in
which preceding semi finished 1
must be finished. The buffer is
like a shock absorber.
START TIME
The CCR determines the Drum. END TIME
In this case, the CCR is
responsible for finished product.
The scheduling of the CCR exact
start and finish time, including
set-up, determines the
dependant demand on the semi
finished 1 and related
components. The semi-finished 1
is planned to include a buffer to
protect the CCR.
The Drum also provides release
date (ROPE) for the raw
materials.

64

Finished Strip Linkage
SEMI FINISHED 2 LINKAGE ATTENTION POINTS
1 MPS on Finished product only creates Dependant Requirements.
Use transaction MD04 to show status on Semi Finished 1
MPS on the Finished
product has only
generated dependant
demand and has not
executed any planning on
semi finished 1.

MPR will be generated
continuously re-creating
planned orders as per
requirements.

Demand is classified as
follows:
1 OrdRes is based on FP
Production Order
2 DepReq is based on FP
planned orders

Source: SAP

65

Semi-Finished 1 Missing Parts List
SEMI FINSIHED 1 MISSING PARTS LIST ATTENTION POINTS
1
Review Missing Parts List; Transaction CO24 Updated automatically
when releasing Production
Order of Semi finished 1.

The Requirement qty is
based on the production
order demand.

Committed qty is what is
currently available or
planned (production
Orders) to satisfy demand.

The missing parts info
system is updated every
time ATP is executed

Source: SAP

66

Semi-Finished 1 Missing Parts List (cont.)
SEMI FINSIHED 1 MISSING PARTS LIST ATTENTION POINTS
2 Review Production Order
The production order for
the Finished Product
contains the details of the
Semi finished 1.

Reservation is assigned to
Semi finished 1.

Reservation is only
relevant for Production
Orders created for Semi
finished 1.

Committed qty is zero. This
is based on ATP check.

Source: SAP

67

Semi-Finished 1 Missing Parts List (cont.)
SEMI FINISHED 1 MISSING PARTS LIST ATTENTION POINTS
3 ATP Check
The confirmed qty is
available to satisfy the
order.
The confirmed qty is based
on production orders
created for Semi Finished
1.

In this example, there is
nothing confirmed to
satisfy demand.

The check rule considers
only Production Orders.

Source: SAP

68

Semi-Finished 1 MRP
SEMI FINISHED 1 MRP ATTENTION POINTS
1 Verify Semi Finished 1 Status, Transaction MD04.

The Semi Finished 1
should have grouping rules
.
Example group 3 days
demand.

Source: SAP

69

Semi-Finished 1 MRP (cont.)
2 Review Master Data, Transaction MM02.
Lot size rule and minimum
lot qty. Groups 3 days
demand for Finished
products.

Lead-time.

Scheduling Margin Key
has opening period of 2
days.

Source: SAP

70

Semi SEMI FINISHED 1 MRP ATTENTION POINTS
3 Execute MRP, Transaction MD02.

Orders will be created as
per material master lead
time. No capacity load
generated.

Planned Orders created in
the past.

Source: SAP

71

4 Convert production Order single Order from MD04.

Start and end as per lead
time (working days as per
plant calendar).

Production Order is not
allowed to be created in
the past. This is critical for
a realistic ATP for the
Finished Product.

Source: SAP

72

Creating Production Order for Semi-Finished 1
PRODUCTION ORDER CREATION FOR SEMI FINISHED 1 ATTENTION POINTS
1 Convert planned Order to Production Orders, Transaction CO41 .

Firm up one week’s orders.

All planned orders within
selected period are
converted.

Source: SAP

73

Refresh Semi-Finished 1 Product Status
REFRESH OF SEMI FINISHED 1 PRODUCT STATUS ATTENTION POINTS
1 Run ATP, transaction COMAC.

The finished Strip should
have grouping rules.
Example group 3 days
demand.

Finished product order is
confirmed with planned
production orders.

Source: SAP

74

Refresh Semi-Finished 1 Product Status (cont.)
2 Re-check Missing parts list, Transaction CO24.

Before

Reservation is gone from
list indicating that Finished
Product production order
can be satisfied with order.

Source: SAP

75

Refresh Semi-Finished 1 Product Status (cont.)
3 Recheck process chain with transaction CM25.
This confirms that Finished
product production order is
protected in terms of
Fished Strip planning.

Zero delay is expected
Receipt qty exceeds
demand

Source: SAP

This concludes the planning of the Drum and how the
Drum scheduling requirements are transferred to Semi-
Finished 1 with the required buffer.

76

• Wrap-up

77

Master Data Objects: Product Master
MASTER DATA OBJECTS
1 Product master The product master is replicated to PPDS using the CIF. PPDS
enables you to assign unique heuristic.
A custom heuristic could be created to replicate the MPS logic,
so that finished products are planned first on CCR and the sub-
components are planned accordingly.

2 Work-centre; Resources

Work centres are replicated to PPDS as
resources. From a production perspective they
will be time-continuous. CCR resource will be
flagged as bottleneck resource.

Source: SAP

Master Data Objects: Work Center (cont.)
MASTER DATA OBJECTS
2 Work centre; Resources

The following resource types will be replicated:
• Single activity resource; therefore only one production order may generate requirements.
• Multi-mixed resource; multiple production order may generate requirements.
• Mixed resources; these resources can be used in both PPDS and SNP. Using SNP is critical to get a medium term view
for production specifically to determine if the CCR capacity is absorbing expected demand; if current shift policy has to
be changed. SNP also enables you to carry out simulation in different versions and models.

Critical considerations regarding scheduling and
capacity:
• CCR that determines the throughput of the
manufacturing plant will be flagged as bottleneck
resource.
• Secondary critical resource can be flagged as
Finite leveling.
• The finiteness level is critical to group resources
together. This grouping can be run in a separate
heuristic step.
• The resources that have specific finiteness level
can have unique strategy profile. This is critical for
DBR when it comes to synchronizing with the
CCR resource.
Note: resources that are not flagged as finite are
planned infinitely. The alert monitor will provide
overload for these resources. Critical for Buffer
Management.
Source: SAP

Master Data Objects: Work Center (cont.)
MASTER DATA OBJECTS
2 Work-centre; Resources

Critical consideration for the resource that have finiteness
specific setting
• Scheduling model
• Planning direction
The above is critical to have a streamlined scheduling on
resources.

Work-centre; CCR Resources The CCR resource flagged as bottleneck resources are
scheduled using mid-point scheduling. A second step
plans the remaining resources that have their unique
scheduling mode and planning direction.

Source: SAP

Master Data Objects: Routing
MASTER DATA OBJECTS
3 Routing; PPM /PDS

Routings are replicated as either PPM or PDS. For a DBR project consider the following:
• Change management: In PPM there is no change mgt. Changes take effect immediately.
• Modification in the PPDS system. PDS do not allow changes, therefore all changes have to be managed in routing in
ECC and replicated.
From a DBR project perspective, PPM provides the most flexibility.
Note: PPM/PDS are not needed if planning option is plan with MRP in ERP and scheduling in PPDS

Source: SAP

Master Data Objects: Setup Matrix
MASTER DATA OBJECTS
4 Setup Matrix

For CCR where setup plays an important role, the sequence dependant setup and setup costs are fundamental in
reducing setup time. Reducing setup is fundamental in elevating CCR output. The setup matrix will be used with the
PPDS optimizer. The purpose of the optimizer is to determine ideal sequence dependant operation taking into
consideration cost, penalty, delay, etc. Therefore, optimization with reason.

Source: SAP

Planning Considerations
PLANNING CONSIDERATION
In order to introduce DBR planning technique in PPDS the following aspects are to be considered:

1 Master data, Resource types need to be replicated correctly (single, multi, mixed).
resource, Resources (CCR) that impact throughput need to be correctly indentified. Related
secondary resources that can creep to CCR need also to be identified with assigned
product and finiteness level.
PPM PPM (routing) needs to be accurate ; execution times and setup time must be accurate.
Setup matrix to be included where set-up plays a big role in CCR.

2 Important to define relevant heuristics and strategy profile for detail scheduling in order to
ensure an accurate and realistic production plan that tries to achieve maximum
Heuristics and throughput on the CCR.
strategy profiles

Set up an ideal planning cycle that plans the Drum at the CCR by means of finite
3 Planning planning, include planning steps to synchronize related planning sub-assembly and
components to satisfy the Drum schedule. Monitor alerts regarding resource loading on
Cycle non CCR.

Set up buffer parameters; this can be set up by product family; use material group; grouping
4 Buffer such as components, semi-finished, and finished in grouping. In each group, define buffer
parameters.
management

83

Planning Sequence Steps
PLANNING SEQUENCE STEPS
1 Stage Numbering
SAP_PP_020
Algorithm: To
determine low level
code
SAP_MRP_001

2 Material Requirement Infinite planning; planning object PRODUCT
Planning; product
Heuristic; finished, sub-
assemble and components
SAP001
Function; Optimization of CCR
resources in Detailed Scheduling
Source: SAP 3 Optimization of CCR Planning Board. Defines the Drum for
CCR

4 Propagation & delays of Re-plan based on
components; re-schedule confirmed Drum
bottom up.

5 Review overloads Detailed
In APO PPDS, it is easy to construct the
Scheduling Planning Board on
automatic production planning process with non CCR, review buffer
several steps. The individual steps are penetration
simply specified in the planning run.

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