SAP Production Planning manages the complete manufacturing cycle, starting from demand forecasting and ending with finished goods delivery. The overall process connects planning, material management, scheduling, capacity utilization, and shop floor execution. This integrated flow ensures that products are manufactured on time with optimal use of resources.
Below is a clear explanation of the end-to-end processing flow in SAP PP.
1. Demand Management
The process begins with understanding what needs to be produced.
- Creation of Planned Independent Requirements (PIR)
- Consideration of sales orders
- Forecasting future demand
Demand management helps companies plan production in advance.
2. Material Requirement Planning (MRP)
MRP checks what material is required and when.
- Runs net requirement calculation
- Checks stock, reservations, and demands
- Generates procurement proposals like purchase requisitions and planned orders
MRP ensures materials are available exactly when production needs them.
3. Master Data Preparation
Master data forms the backbone of production.
- Material Master for product details
- BOM (Bill of Materials) to list components
- Work Centers defining machines or labor units
- Routing for step-by-step manufacturing operations
Accurate master data improves planning and execution.
4. Conversion of Planned Orders
Planned orders created by MRP are then converted into:
- Production Orders for in-house manufacturing
- Purchase Orders for external procurement
This confirms the decision on how and where the material will be produced.
5. Production Order Processing
A production order contains complete manufacturing instructions.
- Component allocation
- Operation sequence
- Scheduling
- Cost tracking
- Material staging
The order authorizes production to begin.
6. Capacity Planning
This step ensures machines and workers are not overloaded.
- Work center capacity checks
- Line balancing
- Adjustments in scheduling
Capacity planning avoids production bottlenecks.
7. Material Staging
Before production starts, materials must be issued.
- Transfer materials from storage to production area
- System posts goods issue automatically or manually
Material staging reduces downtime and keeps production running smoothly.
8. Production Execution
This is the actual manufacturing activity on the shop floor.
- Workers follow routing steps
- Machine operations are performed
- Partial confirmations may be posted
SAP records each activity in real time.
9. Confirmation of Operations
Operation confirmation updates:
- Production progress
- Labor time
- Machine time
- Yield and scrap quantities
These confirmations help track the exact status of production.
10. Goods Receipt (GR) for Production Order
Once manufacturing is complete:
- Finished goods are posted to inventory
- Production order is updated
- Stock becomes available for sale or delivery
Goods receipt marks the completion of the production cycle.
11. Order Settlement
Cost settlements are performed at the end.
- Actual production costs are compared with planned costs
- Variances are posted to finance