Lesson 3 of 6
Plan-to-produce walk-through
8 min
Contoso builds alternators to stock: it produces against a forecast, not against a specific customer order. SAP calls this make-to-stock. The plan-to-produce leg turns a demand into a planned order, a planned order into a production order, and the production order into finished stock.
- DemandPlanned independent requirement: 100 CMC-ALT-100 for October in plant 1710
- MRP runCreates a planned order for alternators and purchase requisitions for missing components
- Production orderPlanned order converted and released; components reserved
- Goods issueRotors and other components issued to the order
- ConfirmationOperators confirm assembly and test operations, with yield and time
- Goods receipt100 alternators received into stock from the order
- SettlementAny difference between actual cost and standard cost is settled at period end
Planning: where the chain really starts
A production planner enters planned independent requirements (the forecast) for the alternator. MRP then compares requirements with stock and open receipts. In SAP S/4HANA the main planning run is MRP Live (transaction MD01N, or scheduled with the Schedule MRP Runs app). For an in-house product, MRP creates a planned order. It explodes the BOM, and for any component that is short, such as the rotor, it creates a purchase requisition. That requisition is the one the buyer converted in the previous lesson. This is the first hand-off: planning to purchasing.
Execution
| Step | Role | SAP GUI | Fiori app (examples) | Result |
|---|---|---|---|---|
| Run MRP | Production planner | MD01N | Schedule MRP Runs | Planned order; requisitions for components |
| Convert and release | Production planner or supervisor | CO40 / CO41; CO02 | Manage Planned Orders; Manage Production Orders | Released production order with reservations |
| Issue components | Warehouse clerk | MIGO (movement type 261) | Goods movement apps for production orders | Material document; component cost on the order |
| Confirm operations | Production operator | CO11N | Confirm Production Operation | Confirmation; activity cost on the order |
| Receive finished goods | Warehouse clerk or operator | MIGO (movement type 101) | Post Goods Receipt for Production Order | Material document; finished goods inventory |
| Settle the order | Cost accountant | KO88 / CO88 | Settlement apps for production orders | Variances moved to finance and margin analysis |
Make-to-stock execution. Some steps are often automated: components can be backflushed and receipts can be posted automatically with the final confirmation.
Component consumption and the cost effect
A production order is also a cost collector. Every component issued and every hour confirmed charges it. Every alternator received credits it at the standard price. Using the course's simple numbers for 100 alternators:
| Event | Debit | Credit | Amount (USD) |
|---|---|---|---|
| Issue 100 rotors and other components | Raw material consumption (on the production order) | Raw materials inventory | 11,000.00 |
| Confirm assembly and test | Production order (internal activity allocation) | Production cost center | 5,000.00 |
| Receive 100 alternators at standard 160.00 | Finished goods inventory | Production output (credits the order) | 16,000.00 |
| Order balance | Actual 16,000.00 vs credit 16,000.00 | No variance to settle | 0.00 |
Simplified cost flow through the production order.
If the operators had scrapped two rotors and needed two extra, actual component cost would be 80.00 USD higher, and the order would carry an 80.00 USD debit balance. At period end, settlement moves that production variance to the general ledger and margin analysis, where the controller can see it.
Reading the planning result
Before converting anything, a planner checks the result. The classic tool is the stock/requirements list (MD04), which shows, for one product in one plant, the current stock, the requirements (forecast, customer orders, dependent requirements from higher-level BOMs) and the receipts (planned orders, production orders, purchase requisitions, purchase orders) in date order, with the projected available quantity after each line. In Fiori, the Monitor Material Coverage app highlights products with shortages so planners can act on exceptions instead of reading every list. For the tour, you should see the forecast of 100 alternators covered by one planned order of 100, and a dependent requirement for 100 rotors covered by the requisition that became your PO.
Backflush and automatic goods receipt
In many plants, components are not issued by hand. They are backflushed: when the operator confirms an operation, SAP posts the goods issue for the components assigned to it automatically. Likewise, the final confirmation can post the goods receipt of the finished product automatically. The documents and journal entries are the same, but they are created by the confirmation instead of by a warehouse clerk. When you test, find out which steps are automatic in your design, and check that the automatic postings actually happened.
What would you do?
In the tour, MRP runs but no planned order appears for CMC-ALT-100 in plant 1710, even though the forecast of 100 is there and there is no stock. What do you check first?
- Make-to-stock: forecast → MRP → planned order → production order → goods issue → confirmation → goods receipt → settlement.
- MRP Live creates planned orders for in-house products and requisitions for short components: the planning-to-purchasing hand-off.
- The production order collects component and activity costs and is credited at standard on goods receipt.
- Differences between actual and standard are production variances, settled at period end.
Check your understanding · not graded
Lesson check
1. What does MRP create for an in-house produced product with a shortage?
2. Which movement type issues components to a production order?
3. What does the goods receipt from a production order do to the order's costs?
4. What is settled from a production order at period end?