Job order production practically implemented in the system

21.07.2016

From time immemorial, many manufacturing companies have had to maintain a delicate balancing act between efficiency and flexibility. If a machine fails, the orders have to be rescheduled so as to be able to deliver on time despite this.

It is extremely important – precisely in this context – to take account of external capacities and expertise if your own resources cannot ensure this. We are talking here about outsourcing or even contract manufacturing.

In this way, an external partner is hired to undertake tasks in the value-added chain, if you are not able to do so yourself short-term or the manufacturing of individual products is to be fully relinquished.

This special case from the area of production can also be implemented in SAP Business ByDesign.

1. Implementation of contract manufacturing in SAP Business ByDesign

Certain master data needs to be adapted for the purpose of contract manufacturing, including additional plant facilities corresponding to the production site of the external manufacturer. It is possible to differentiate here between a global external production site for all potential third-party manufacturers or separate operational facilities for individual external manufacturers.

Fig. 1: Illustrated below is our main company Almika GmbH, which receives production capacities from the BR Berlin site of the external manufacturer Innovat GmbH.

However, this choice also influences the settings in

• materials (for which the planning, logistics, evaluation for the individual plants need to be set),
• production master data such as bills of materials, workplaces, production models and services to be utilized with various cost records (depending on how high the cost record of the external manufacturer is for this service),
• as well as transport zones and transport lanes.

To keep things simple, the production process is only provided with one procedure, with the result that only the price valuation of the externally manufactured product is determined at the end, this correctly influencing the price valuation within the actual company.

2. Process sequence of a contract manufacturer with SAP Business ByDesign

On the process side, the production of a contract manufacturer with SAP Business ByDesign is realized in just the same way as the production within a company that has several locations.

A redistribution order is initiated in order to send the materials used from the company’s own site to the external production site. The goods are booked in at this site and the materials are used to produce the finished product with the help of a production suggestion.

The service used in the production process is responsible for the price surcharge. After production is completed, the finished product is sent back to the company’s own site via a redistribution order, where it is available after the goods receipt entry.

Alternatively, to this, the external manufacturer can act as a supplier, with the result that the location is not served via redistribution but instead via purchase orders and customer orders. Nevertheless, the price input in the purchase order needs to be reset to zero here, while an invoice is not expected. In the customer order, the item produced as well as the service is selected with the relevant expense.

Likewise, this process can be applied similarly if the actual company itself acts as an external manufacturer. Less master data needs to be maintained for this, as only corresponding production models have to be created.

For production companies in particular, these approaches reveal considerable potential for mapping their processes realistically and tracking these with corresponding financial accounting systems.

Do you have any questions about contract manufacturing within SAP Business ByDesign? Our internationally experienced SAP Business ByDesign consultants will be pleased to help with support and advice!