case study 4: operate a manufacturing company (extension) egn 5621 enterprise systems collaboration...

Case Study 4:Case Study 4:Operate a Manufacturing Operate a Manufacturing

CompanyCompany(Extension)(Extension)

EGN 5621 Enterprise Systems CollaborationProfessional (MSEM)

Fall, 2012

What’s New in Mfg Extension?What’s New in Mfg Extension?1. Company can design own products

based on specified rules2. Distribution channel 14 is available3. Company can make investment to

improve production capacity1) Reduce set-up time2) Increase production capacity

4. No starting inventory. Each company should do planning, run MRP, and convert purchase requisitions to POs before starting game.

What’s New in Mfg Extension?What’s New in Mfg Extension?5. Depreciation of fixed assets is

assessed6. Fixed overheads are assessed7. Inventory storage cost for excess stock

is assessed

1. Develop New Products1. Develop New Products

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At beginning of the game, each company has six finished products with a preset recipe for each product.

You can change the recipe of a product during the simulation by changing its bill of material with T-code ZCS02. During simulation, your company always has six BOMs of finished products.

If your company still has inventory of the finished product, the system doesn’t allow you to change its BOM.

Your new product must meet the guideline for recipes.

When the system accepts your changes in BOM, it will change the description in the material master to match the new content and weight.

Muesli Muesli Manufacturing Manufacturing Association Label Association Label RegulationRegulation

List of Master Data Created for List of Master Data Created for the Simulationthe Simulation

Master Data Alphanumeric codes        

6 Finished products $$-F01 $$-F02 $$-F03 $$-F04 $$-F05 $$-F06

6 Raw materials $$-R01 $$-R02 $$-R03 $$-R04 $$-R05 $$-R06

4 Packaging materials $$-P01 $$-P02 $$-P03 $$-P04    

2 Vendors V01 V02        

6 Bill of materials $$-F01 $$-F02 $$-F03 $$-F04 $$-F05 $$-F06

1 Work center $$          

6 Routings $$-F01 $$-F02 $$-F03 $$-F04 $$-F05 $$-F06

3 x 6 price lists (DC 10, 12, and 14) $$-F01 $$-F02 $$-F03 $$-F04 $$-F05 $$-F06

6 info-records and 6 source lists for raw materials V01-$$-R01 V01-$$-R02 V01-$$-R03 V01-$$-R04 V01-$$-R05 V01-$$-R06

4 info-records and 4 source lists for packaging materials V02-$$-P01 V02-$$-P02 V02-$$-P03 V04-$$-P04    

1 profit center $$          

1 coster center $$          

New Product Development (1/2)New Product Development (1/2)

New product New product development (2/2)development (2/2)

Change BOM for New ProductChange BOM for New Product

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Change BOM for New ProductChange BOM for New Product

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2. Distribution Channel 142. Distribution Channel 14

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Only buy small boxes (0.5 kg)Less price sensitiveSensitive to advertisingPayment delay of 5 to 15 stepsWill have a stronger preference for 3

particular products during the simulation

3. Investment for Improvement of 3. Investment for Improvement of Production CapacityProduction Capacity

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1) Reduce set-up timeThe default set-up time is 12 hours for changing product in your production line. If you want to keep product variety and wish to run small production batches, you can make investment to reduce the set-up time. The following table shows the set-up time as a function of your investment. If your investment is zero, the set-up time is 12 hours. If you invest 44,117.75, then the set-up time reduces to 10.5 hours.

Production Improvement DecisionProduction Improvement Decision

Investment for Reducing Set-up Time

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Investment for Reducing Set-up Investment for Reducing Set-up Time in the First QuaterTime in the First Quater

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In the first quarter, every company must invest 5,000 euros to reduce set-up time. After the first investment, it’s your company decision if to make more investment.

Investment in SAP to Reduce Set-up Investment in SAP to Reduce Set-up TimeTime

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Use T-code: FB50G/L Account: 113300 (Weizen bank)

D/C: creditAmount: 5,000 (first investment)

G/L Account: 478000 (Lean manufacturing expense)

D/C: debitAmount: 5,000 (first investment)Cost center: $$

Investment for Reducing Set-up Investment for Reducing Set-up Time in SAPTime in SAP

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Investment for Increasing Investment for Increasing Production CapacityProduction Capacity

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Your company can make investment into production equipments to increase your production capacity. This may be your strategic weapon. When you start the simulation, you have 5 million euro production equipment with a production capacity of 21,000 boxes per day.

Increase Production CapacityIncrease Production Capacity

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For an investment of 100,000 euros you can increase production capacity by 400 boxes per day. In order to obtain a daily capacity of 25,000 boxes, you need to invest 1 million euros.Formula for capacity improvement:Total daily capacity = 21,000 + (0.004 x additional machinery investment).

Investment for Improving Production Investment for Improving Production Capacity in SAPCapacity in SAP

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Use T-code: FB50G/L Account: 113300 (Weizen bank)

D/C: creditAmount: Your investment

G/L Account: 11000 (Machinery & equipment)D/C: debitAmount: Your investment

Investment to Improve Production Investment to Improve Production Capacity in SAPCapacity in SAP

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4. No Starting Inventory. 4. No Starting Inventory. Each company should plan and complete the following steps before simulation:

1) - Planning for finished products (T-code: MD61), 2) - Run MRP (T-code, MD01), and3) - Convert purchase requisitions to Purchase orders

(T-code:ME59N) 4) - Convert planned orders to production order after

raw and packing materials are available (T-code CO41)

Pricing decisionPricing decision

Marketing decisionMarketing decision

Create Planned Independent Create Planned Independent Requirement for 6 Finished Requirement for 6 Finished Products (MD61)Products (MD61)

Create Planned Independent Create Planned Independent Requirement for 6 Finished Requirement for 6 Finished Products (MD61)Products (MD61)

Execute MRPExecute MRP

Create Purchase Orders from Create Purchase Orders from Purchase Requisitions (ME59N)Purchase Requisitions (ME59N)

Convert Purchase Requisitions Convert Purchase Requisitions into Purchase Ordersinto Purchase Orders

Convert Planned Orders to Convert Planned Orders to Production OrdersProduction Orders

After simulation started and you received required raw and packaging materials, your planning manager needs to convert planned orders to production orders (T-code: CO41).

You can only release those planned orders to production orders with which the required raw materials are available in your inventory.

Collective Conversion of Planned Collective Conversion of Planned Order (CO41)Order (CO41)

Release Production OrderRelease Production Order

Release Production Orders (CO41)Release Production Orders (CO41)

5. Depreciation of fixed assets5. Depreciation of fixed assets Depreciation of fixed assets is assessed

(ZCK11)

Annual depreciation is calculated as 5% of building value and 10% of machinery value at 5 million.

5. Depreciation of fixed assets5. Depreciation of fixed assetsDepreciation of fixed assets is assessed (ZCK11)

6. Fixed Mfg Overhead6. Fixed Mfg OverheadFixed mfg overhead is assessed (T-code: ZCK11)

7. Inventory Storage Cost7. Inventory Storage Cost Each team has 2 warehouse storage areas:

◦ Finished product (02) - space for 250,000 boxes◦ Raw materials (88) - space for 250,000 kg of raw

materials and space for 500,000 boxes and space for 500,000 bags

Additional warehouse space can be rented:◦ 100,000 boxes of finished products (or part thereof), @ €

200/step (less than € 0.01 per box per step)◦ 100,000 kg (or part thereof), @ € 350/step (more

expensive because it's raw food product)◦ 100,000 boxes AND/OR bags (or part thereof), @ € 50

step◦ The cost of additional storage will be automatically billed,

and paid immediately.

Corporate Roles DesignationCorporate Roles DesignationCEO

◦Check Financial Statement◦Make investment for production ◦Check summary sales report◦Check price market report

Market & Sales Manager◦Check sales order report◦Check summary sales report◦Check price market report◦Maintain and change market expenditure◦Change selling prices for finished goods

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Corporate Roles DesignationCorporate Roles DesignationProduction and Planning Manager

◦ Create planned independent requirement◦ Run MRP◦ Release production orders◦ Modify BOM◦ Monitor production schedule◦ Check product costs, including overhead costs◦ Check raw materials cost per production order

MM Manager◦ Convert purchase requisitions to purchase orders◦ Track PO report◦ Check MRP results ◦ Check individual stock level◦ Check inventory report

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Tasks for the Manufacturing Case Tasks for the Manufacturing Case StudyStudy

No Roles Functions Transaction Code

1 CEO Check financial statement F.01Create GL Post (Investment) FB50Check Price market report ZMarketCheck Summary sales report ZVC2

Sales & Marketing Manager

Check Sales order report ZVA05Check Summary sales report ZVC2Check Price market report ZMarketMaintain marketing expense ZADSChange selling price for FG VK32

3 Production & Planning Manager

Create planned independent Requirements MD61

Run MRP MD01Release production orders CO41Modify BOM ZCS02Monitor production schedule ZCOOISCheck finished product cost ZCK11Check RM cost per Prod. order ZKSB1

4 MM Manager Automatically generate POs ME59NTrack PO report ZME2NDisplay MRP results MD07

Warehouse Management

Check stock level MD04Check Inventory report ZMB52

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Rules of the GameRules of the Game• Each round will be of 30 steps (approx 1

min per step)• End-of-round inventory is carried over to

the next round• You can sell a product only if you have it

in stock• You compete against the other teams and

importers• Your objective is to maximize profit

Participant’s Job Aid & Menu for Mfg ExtensionParticipant’s Job Aid & Menu for Mfg Extension

Participant’s Job Aid & Menu for Mfg ExtensionParticipant’s Job Aid & Menu for Mfg Extension

Raw Material Cost per PORaw Material Cost per PO

Product Cost PlanningProduct Cost Planning

Game LayoutGame Layout

30 steps30 min

30 steps30 min

30 steps30 min

Login InformationLogin Information

Client 815

Login : $#$ = Team, # = User 1 to User 6

Password: ERPSIM

User Menu for Mfg ExtensionUser Menu for Mfg Extension

User Menu for Mfg ExtensionUser Menu for Mfg Extension

Initial Financial Statement (F.01)Initial Financial Statement (F.01)