planning for material losses -...

2010

University of Texas at Dallas Miglena Marinova

PLANNING FOR MATERIAL LOSSES Professor: Eugene Deluke Course: Supply Chain Management with SAP Term: Fall2010

Planning for Material Losses

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TABLE OF CONTENTS

Part 1. Scrap definition and types …………………………………………………………………………………………. 3

Part 2. Practical view/example within the SAP R/3 SCM system …………………………………………… 6

- Assembly scrap maintained in MRP1 view of the material master record ………………… 7

- Calculating assembly scrap using the Operation scrap ……………………………………….….. 19

- Assembly and Operation scrap turned on for a material ………………………………….…….. 22

- Component scrap maintained in BOM ………………………………………………………………….… 24

- Component scrap maintained in MRP4 view of the material master record ……….…. 27

- Component scrap maintained in BOM and in material master record ……………….….. 31

Sources ……………………………………………………………………………………………………………………………….. 33


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Part 1. Scrap definition

Scrap can be defined as “that portion of material which does not conform to quality standards and

which is not reworked”. Scrap can be entered within the SAP system (via the Logistic master data) in %

so that the system will be able to make further calculations for what quantity is needed. Knowing

approximate scrap quantity may bring important information for the material planning and more

specifically for the requirements planning – quantities could be measured in a more precisely way and

the requirements planning levels changed.

Costing is another place in the system where scrap could be used. Once we have entered the scrap

quantities in the Logistic master data, those quantities will be considered for the “cost of planned

scrap”. A new quantity structure is going to be created. This cost of planned scrap is going to be included

into the e.g. “standard price” of the material. As scrap could be calculated for all the components of a

multilevel BOM, costing could be calculated accordingly and could be increased – the more scrap is

entered at the different components and different levels of the BOM, the more the material cost (more

quantities will be needed) will be. However, if a scrap is assigned to operation in routing, this will reduce

the quantity of subsequent operations and will reduce the production costs too.

A good option within the system is to calculate e.g. scrap variances (value of unplanned scrap

quantities). Of course these values are difficult to be predicted and the purpose of having them is not to

be predicted but to be known and eventually further analyzed. At period end-closing those quantities

are calculated as the difference of actual costs and planned scrap costs.

There are three types of scrap maintained within the SAP system:

1. Assembly scrap;

2. Component scrap;

3. Operation scrap.


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1. Assembly Scrap

The Assembly scrap can occur when the material is used as an assembly and is the scrap expected to

occur during the production of such a material. The assembly could also be contained as a component in

another assembly. As the idea behind the scrap analysis is to give specialists information how the

material requirements should be changed, here with the assembly scrap the quantities must be adjusted

(increased) within the system, so that the end log size quantities could be met.

The place where this scrap can be entered is MRP1 view of the material master record. Value can be a

percentage, flat-rate. The system then calculates the quantity to be produced (increased with the scrap

value). Not only the materials, but also the activities are being adjusted as well.

2. Component Scrap

The Component scrap occurs when the material is used as a component in the production. Similar to the

Assembly scrap, the system is increasing the quantity (here, is the component quantity) so that the lot

size could be met. If there are components in an assembly with assembly scrap, the priority of the scrap

calculation is for the assembly scrap. The system first generates the assembly, then the component

scrap. The two ways this scrap can be maintained are: in the BOM item and in the material master

record (MRP 4 view). Once entered in BOM item, the component scrap value will be considered only for

the BOM it had been entered to. If it is entered in the material master, then the system will considered

the component scrap value for all the BOMs that the material is part of.


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3. Operation Scrap

It is that scrap that is projected to occur in an operation during production. What this type of scrap will

have as an effect is to reduce the planned input quantities in follow-up operations and to calculate the

precise amount of assembly scrap. There are two ways this scrap to be maintained (in %) in the system:

in routing and in BOM. If entered in routing (and not in BOM) the costing lot size will be reduced by the

percentage value entered. When entered in BOM, the planned input is increased and any assembly

scrap is reduced.

The type of scrap has been covered in this section very briefly. Second part of this work will try to

explain the process of maintaining different type of scrap and for different combinations so each of

them will be explained in details.


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Part 1. Practical work

The following scenarios will be covered in this section (way to do it and result):

1. Assembly scrap maintained in MRP1 view of the material master record.

2. Calculating assembly scrap using the Operation scrap.

3. Assembly and Operation scrap turned on for a material (Net indicator in BOM turned on).

4. Component scrap maintained in BOM.

5. Component scrap maintained in MRP4 view of the material master record.

6. Component scrap maintained in BOM and in material master record.


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1. Assembly scrap maintained in MRP1 view of the material master

record.

I am going to use the data already entered in the system – Finished bike for plant 32A1.

The material that I am going to use for this exercise is number: FG-0010-32

The components this finished material is based on are:

SF-0010-32

SF-0020-32

SF-0030-32

SF-0050-32

RM-0010-32

RM-0150-32

RM-0160-32

The assembly scrap entered in MRP1 for FG-0010-32 should impact all other components.

First I am going to execute a multi-level level MRP run in T-code: MD02


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Here is the result of this run:

I can now go to check the current status of the Stock/Requirements list for material FG-0010-32 (T-code:

MD04)

Since the safety stock is 100, and no quantities are available the system generated a Planned Order for

100.

I would like to check what is the BOM for this material (current condition). I clicked on

button and then from the screen that appeared clicked on icon.


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Here are the components of this finished material:

The current condition of material: SF-0010-32 (planned orders were created):


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The current condition of material: SF-0020-32:


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The current condition of material: SF-0030-32:

Current condition of material: SF-0050-32:


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Current condition of material: RM-0010-32:

Current condition of material: RM-0150-32


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Current condition of material: RM-0160-32:

The reason I am showing all this data is to make comparison of the effect after the assembly scrap value

has been maintained for the finished product.

Now, I am going to enter the assembly scrap value in MRP1 view in the material master of finished

product: FG-0010-32

For this purpose I go to T-code: MM02 (change material) and select MRP1 view for plant 32A1.


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In Assembly scrap field I enter 10 (the value is in percents):

Saved the material:

To be able to see the result, I have to execute again the MRP run.

I went to MD02, choosing FG-0010-32 and planning mode 03.


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Here is the result of MD02:

Now, we are ready to see the result in MD04.

By looking at the Stock/Requirements list for FG-0010-32, we will notice that there is a new field

maintained for the scrap.

What about the components of the finished material:


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Here is the result for material: SF-0010-32 (the scrap value has been taken into consideration):

The result is similar for the other components:


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I go back to T-code MM02, so that the changes of the material master (assembly scrap value) to be

deleted.


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2. Calculating Assembly scrap using the operation scrap.

I went to T-code CA03 (Display Routing – Initial Screen) so we can track the current routing for FG-0010-

32. Entered the material and clicked on

Then I scrolled the bar to the right to be able to confirm that no scrap has been entered for the

operations:

If I go to Extras -> Scheduling -> Schedule it will give me the details (time) for each operation:

I clicked on The screen that appears is saying that no scrap has been maintained

in Material master and no scrap is maintained in Scheduling (operation) as well.


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Now, I will enter the scrap value in Routing.

T-code: CA02 (change routing), clicked on Operations and entered 10 (in percents) in Scrap field for each

of the operations. Received the following system confirmation:

I went to Operations and again Exrtras-> Scheduling->Schedule

The times have already been changed:


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The Scheduling results are as follows: Processing time has been reduced to 6.66, from 8.09, Production

time adjusted from 10 to 9, and assembly scrap adjusted as well. If I click on Update mat.master the

information in MRP views and Work scheduling for the components material masters will be adjusted,

but since I still have another tests to do I do not want to do that.


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3. Assembly and operation scrap turned on for a material.

If both assembly and operation scrap have been maintained in the system for a particular material, the

operation scrap in BOM overrides the assembly scrap and the assembly scrap values have been ignored

by the system.

Let assume we have entered assembly scrap for material SF-0020-32 which is a component for FG-0010-

32. Let this assembly scrap to be 10% (entered in the material master MM02 transaction for SF-0020-

32). Let put as operation scrap for the same component in CS02 (change BOM) value of 5 (in percents)

and turn the Net indicator on (saying that the scrap for this component will be calculated on the basis of

the net required quantity. In other words without the assembly scrap from the material master record):


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I will execute MRP run for FG-0010-32 with T-code MD02 and will see the result in MD04.

The result is that indeed the assembly scrap is ignored and only the operation scrap (5%) has been taken

into consideration:

The operation scrap and the Net indicator for SF-0020-32 are deleted in CS02.

The assembly scrap for the same material is deleted as well in MM02.


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4. Component scrap maintained in BOM.

The next two tests will show how the system is behaving when a component scrap is entered in BOM

and Material master. The main difference here is that if entered in BOM the scrap will be considered by

the system for this particular BOM only, while if the scrap is entered in material master, all BOMs that

contain this master will be considering the component scrap value.

For the purpose of this test I would need another one BOM, so the above sentence could be tested.

There is one BOM we used for some of our exercises that is a perfect match for the needs of this test.

The two BOMs that I am going to use are: FG-0020-32 (Finished Bike) and FG-0011-32 (Ridge Front-32). I

need one shared component that is part of both BOMs. Fortunately, almost all the components are the

same ones, only one is different for these two BOMs.

I am going to enter component scrap for material SF-0020-32 in its BOM.

Transaction CS02. General tab for the material and then I entered 5 (meaning 5 % component scrap).

Received a confirmation that the BOM is changed:


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After executing MD02 and MD04 for FG-0010-32 I got the following result: Component scrap effected

the MRP run and the required quantities as well.

What about FG-0011-32 BOM? Let us do MD02 and MD04.

Before the components scrap entry, the Stock/Requirements list looked the following way:

After the component scrap was entered for material SF-0020-32, here is how FG-0011-32 material SF-

0020-32 looked like:


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Conclusion: If component scrap is maintained in BOM item, it will be considered for the same BOM and

no other BOMs that contain the same component will be affected.

To delete the entry for this test, I went to CS02 and deleted component scrap value.


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5. Component scrap maintained in Material master (MRP4 view of

the material master record).

I showed how the system behaves with a component scrap entered in BOM. The following test will

display the result after entering the component scrap in Material master.

I am going to use the very well known component SF-0020-32.

T-code MM-2 and MRP4 view is where I am going to enter the scrap value.

The entered value is 5 (meaning 5 percents component scrap).

What the result is going to be after this entry?


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MD02 and MD04 are going to tell us:

MD02 for FG-0020-32:


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And MD02 for FG-0011-32:

MD04 for FG-0010-32 and material SF-0020-32:


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And MD04 result for FG-0011-32 and material SF-0020-32:

Conclusion: Both BOMs were affected by the component scrap maintained in Material master record for

material SF-0020-32.


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6. Component scrap maintained in BOM and in Material master

record.

Now, when we have the component scrap entered in Material master from our previous test, we can

easily make another test. How the system will respond when it has to deal with component scrap

entered in both BOM and material master record?

I will need to go back to CS02 and enter in the FG-0010-32 for SF-0020-32 the component scrap value.

The books show that when component scrap is maintained in both places, the entry in the BOM takes

priority. We know what the result was when 5% component scrap was entered in Material master. Now,

in CS02 I will enter 10% so that the end result will be easily distinguished.


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What I have left now is to test the result with MD02 and MD04 for both FG-0010-32.

MD04 result for FG-0010-32: Both DepReq and PldOrd are affected by 10% (not 15%, nor 5%).

Conclusion: Indeed, when component scrap was maintained in both BOM and Material master the

system is considering what was written in the BOM.

I went to CS02 and MM02 and deleted component scrap entries.


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S O U R C E S

http://help.sap.com/saphelp_46c/helpdata/en/7e/cb849e43a311d189ee0000e81ddfac/frameset.htm

http://help.sap.com/saphelp_46c/helpdata/en/7e/cb84ab43a311d189ee0000e81ddfac/content.htm

http://help.sap.com/saphelp_46c/helpdata/en/7e/cb84df43a311d189ee0000e81ddfac/content.htm

http://help.sap.com/saphelp_46c/helpdata/en/7e/cb84c543a311d189ee0000e81ddfac/content.htm

http://help.sap.com/saphelp_46c/helpdata/en/7e/cb849e43a311d189ee0000e81ddfac/frameset.htm

http://help.sap.com/saphelp_46c/helpdata/en/7e/cb84ab43a311d189ee0000e81ddfac/content.htm

http://help.sap.com/saphelp_46c/helpdata/en/7e/cb84df43a311d189ee0000e81ddfac/content.htm

http://help.sap.com/saphelp_46c/helpdata/en/7e/cb84c543a311d189ee0000e81ddfac/content.htm

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