When companies embark on ambitious capacity expansion, cost-cutting or process efficiency improvement plans, materials...
planners face an enormous challenge: seeing how the current SAP ERP system supports the changed or new business processes. Fortunately, an SAP system offers better options for managing special procurement types than the business processes of traditional production, procurement or inventory management.
Phantom assembly. For the grouping of components that are an integral part of a product, but aren't consumed in the production process, the system automatically suggests assembly components that are then packed or assembled together.
Direct production. When materials move from one production step to the next, without involving unnecessary additional steps (i.e., issuance and receipt of goods) at the end of every production step, the system directly and automatically transfers materials between two production steps.
Direct procurement. For direct procurement, which refers to procuring materials used for production, the system automatically creates a procurement proposal (a purchase requisition) as soon as the business user creates a production order. This shortens the effort and time it takes to complete the end-to-end procurement process.
Stock transfer. When an inter-plant transfer, or stock transfer, occurs, the supplying plant issues the material to another plant. The system shows the material in transit until it arrives at the receiving plant. It is also possible to incorporate the cost of transporting materials between two plants.
Withdrawal from an alternate plant. If a component required for a product's assembly is available in another plant, the system automatically requests withdrawal of the requisite component from the plant holding the component.
Production in an alternate plant. In this case, material requirements planning (MRP) happens in one plant, while production takes place in another plant. The SAP system automatically handles the MRP.
Subcontracting. Due to a lack of in-house capability or capacity, a company outsources manufacturing operations to a vendor for value additions. The system automatically reflects the components' inventory at the vendor location.
Consignment. A company's stock of material is placed at a customer location. The customer is charged only for material consumed, and the system automatically takes care of the amount it needs to receive from the customer for the material consumed.
Pipeline. With pipeline handling, a company will access supply materials such as water, natural gas, steam and compressed air automatically and only when it needs them. The system automatically enables the company to pay the vendor or utility company for the material consumed.
A company will gain improved efficiencies when materials planners assign the right procurement types to relevant material. When special procurement types are assigned, the ERP system takes the appropriate action, which leads to smoother logistics and supply chain operations.
How to improve supply chain operations
Predicting material consumption
Sailing with SAP ERP logistics
Dig Deeper on SAP manufacturing
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