Streamlining Production: A Guide to Direct Production in SAP PP

In the fast-paced world of manufacturing, efficiency is paramount. Traditional production methods often involve managing raw materials, semi-finished products, and finished goods through a warehousing cycle. But what if there’s a way to bypass this step for specific components?

This is where Direct Production in SAP PP comes in. It’s a powerful strategy that eliminates the need to physically hold certain materials and optimizes production processes.

What is Direct Production?

Direct Production allows you to manufacture components directly for higher-level assemblies without entering them into the warehouse. Imagine you’re building a complex machine. Some sub-assemblies might be ideal candidates for direct Production. The components are produced just in time for the final assembly, eliminating storage costs and streamlining the flow of materials.

How Does it Work?

The magic lies in the procurement type (52) assigned to materials in the Bill of Materials (BOM) designated for direct Production. When a production order is created for the finished product, the system automatically generates dependent planned orders for the directly produced components. These planned orders are then converted into production orders during the conversion process.

Here’s a breakdown of the critical aspects:

• No Stockholding: Materials for direct Production bypass the warehouse, eliminating inventory management needs.
• Automatic Order Generation: The system creates dependent planned orders for directly produced components based on the higher-level assembly requirements.
• Synchronized Scheduling: Changes in the higher-level assembly order (date or quantity) automatically reflect in the directly produced components, ensuring consistency.
• Costing Considerations: Directly produced materials are treated as semi-finished products during costing, and the cost estimate results are updated accordingly.

Benefits of Direct Production

• Reduced Inventory Costs: You save on storage space and associated costs by eliminating warehousing needs for directly produced materials.
• Improved Efficiency: Streamlined material flow eliminates unnecessary handling and reduces lead times.
• Enhanced Planning: Automatic order generation ensures components are produced quickly, minimizing production delays.
• Accurate Costing: Direct Production reflects actual material consumption, leading to more accurate cost calculations.

Who Should Consider Direct Production?

Direct Production is best suited for companies that manufacture complex products with:

• High-value components
• Limited shelf life materials
• Just-in-time production strategies

Before You Implement

While Direct Production offers numerous benefits, it’s crucial to consider your specific needs. Here are some factors to evaluate:

• Production Planning Complexity: Direct Production adds another layer to production planning. Ensure your team has the expertise to manage it effectively.
• Material Availability: Reliable suppliers are essential for directly produced components to avoid bottlenecks.
• Integration with Other Systems: For optimal results, ensure your production planning system seamlessly integrates with other systems, such as MRP (Material Requirements Planning).

Conclusion

Direct Production in SAP PP is a valuable tool for companies seeking to optimize production processes and reduce inventory costs. You can leverage this strategy to achieve a streamlined and efficient manufacturing environment by understanding its functionalities and carefully evaluating your needs.