Make to Order on Demand: Understanding SAP PP Strategy 20

Strategy selection is crucial in the world of Production Planning (PP) with SAP. Today, we’re diving into Strategy 20, also known as Pure Make-to-Order (MTO).

What is SAP PP Strategy 20?

Strategy 20 represents a pure MTO approach in SAP PP. This means production happens only after a confirmed sales order arrives. There’s no forecasting involved; the sales order triggers everything.

Here’s the gist:

• A customer places a sales order.
• Strategy 20 ignores existing stock.
• The system generates a planned order for the exact quantity in the sales order.
• This planned order is converted into a production order to fulfill the specific customer request.

Who should use Strategy 20?

This strategy is ideal for several scenarios:

• Low-demand items: Holding inventory wouldn’t be cost-effective for products that rarely sell. Strategy 20 ensures production only occurs when there’s a confirmed order.
• High-value items: For expensive products, keeping stock is risky. Strategy 20 minimizes the financial exposure of holding such inventory.
• Highly customizable products: Pre-production wouldn’t make sense when customization is a significant factor 20 allows for production based on specific customer requirements.

Things to Consider with Strategy 20

• Longer lead times: Since production starts upon order confirmation, lead times can be longer compared to strategies with stocked finished goods.
• Increased planning effort: With no stock buffer, production planning must be more meticulous to ensure on-time deliveries.
• Capacity planning: Since sales orders trigger production, capacity must be readily available.

Conclusion

Strategy 20 offers a responsive approach to production, ideal for specific product categories. By understanding its strengths and considerations, you can make informed decisions about when to leverage this strategy in your SAP PP environment.