A Beginners Guide to the Production Planning Cycle

a guest post by Pandhre

This article would help beginners get an overall basic picture of the entire PP cycle.

Before I start, I would like to mention that I have just started learning the finer nuances of SAP PP ( I am basically an SAP ABAPer with good MM module knowledge ). So if some PP experts don't agree with the contents of the article, I would really appreciate if they come forward and guide us in the proper direction. As I mentioned, my only aim to write this article is to help people get a basic knowledge of the PP cycle.

So here we go….

The overall PP cycle follows the following pattern:

1. Sales and Operations Planning
2. Demand Management Program.
3. MPS
4. MRP
5. Production Control
6. Settlement.

1) Sales and Operations planning.

Is used to forecast sales, create a sales plan, create a production plan and test its feasibility. Once this is done desegregation is done to bring the requirements to the individual materials level.


2) Demand Management Program.

The individual material level plan from the Sales and Operations Planning is then fed to the Demand program to generate independent requirements along with quantity and requirement dates.

The Demand Management Program is the link between Sales and Operations Planning and the Master Production Schedule/Material Requirements Planning. Input to demand program can come from Sales plan, production plan, Manual entry, material forecast, any other plan, etc. The result of the Demand program is Planned Independent Requirements with their quantities and requirement dates.


3) Master Production Schedule ( MPS).

The Master Production Schedule usually follows the Demand Management Program. MPS- Master Production Scheduling only plans Master Schedule items (like type-A materials) which may be very important to the company. It does the planning at the planned independent requirements level and one level below it (i.e. the immediate dependent requirement level).


4) Materials Requirement Planning (MRP).

MRP analyses the demand from sales orders and forecasts. If stock is needed then a planned order is created. A planned order consists of a suggested order quantity, a start date and a finish date.

To calculate the quantity of material required, Net requirements Calculation is carried out. This involves Lot-size calculation which decides how much quantity to prepare.

To determine the start and finish dates, Scheduling is carried out.

Once the quantity and dates have been decided, we need to decide about the planning level (single-item, single-level, single-item, multi-level) and the planning horizon and regenerative planning.

5) Production Control.

If the material is produced in-house, then the planned orders are converted into production orders.

Production order document contains a lot of data including.

Planning data – finished product, quantity, components and quantity.

Scheduling data – start date, end date.

Accounting data- material cost.

Warehouse data – storage locations for finished and issue

Production data – PRTs to use.


The Production Control flow is as follows:
a. Proposal (planned order)
b. Order Creation ( reservation for components )
c. Availability check
d. Capacity planning
e. Order release ( now reservations can be issued)
f. Print Production Order.
g. Withdrawal of materials
h. Execution.
i. Confirmation( record quantity produced, who produced it, which work center,etc )
j. Warehouse Receipt
k. Order settlement.


6) Order Settlement

In order settlement, the costs collected in an order are allocated to one or more receivers. When final delivery has been made for a production order, it can be settled. If no final delivery can be made, then the order status must be set to "technically completed" before the order can be settled. The status of technically completed may be assigned to a single order or to several orders.