Lean PCS projects

In a make-to-order production environment, production only starts when a customer places an order. Contrary to an engineer-to-order environment, a product in a make-to-order environment has, for the most part, fixed features and specifications that are unlikely to be changed. In LN, the type of make-to-order without any engineering is also called standard-to-order. The product then has a standard BOM and a standard routing, and is, therefore, a standard product.

Standard-to-order products are mostly products that are not desired to keep in stock, for example, because the product is very expensive or very voluminous. If you produce standard-to-order, the finished products can be transported directly to the customer that ordered them, which saves you most of the inventory costs.

How to handle standard-to-order production in LN

You can use Project Control to support to-order production for standard items. You then make use of so-called lean PCS projects. The purpose of a lean PCS project is that the activities under the project can be pegged to a specific sales order, and that costs are known by PCS project. The items to be produced are copied to a PCS project, but without the BOM and routing because those are standard. Consequently, engineering is no longer possible. Because the BOM and routing of a standard-to-order item are not copied, the BOM and routing are stored only once, independent of the number of generated PCS projects, which prevents redundant data in LN.

To use PCS for standard-to-order production, carry out the following steps:

Step 1. Create a sales order for the item that you want to produce standard-to-order.

The Order Policy of the item in the sales order line must be To Order, which you can define in the Items - Ordering Defaults (tcibd2501m000) session and/or in the Items - Ordering (tcibd2500m000) session. As a result, the Make Customized check box in the Sales Order Lines (tdsls4101m000) details session is selected, which indicates that a PCS project can be generated.

Step 2. Trigger the production of a standard-to-order item

In LN, you can trigger the production of a standard-to-order item directly from the sales order. Select a sales order line, and start the Generate (Project) Structure for Sales Orders (tdsls4244m000) session from the appropriate menu to generate the project structure for the standard item. You must select Standard-to-Order in the Generation Method field. The item in the sales order line is copied as a customized item to the PCS project. In other words, a project code is added to the standard item, which makes the item a customized item. However, the BOM and the routing are not copied to the project, so no customized BOM or routing is created at any level in the project structure.

Dependent on the settings in the Generate (Project) Structure for Sales Orders (tdsls4244m000) session, the project code for the newly created customized item is based on the sales order number, if the Equate Project with Sales Order check box is selected, or on a project series, if the Project Series field is filled.

Step 3. Generate planned orders

After a project structure is created for the standard-to-order item by running the Generate (Project) Structure for Sales Orders (tdsls4244m000) session, planned orders can be generated for all items under the PCS project in the Generate Order Planning (cprrp1210m000) session in Enterprise Planning. Planned orders are created for materials in the project that are standard-to-order items, but also for materials that are Anonymous. For this purpose, the BOM is exploded. The BOM that is used for the BOM explosion is the standard BOM of the item from which the customized item is derived. The item from which the customized item is derived can be found in the Derived-from Item field in the Items - General (tcibd0501m000) details session for the customized item.

The BOM is exploded in the following way: if the encountered material in the BOM is a To Order item, Enterprise Planning checks the item's inventory to determine the lowest inventory level in the future. The calculation is as follows:

on hand inventory + future receipts - future deliveries

Excluded in the calculation are:

  • Production plans.
  • Purchase plans.
  • Planned orders.

If sufficient inventory is available, Enterprise Planning creates a customized item for the standard-to-order item, and allocates inventory for the customized item instead of for the standard item. After this, the BOM explosion comes to a halt.

If inventory is insufficient, Enterprise Planning creates a customized item for the standard-to-order item, and BOM explosion continues.

If the material on the BOM line is an anonymous item, a planned order is created in case of insufficient inventory. However, the item is not customized.

In short, every material in the BOM with order system To Order that is encountered during BOM explosion, is changed by Enterprise Planning into a customized item. BOM explosion stops when sufficient inventory is available for a material.