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.

There are two types of projects you can use in Project Control for the production of to-order standard items:

  • You can set up a standard project
  • You can set up a lean PCS project

Using a lean PCS project, you can peg activities to specific sales orders, with cost known by the PCS project. When a project is generated to manufacture the specified item, no BOM or routing is copied in to the project as those are standard and no engineering is possible once the item goes in projection.

The BOM and routing of a standard to order item are stored independently of the projects making use of them, preventing redundant data.

Step 1. Create a sales order for the standard-to-order item.

The order policy of the item in the sales order line must have the Customizable check box selected, which you can define in the Items (tcibd0501m000) 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 PCS) 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 PCS) 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 (PCS) 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 PCS) 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 (tcibd0501m000) details session for the customized item.

The BOM is exploded in the following way: if the encountered material in the BOM is a customized 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 Customizable check box selected 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.