SAP Production Planning

SAP Production Planning is one of the key modules in ERP and deals with planning processes, such as capacity planning, material planning, execution of production order, bill of material and goods movement. SAP PP module handles the master data required for Bill of Materials (BOMs) activity, work center and routing, and keeps it in a separate component.


Organization Structure in SAP PP

In SAP PP module, the organization structure defines the location of manufacturing plants and storage locations within the plant. At the top of the structure, you have the company and the company code and then each company code contains different plant and storage locations

Following diagram represents a common organization structure in live SAP Production Planning environment

Importance of Plant and storage locations in Production Planning

All Production master data is created at Plant level

Planning activities are also performed at Plant level

Production Confirmation process and related goods movement occur at plant and storage location level

Master Data in SAP PP

Master data is generally static for any company and is very rarely changed depending on the requirement. There are 5 master data to be maintained in Production Planning module

Material Master

The material master contains information on all the materials that a company procures, produces, stores, and sells. It is a number uniquely identifies a material master record, and hence a material

Materials with the same basic attributes are grouped together and assigned to a material type such as finished, raw material, etc

It is used for the following purposes

To purchase materials

For Goods Movement postings such as goods issue or receipt in inventory management and also for physical inventory postings

In invoice verification for posting invoices

In sales and distribution for sales order fulfillment process

In production planning and control for material requirements planning, scheduling, and production confirmation processes


(Bill of Material (BOM

A bill of material is a complete, formally structured list of the components together with the quantity required to produce the product or assemblyBOM’s are used in material requirement planning and product costing

You can also create up to 99 alternative BOMs for a single productFor Products having variants, you can create Super BOM, which has all possible types of components used to manufacture different types of variants, and the appropriate component is selected based on characteristic chosen in the sales Order

For example, Product Cycle can contain all types of frames (with different colors and sizes) and desired frame is selected in production order based on color and size chosen in the sales order

Work Center

A Work Center is a machine or group of machines where production operations are performed. Work centers are used in task list operations (Routings

It contains the data for





Routing is nothing but a sequence of operation performed at the Work Center. It also specifies the machine time, labor time, etc. for the execution of operations

It is also used for scheduling of operations and used in standard cost calculation of the product

Production version

The production version is a combination of BOM and Routing data for production. It is a linkage between BOM & Routing and determines the manufacturing process

There can be multiple production versions as per different manufacturing process to produce the product

Production Planning Cycle

The Production Planning and Control consist of below processes. Depending on industry type and requirements, some of them could be disregarded

Sales & Operations Planning – SOP

SAP SOP stands for Sales & Operations Planning. It is one of the important components of PP module. As the name says it is used as a planning tool based on the past, present & estimated data. This tool helps the organization to decide their targets for sales & products. By default many SOP plans are already available with the system and they are called as Standard SOP. You can also customize and add other options for planning as per the company requirements and they are called as flexible planning.

Demand Management

The function of Demand Management is to estimate requirement quantities and delivery dates for finished products and important assemblies. Demand Management uses PIR (planned independent requirements) and customer requirements

Planning strategies must be defined for a product. It represents the methods of production for planning and manufacturing. There are two methods by which we can do this

Make to Stock: Production of goods without having sales orders, i.e., stock is produced independently of orders

Make to Order: This strategy applies to the production of material for a specific individual sales order or line item

Combination of both: use make to stock for some materials, for example semi-finished materials; and use make to order for others, for example finished materials

Long Term Planning -LTP

Long term planning (Simulative MRP) is used to simulate the future demand and supply situation in all BOM levels. The main function is to check the capacity situation, material requirement and vendor ability to provide the material in desired time

This is not an actual run but a simulative run where actual planning situation is not being affected, and we can see the capacity situation of the work centers well ahead in time. If such information is available in advance, then we can decide at an early date whether additional machines will be required to cope with capacity bottlenecks

Material Requirement Planning -MRP

MRP determines any shortages and creates the appropriate procurement elements. It does net requirement calculation and generate planned orders for in-house produced materials and purchase requisition for raw materials

It does lead time scheduling and calculate production dates in planned orders

It explodes the BOM and generates procurement proposals at each BOM levels



Planning in Shop Floor Control 

Shop floor control converts the planning data in material requirements planning into actual production orders and coordinates the production process with all the resources involved

The main tool for carrying out production is the production order. The production order generates capacity requirements at the detailed planning level and these are dispatched during capacity leveling

You specify the following in a production order

What is produced

On what date production should take place

How much production costs

To which work centers capacity requirements should be dispatched