Process Or Discrete in SAP S/4HANA Manufacturing – Can’t Decide?

[sangeet_dadwal]

Manufacturing is complex and this gets exacerbated when the technology and systems used are not in alignment with the core characteristics of manufacturing processes. Often during the initial phases of SAP manufacturing greenfield project implementation or transformation, a common and incongruous discussion is undertaken to finalize which component either discrete or process manufacturing of SAP S/4HANA manufacturing solution jells with the organization. I have tried to quell the perplexity around these long-drawn discussions based on my experience and understanding of the SAP manufacturing solution.

To start with we can classify the manufacturing industry broadly into two categories viz. discrete and process industry. The discrete and process industry types can be seen as two spectrums of manufacturing industry type. However, a company can have characteristics of both the industry types.

To facilitate further discussions and decision-making let’s now outline the characteristics of discrete or process industry types:

	Discrete Industry	Process Industry
Product Characteristics	●       The final product is manufactured by processing components for example through machining, grinding etc. and then assembled into a final product. ●       The final product or intermediate product can be disassembled and replaced with new components. ●       Usually has a replacement supply chain that is spare parts that can be manufactured and sold. ●       The components not adhering to specified quality are rejected. ●       Volume, density, and mass of the product is not affected during the manufacturing process. ●       The products may be serialized to track the product characteristics at individual piece level.	●       The final product is manufactured by processing ingredients for example mixing, heating etc and then suitably packed so that it can be stored and transported. ●       The final product or intermediate products can’t be dis-assembled/taken-out and replaced with new ingredients. ●       Usually has co-products manufactured as part of manufacturing the final product. ●       The components not meeting the required specifications can be accepted under deviation with price discount. ●       Volume, density, and mass are affected as the product is processed through the manufacturing steps.
Process Characteristics	●       The products move through the manufacturing facility via predefined steps called routing. ●       The product must be moved from one step to another through transport equipment such as forklifts, conveyer belts etc. ●       The quality of components should be adhered to specified standards to manufacture the final product.	●       The products move through the manufacturing facility via predefined steps called recipe or formula. ●       The product must be moved from one step to another through pipes, pumps, intermediate storage tanks etc. ●       The quality of components can vary the parameters of the production process. ●       Usually manufactured in batches with product genealogy mandated by regulatory authorities.
Unit of Measure	●       The production is usually measured in EA (each), PC (piece) etc. identifying a distinct unit.	●       The production is measured in KG (Kilogram), MT (Tons) or L (Liters) etc.
Industry Examples	●       Automotive, Electronics, Industrial machinery, medical devices etc.	●       Food & Beverage, Pharmaceuticals, Chemical, steel, and aluminium processing, plastics, Petro-chemical etc.

 

By no means, the parameters delineated above are exhaustive. However, it will provide you a good starting point to kick-start the discussions and probably conclude. Once you have decided that the industry type for a customer is either process or discrete, the next step is to validate the customer requirements from SAP solution perspective.

S/4 HANA manufacturing solution can be implemented either on premise or on cloud. Irrespective of how the solution is implemented, it can be designed with following three components:

• Manufacturing with Production Orders – The manufacturing with production orders is a cornerstone solution for designing a manufacturing solution in SAP S/4HANA. It caters to discrete industry environment and uses routings which define the discrete steps to manufacture the product. Many other functionalities such as serial number management, engineering change control, trigger points and integrated product and process engineering are tightly integrated and are key requirements for discrete industry requirements.


• Manufacturing with Process Orders – The manufacturing with Process Orders has been designed to typically cater to the process industry environments. Process orders use a recipe which defines the formulation with which the ingredients will be processed and consumed. With process order you can design complex network of equipment’s with different relationships such as start-start or finish start etc. Additionally, it also gives you in-built feature to connect these equipment’s with process instructions, user driven or automated material consumption along the manufacturing process, active ingredient management, digital signatures to name a few.


• Repetitive Manufacturing – Repetitive manufacturing is the third option to design manufacturing processes in SAP S/4HANA. This component is used when you manufacture same or similar products over a lengthy period. The manufacturing is not lot/batch based rather the manufactured quantity is produced over a certain period at a certain rate. Routings are simple (usually one step) and do not vary much. The point to note in this component of SAP is that though process order and production orders are not usually used but can be deployed if required. Additionally, unlike production order and process orders where the cost object is an order (Make to Stock environment), the cost object is a product cost collector (Internal Order). Product cost collector helps in collecting cost for period instead for every order created during that period.

Note: In MTO (Make to Order) scenario the cost object is a sales order for the above discussed three manufacturing design options.

Functionalities like engineering change control, shop floor instructions (Xsteps/Process Instructions), serial number management, batch management can be used for both the production and process orders. For example, auto ancillary manufacturer manufacturing axels would heat-treat the components before machining. The heat treatment is done in furnace which has a heat number and associated quality results. This manufacturing step can be captured with production orders with batch management along with SAP quality management module for quality results.

SAP does provide industry specific solutions which can also be implemented if there are considerable gaps in the solution design which warrants an industry specific solution. These solutions are either developed by SAP or by the partner ecosystem. For further details refer to https://roadmaps.sap.com

Also, with the advent of new age ERP SAP S/4HANA, SAP PP/DS functionality has been embedded in S/4HANA Manufacturing and forms integral part of the overall manufacturing solution. Referred to as embedded PP/DS (Advance Planning), it can be used to seamlessly plan manufacturing planning and execution requirements with advance algorithms. For example, if the business requirement is to plan manufacturing based on common product characteristics, block planning algorithms which are available in embedded PPDS can be utilized. Similarly, if setup optimization must be done based on setup optimization matrix to reduce the overall setup times and improve equipment utilization, then embedded PP/DS would be a good fit.

Finally, once all the aspects of business requirements and SAP solution are considered a decision to implement production order, process order or repetitive manufacturing is made. The key here is that the decision to use production order or process order is not an either-or decision. You can have all three manufacturing design components that is, process order, production order and repetitive setup for a single customer.

In conclusion, this would guide consultants, business users and key stakeholders in manufacturing stream to decide which components of SAP S/4HANA manufacturing solution align best with their organization. Having the right components will help you get the most out of SAP solution and decrease time to value by reducing unwarranted enhancements.

Looking forward to hear your feedback, proposals for improvement as well as general thoughts, simply hit the comment section below!

 

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