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SAP process orders provide you with extra functionality compared to production orders, including phases and process instructions for process industries.
When you use production orders, a routing and a bill of material (BOM) are transferred to the master data of the order header. When you manufacture with process orders, the master recipe and associated materials list are transferred. The difference occurs because process industries manufacture in phases, converting initial liquid batches into consumable batches, which are then bottled and packaged.
There are no costing differences between process and production orders, however, there are differences in terminology and production functionality. Let’s explore these in detail.
You display a process order with Transaction COR3 or by following menu path:
Logistics • Production – Process • Process Order • Display
A process order is displayed as shown in Figure 1.
Figure 1 Display Process Order
Click the Operations button at the top to display the Operation Overview as shown in Figure 2.
Figure 2 Process Order Operation Overview
A process order contains operations that are divided into phases. A phase is a self-contained work step that defines the detail of one part of the production process using the primary resource of the operation. A resource is similar in concept to a work center, and is assigned to a cost center. The cost center assigns activity types to the resource.
In process manufacturing, only phases are costed, not operations. A phase is assigned to a superordinate operation and contains standard values for activities, which are used to determine dates, capacity requirements, and costs. The Relevancy to Costing Indicator in the phase must be selected as shown in Figure 3.
For each operation or phase you plan, materials are required for the execution of each step. Raw materials and semi-finished products that enter the production process debit the manufacturing order as they are withdrawn from inventory. Click the Materials List button in Figure 2 to display the materials as shown in Figure 3.
Figure 3 Process Order Material List
Intra materials, material type INTRA, are temporary and only exist between production phases. Intra materials appear in the material lists as items of category M, and are not costed. If the process is interrupted because of a malfunction, however, an intra material may have to be put into inventory. In this case, it’s valuated with a price in the material master.-
Remaing materials are represented as by-products. A by-product is an incidental output of a joint process. You enter a by-product with a negative quantity in the materials list of a primary product or process material. For by-products, you don’t select the Co-Product indicator in the material master or in the BOM.
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Circulating materials, such as catalysts can be both a process input and a process output. You can specify in the material list whether the costs for a circulating material should be taking into account. The system selects a price for the circulating material from the material master. If the circulating material is flagged as relevant to costing, the material costs appear in the itemization twice: once with a plus sign and once with a minus sign. The balance is the material input cost.
If the materials list contains co-products, you can add additional co-products. You cannot, however, delete co-products from the materials list. To see if a material component is relevant to costing, go from the materials list to the detail screen for the material. All co-products (both leading co-products and non-leading co-products) are items with a negative quantity. Leading co-products are called primary products.
You maintain process instructions (PI) for phases by clicking the Operations button in the header screen of a process order, select a phase, and choose Operation • Process Instruction Overview from the menu bar.
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An accrual order enables you to monitor period-related accrual calculation between expenses posted in financial accounting and controlling.
An active pharmaceutical ingredient (API) is the substance in a drug that is pharmaceutically active and is by far the highest-cost ingredient in pharmaceutical products. One way to identify these costs is with a separate cost component by creating an API origin group and assigning it to API material masters with Transaction MM02 and an API cost component in the cost component structure with Transaction OKTZ.
While you typically allocate overhead costs during activity-type confirmations or with costing sheets, templates offer an alternative with more flexibility. Although there is more complexity when setting up templates, they are set out logically and are worth considering as a flexible alternative for overhead costs.
As cost centers can provide planned output services based on activity quantities with Transaction KP26, you can plan cost center activity input quantities from other cost centers with activity input planning using Transaction KP06.
An activity type identifies activities provided by a cost center to manufacturing orders. The secondary cost element associated with an activity type identifies the activity costs on cost center and detailed reports.
Actual costing determines what portion of the variance is debited to the next-highest level using material consumption. All purchasing and manufacturing difference postings are allocated
Backflushing is the automatic posting of a goods issue for components after their actual physical issue for use in an order. The goods issue posting of backflushed components is carried out automatically during confirmation.
Backflushing reduces the amount of work in warehouse management, especially for low-value parts. The material components from the BOM required in the operation should be assigned to the operations in the routing.
A bill of material (BOM) is a structured hierarchy of components necessary to build an assembly. BOMs and purchasing info records provide cost estimates with the information necessary to calculate the material costs of assemblies.
A by-product is a product that is produced in conjunction with other products. The system does not create a separate order item for each by-product. The material valuation of a by-product is always based on the price specified by price control in the material master. If a by-product is indicated as being relevant to costing in BOM, the total cost of the process is reduced by the costs of the by-products
You select the co-product indicator in the MRP 2 and Costing 1 views if a material is a valuated product that is produced simultaneously with one or more other products. Setting this indicator allows you to assign the proportion of costs this material will receive in relation to other co-products within an apportionment structure.
A cost center is master data that identifies where the cost occurred. A responsible person is assigned to the cost center that analyzes and explains cost center variances at period-end.
An internal order monitors the costs and revenue of an organization for short-to medium-term jobs. You can carry out planning at a cost element and detailed level and budgeting at an overall level with availability control.
Intra Materials are intermediate materials generated in a process. They can be neither purchased nor sold. They do not have a purchase or sales view.
An investment order monitors investment costs to be capitalized and settled to fixed assets.
A master recipe consists of a header and several operations, each of which is carried out at a primary resource
A process order consists of operations, each of which is carried out at a primary resource. An operation is subdivided into phases. A phase is an independent process step that contains the detailed description of a part of the entire manufacturing process.
A process order is a manufacturing order used in process industries. A master recipe and materials list are copied from master data to the order. A process order contains operations which are divided into phases. A phase is a self-contained work step that defines the detail of one part of the production process using the primary resource of the operation.
In process manufacturing only phases are costed, not operations. A phase is assigned to a subordinate operation and contains standard values for activities which are used to determine dates, capacity requirements, and costs.
A production order is used for discrete manufacturing. A bill of material and routing are copied from master data to the order. A sequence of operations is supplied by the routing which describes how to carry out work steps.
An operation can refer to a work center at which it is to be performed. An operation contains planned activities required to carry out the operation. Costs are based on the material components and activity price multiplied by a standard value.
Production variance is a type of variance calculation based on the difference between net actual costs debited to the order and target costs based on the preliminary cost estimate and quantity delivered to inventory. You calculate production variance with target cost version 1. Production variances are for information only, and are not relevant for settlement.
A production version describes the types of production techniques that can be used for a material in a plant. It is a unique combination of bill of material, routing and production line and is maintained in the MRP 4, Work scheduling and Costing 1 views of the material master.
A profit center receives postings parallel to cost centers and other master data, such as orders. Profit center accounting is a separate ledger that enables reporting from a profit center point of view. You usually create profit centers based on areas in a company that generates revenue and have a responsible manager assigned.
When raw materials are valued at a standard price, a purchase price variance will post during goods receipt if the goods receipt or invoice price is different from the material standard price resulting in GR/IR posting.
Operations are carried out at work centers representing, for example, machines, production lines, or employees. Work center master data contains a mandatory cost center field. A work center can only be linked to one cost center, while a cost center can be linked to many work centers.
John Jordan is Lead SAP Controlling Consultant at ERP Corp. We improve your SAP Material Ledger, Profitability Analysis, and Controlling experience and prepare you for SAP S/4HANA. Contact John at jjordan@erpcorp.com
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