Case Study 4: Operate a Manufacturing Company (Extension)

1. Case Study 4:Operate a Manufacturing Company(Extension) EGN 5621 Enterprise Systems Collaboration Fall, 2015

2. Each round will last for 30 steps • End-of-round inventory is carried over to the next round • You can sell a product only if you have it in stock • You compete against the other teams and importers • Your objective is to maximize profit Rules of the Game

3. Company can design own products based on specified rules, but the total number of products keeps six. • Besides 10, and 12, the distribution channel 14 is available. • Company can make investment to improve production capacity: • Reduce set-up time • Increase production capacity • No starting inventory. Each company needs to do planning, run MRP, and convert purchase requisitions to POs before starting game. What’s New in Mfg Extension?

4. Depreciation of fixed assets is assessed • Fixed overheads are assessed • Inventory storage cost for excess stock is assessed What’s New in Mfg Extension?

5. Corporate Roles Designation • CEO • Check Financial Statement • Make investment decisions for production • Check summary sales report • Check price market report • Market & Sales Manager • Check sales order report • Check summary sales report • Check price market report • Maintain and change market expenditure • Change selling prices for finished goods 5

6. Corporate Roles Designation • Production and Planning Manager • Create planned independent requirement • Run MRP • Release production orders • Modify BOM • Monitor production schedule • Check product costs, including overhead costs • Check raw materials cost per production order • MM Manager • Convert purchase requisitions to purchase orders • Track PO report • Check MRP results • Check individual stock level • Check inventory report 6

7. 2 Tasks for the Manufacturing Case Study

8. What’s New in Mfg Extension?

9. Muesli Manufacturing

10. Muesli Manufacturing

11. Muesli Manufacturing

12. 1. Develop New Products • At beginning of the game, each company has six finished products with a preset recipe for each product. • You can change the recipe of a product from 1kg to 0.5 kg during the simulation by changing its bill of materials with T-code ZCS02. During simulation, your company always has sixBOMs of finished products. • If your company still has inventory of the finished product, the system doesn’t allow you to change its BOM. • Your new product must meet the guideline for recipes. • When the system accepts your changes in BOM, it will change the description in the material master to match the new content and weight. 12

13. Muesli Manufacturing Association Label Regulation

14. List of Master Data Created for the Simulation

15. New Product Development (1/2)

16. New product development (2/2)

17. Change BOM for New Product(T-code ZCS02) 17

18. Change BOM for New Product(Before change) 18

19. Change BOM for New Product(After Change) 19

20. 2. Distribution Channels 20

21. DC10: Hypermarkets (Review) • Buy only large boxes (1 kg) • Payment delay of 20 steps • More sensitive to price • Less sensitive to advertising • Will have a stronger preference for 3 particular products during the simulation DC12: Grocery Chains (Review) • Buy both large boxes (1 kg) and small boxes(0.5 kg) • Payment delay of 10 to 15 steps • Will have a stronger preference for 4 particular products during the simulation

22. Distribution Channel 14 • Only buy small boxes (0.5 kg) • Less price sensitive • Sensitive to advertising • Payment delay of 5 to 15 steps • Stronger preference for 2particular products during the simulation 22

23. Number of Stores by Geographical Area

24. 3. Investment for Production Capacity Improvement 24

25. 3. Investment for Production Capacity Improvement • Reduce set-up time • The default set-up time is 12 hours for changing product in your production line. If you want to keep product variety and wish to run small production batches, you can make investment to reduce the set-up time. • The table below shows the set-up time as a function of your investment. If your investment is zero, the set-up time is 12 hours. If you invest 44,117.65, then the set-up time reduces to 10.5 hours. 25

26. Investment for Reducing Set-up Time 26

27. Investment for Reducing Set-up Time

28. Special Investment for Reducing Set-up Time in the First Quarter • In the first quarter, every company must invest 5,000 euros to reduce set-up time. • After the first investment, it is up to your company to decide whether to make further investment. 28

29. Investment in SAP to Reduce Set-up Time • Use T-code: FB50 • G/L Account: 113300 (Weizen bank) • D/C: credit • Amount: 5,000 (first investment) • G/L Account: 478000 (Lean manufacturing expense) • D/C: debit • Amount: 5,000 (first investment) • Cost center: $$ 29

30. Investment for Reducing Set-up Time in SAP 30

31. Investment for Increasing Production Capacity • Your company can make investment on equipment to increase your production capacity. • This is a strategic decision for your operation. • At the start of simulation, your production equipment is worth of 5 million euros with the production capacity of producing 24,000 boxes per day. 31

32. Increase Production Capacity • For an additional machinery investment of 1,000,000 eurosyou can increase production capacity by 1,000 boxes per day. In order to obtain a daily capacity of 25,000 boxes, you need to invest 1 million euros. • Formula for capacity improvement: • Total daily capacity = 24,000 + (0.001 x additional machinery investment). 32

33. Production Improvement Decision

34. Investment for Improving Production Capacity in SAP • Use T-code: FB50 • G/L Account: 113300 (Weizen bank) • D/C: credit • Amount: Your investment • G/L Account: 11000 (Machinery & equipment) • D/C: debit • Amount: Your investment 34

35. Investment to Improve Production Capacity in SAP 35

36. Difference between Investment for Reducing Set-up Time & Improving Production Capacity • Investment for reducing set-up time is a one shot investment as manufacturing expense. • Investment for improving production capacity is an investment to increase machinery assets. The annual depreciation of machinery assets is calculated as 10% of machinery value. 36

38. Initial Financial Statement

39. Pricing decision

40. Marketing decision

41. Each company needs to plan and complete the following steps before simulation: • - Planning for finished products (T-code: MD61), • - Run MRP (T-code, MD01), and • - Convert purchase requisitions to Purchase orders (T-code:ME59N) • - Convert planned orders to production order after raw and packing materials are available (T-code CO41) 4. No Inventory at Beginning

42. Create Planned Independent Requirement for 6 Finished Products (MD61)

43. Create Planned Independent Requirement for 6 Finished Products (MD61)

44. Execute MRP

45. Create Purchase Orders from Purchase Requisitions (ME59N)

46. Convert Purchase Requisitions into Purchase Orders

47. After simulation is started and when required raw and packaging materials are received, the planning manager needs to convert planned orders to production orders (T-code: CO41). • You can release only those planned orders into production orders with which the required raw materials are available in your inventory. Convert Planned Orders to Production Orders

48. Conversion of Planned Order (CO41)

49. Release Production Order(s)

50. Release Production Orders (CO41)