Case Study 4: Operate a Manufacturing Company (Extension)

1. Case Study 4:Operate a Manufacturing Company(Extension) EGN 5621 Enterprise Systems Collaboration Summer B, 2013

2. Company can design own products based on specified rules • 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 should do planning, run MRP, and convert purchase requisitions to POs before starting game. What’s New in Mfg Extension?

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

4. 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 during the simulation by changing its bill of material with T-code ZCS02. During simulation, your company always has six BOMs 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. 4

5. Muesli Manufacturing Association Label Regulation

6. List of Master Data Created for the Simulation

7. New Product Development (1/2)

8. New product development (2/2)

9. Change BOM for New Product(Before change) 9

10. Change BOM for New Product(After Change) 10

11. 2. Distribution Channel 14 • Only buy small boxes (0.5 kg) • Less price sensitive • Sensitive to advertising • Payment delay of 5 to 15 steps • Will have a stronger preference for 3 particular products during the simulation 11

12. 3. Investment for Improvement of Production Capacity • 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 following table 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 44,117.75, then the set-up time reduces to 10.5 hours. 12

13. Production Improvement Decision

14. Investment for Reducing Set-up Time 14

15. Investment for Reducing Set-up Time in the First Quater • In the first quarter, every company must invest 5,000 euros to reduce set-up time. After the first investment, it’s your company decision if to make more investment. 15

16. 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: $$ 16

17. Investment for Reducing Set-up Time in SAP 17

18. Investment for Increasing Production Capacity • Your company can make investment into production equipments to increase your production capacity. This may be your strategic weapon. • When you start the simulation, you have 5 million euro production equipment with a production capacity of 21,000 boxes per day. 18

19. Increase Production Capacity • For an investment of 100,000 euros you can increase production capacity by 400 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 = 21,000 + (0.004 x additional machinery investment). 19

20. 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 20

21. Investment to Improve Production Capacity in SAP 21

22. Each company should 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 Starting Inventory.

23. Pricing decision

24. Marketing decision

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

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

27. Execute MRP

28. Create Purchase Orders from Purchase Requisitions (ME59N)

29. Convert Purchase Requisitions into Purchase Orders

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

31. Collective Conversion of Planned Order (CO41)

32. Release Production Order

33. Release Production Orders (CO41)

34. Depreciation of fixed assets is assessed (ZCK11) • Annual depreciation is calculated as 5% of building value and 10% of machinery value at 5 million. 5. Depreciation of fixed assets

35. Depreciation of fixed assets is assessed (ZCK11) 5. Depreciation of fixed assets

36. Fixed mfg overhead is assessed (T-code: ZCK11) 6. Fixed Mfg Overhead

37. Each team has 2 warehouse storage areas: • Finished product (02) - space for 250,000 boxes • Raw materials (88) - space for 250,000 kg of raw materials and space for 500,000 boxes and space for 500,000 bags • Additional warehouse space can be rented: • 100,000 boxes of finished products (or part thereof), @ € 200/step (less than € 0.01 per box per step) • 100,000 kg (or part thereof), @ € 350/step (more expensive because it's raw food product) • 100,000 boxes AND/OR bags (or part thereof), @ € 50 step • The cost of additional storage will be automatically billed, and paid immediately. 7. Inventory Storage Cost

38. Corporate Roles Designation • CEO • Check Financial Statement • Make investment 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 38

39. 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 39

40. 2 Tasks for the Manufacturing Case Study

41. Each round will be of 30 steps (approx 1 min per step) • 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

42. Participant’s Job Aid & Menu for Mfg Extension

43. Participant’s Job Aid & Menu for Mfg Extension

44. Raw Material Cost per PO

45. Product Cost Planning

46. 30 min 30 min 30 min 30 steps 30 steps 30 steps Game Layout

47. Client : 360 Login : $# $ = Team, # = User 1 to User 6 Password: ERPSIM Login Information

48. User Menu for Mfg Extension

49. User Menu for Mfg Extension

50. Initial Financial Statement (F.01)