All ERP software supports every business process with its distinct modules helping to gain better visibility of analytics and in turn easing the entire cycle of operations of each module’s distinct process. SAP is one such player in the ERP world with 40+ years of expertise in providing unique business solutions drafted for your business’s needs. 

The core business modules offered by the SAP ERP software are: 

  • Human Resource Management (SAP HRM)
  • Production Planning (SAP PP)
  • Material Management (SAP MM)
  • Financial Supply Chain Management (SAP FSCM)
  • Sales and Distribution (SAP SD)
  • Project System (SAP PS)
  • Financial Accounting and Controlling (SAP FICO)
  • Plant Maintenance (SAP PM)
  • Quality Management (SAP QM)

This article focuses on elaborating on the core functionalities of the SAP PP (Production Planning) module. Let’s dive in to understand the word Production Planning.

Production Planning

Production Planning is a process of orchestrating the demand in accordance with pre-production and post-production activities. This process focuses to deliver a proper strategy for the scheduled production activities with increased efficiency.

The SAP PP module tracks and records the entire process of manufacturing activity by considering the projected and actual expenses, goods movements from the conversion of raw materials to semi-finished commodities, and a lot more activities that are streamlined under this module. The PP module is integrated along with the SD, MM, QM, FICO & PM modules of SAP.

The Key-Objectives of the Production Planning Module is; 
  • Production of Quality Products
  • Maximum utilization of resources
  • Economy at production time
  • Optimum inventory level maintenance
  • Ensure the smooth flow of operation

The primary objects in SAP PP are the Bill of Materials, material master, routing, and work center. The important attributes of the above modules are to ensure data like production orders, material type, planning needs, product issues, and goods receipt, are contained in master data. Let’s look into each prime object of SAP PP’s material master in detail;

Material Requirement Planning(MRP)

A Material Master is an organization’s core master data that comprises information on a material’s sourcing, manufacturing, quality, sales, and financial data. The data in an SAP PP material master will be kept at several levels:

  • Client Level or general data
  • Plant Level
  • Storage Location Level
  • Valuation Level
Bill of Materials(BOM)

The Bill of Materials master data is connected to material requirement planning and gives a list of components needed to manufacture the product. A Bill of Materials is a document that specifies how much of each component is needed to create or deliver a finished product. It can also comprise the numerous activities and step-by-step instructions required to finish a production process. The component is chosen based on the information in the planning order. The characteristics of BOM are:

  • A single-level or multiple-level Bill of Materials can be created.
  • The size, validity dates, and manufacturing process all influence the kind of BOM.
  • Based on the material type, you can produce up to 99 Bills of Materials.
  • You can use the Bill of material document to find the materials available in the PP module.
Work Center

The work center contains master data for product routing. It comprises information on scheduling, capacity planning, and production costs. The work center is where all production operations take place. The work center can be used to monitor the actions listed below.

Scheduling – You can plan activities in Production order according to operating times in Routing and formulae specified in the work center.

Production Costing – You may also examine the production costing based on the formulae listed in the work area. The work center is related to the cost center and determines the cost of operation in the manufacturing sequence.

Capacity Planning – The work center stores the existing capacity and future capacity requirements.


Routing describes the order of actions carried out in the work center. Routing is critical in estimating production costs, machine time, and labor time. The key features of routing are:

  • To construct routing, the work center must first be defined.
  • A single routing group can handle many materials.
  • Routing is used for raw and final product operation scheduling and budgeting.
  • Routing is used to compute the cost of operation for a final product.

Until now we’ve had a brief view of the key components and the objectives of production planning. Read further to analyze the entire lifecycle of SAP PP.

Production Planning Cycle

Planning Independent Requirement(PIR)

Planned Independent Requirement drives the production planning process. A PIR incorporates one planned volume of items and one material date or a planned quantity that is divided over a time period. You can keep a number of PIR versions constant, by setting certain numbers to active and others to inactive.

PIR outlines the material master planning approach, which establishes the planning methodologies – make-to-order and make-to-stock.

PIRs are utilized in Make-to-Stock environments when stock is created based on prediction rather than sales order.

Demand Management

Demand Management estimates required quantities and delivery dates for completed products and critical assemblies. PIR (planned independent requirements) and customer needs are used in demand management.

A product’s planning strategy must be outlined. It shows the industrial procedures for planning and manufacturing. There are two ways we can accomplish this.

  • Make-to-Stock: The production of items in the absence of sales orders, i.e., the stock is produced independently of orders.
  • Make-to-Order: This method is used to produce material for a single sales order or line item.
Material Requirement Planning (MRP)

MRP identifies any shortfalls and generates the necessary purchase items. It computes net requirements and generates planned orders for in-house manufactured goods as well as buy requisitions for raw materials. It manages time, explodes the BOM, calculates production dates in scheduled orders, and prepares BOM-level procurement bids.

Capacity Planning & Leveling 

Capacity Planning is used to identify capacity constraints at work centers and shift orders to prevent capacity bottlenecks. Capacity needs are established in Work Center by MRP, and because MRP works with limitless capacity, it plans everything in Work Center without regard for capacity restrictions. It is necessary to level capacity at the work facility. In order to build a constrained production plan, capacity can be leveled at each work center using a planning table.

Production Orders

MRP will generate “Planned Orders,” which must be translated to production orders before the process can be completed. Unlike Planned Orders, the Production Order is a firmed receipt element that is unaffected by MRP runs. A Production Order is a document that defines what material and in what quantities must be produced. It also includes the BOM components and routing operating data for the work center. The Production Order is issued for execution, and material availability checks can be performed to see if any missing components exist.

Production Order Confirmation

While physically manufacturing materials on the shop floor to confirm the production order, component materials will be automatically updated using the backflush methodology for confirmation, and then the material reception is also completed instantly via the operation Control key in Routing. Manual Goods Issue and receipt can be handled individually from confirmation rather than auto goods mobility. Any unsuccessful goods movement caused by a component supply shortage can be reprocessed manually.

Activity expenses such as machines, labor, and so on will be updated on an ongoing basis in the production order during confirmation. After final confirmation & final Goods receipt, the order is marked as CNF (Confirmed) and DLV (Delivered). If confirmation is uploaded incorrectly, we can cancel it and re-post it with the right data.

Production Order Close 

The order should be technically finished after the manufacturing order is totally supplied or we do not wish to execute the order further. When an order receives TECO (Technically completed order) status, it is removed from the stock/requirement list along with its dependent resources and is no longer evaluated in the material requirement planning process.

Final Thoughts

This SAP PP module is in high demand since all businesses require it to efficiently manage the demand and requirements of their product. The SAP PP module keeps businesses up to date on the demand and amount of their products. To know more about the SAP Production Planning module, do contact our expertise!