Case Study 4: Operate a Manufacturing Company (Extension)

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

2. 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?

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 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. 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 • Stronger preference for 3 particular products during the simulation 11

12. 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

13. For Extended Mfg Number of Stores by Geographical Area

14. 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. 14

15. Investment for Reducing Set-up Time 15

16. Production Improvement Decision

17. 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. 17

18. 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: $$ 18

19. Investment for Reducing Set-up Time in SAP 19

20. 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 21,000 boxes per day. 20

21. Increase Production Capacity • For an additional machinery investment of 100,000 eurosyou 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). 21

22. 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 22

23. 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. 23

24. Investment to Improve Production Capacity in SAP 24

25. 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

26. Initial Financial Statement

27. Pricing decision

28. Marketing decision

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

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

31. Execute MRP

32. Create Purchase Orders from Purchase Requisitions (ME59N)

33. Convert Purchase Requisitions into Purchase Orders

34. 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

35. Conversion of Planned Order (CO41)

36. Release Production Order(s)

37. Release Production Orders (CO41)

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

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

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

41. 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 for: • 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 they are raw materials) • 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

42. 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 42

43. 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 43

44. 2 Tasks for the Manufacturing Case Study

45. 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

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

47. Participant’s Job Aid & Menu for Mfg Extension For DC 14, the lead time is 0, and payment time is 5 -10 steps.

48. Raw Material Cost per PO

49. Product Cost Planning

50. 15 min 15 min 15 min 30 steps 30 steps 30 steps Game Layout