Manufacturing Industry Types
In this blogpost, I’ll introduce the common types of Industries which exist in the manufacturing sector. I’ll also discuss the solutions in SAP and how to decide which solution is best for your business.
Manufacturing Industry Types
The manufacturing industries are broadly divided into two industry types—discrete manufacturing and process manufacturing.
Discrete manufacturing is a production methodology used to produce materials or assemblies that can be disassembled, completely or partially, into the original state of the components used. The methodology uses complex, multi-level BOMs and products change frequently from order to order. Lots of different products can be produced on the same production line with a little variation of machine parameters/settings. The products are manufactured using process like assembly, welding, machining, punching, stamping, and so on. Industries such as automotive, electronics, medical devices, and heavy machinery use discrete manufacturing to produce products like bicycles, cars, computers, mobile phones, forklifts, heavy earth movers, and so on.
Process manufacturing is a production methodology where the production involves a special process that transforms the ingredients into a totally new product. The production process is quite intricate as it involves formulas or recipes. The production involves highly composite processes like casting, grinding, blending, boiling, and so on. Chemicals and food products go through a chemical process. Industries like chemical, pharma, FMCG (fast-moving consumer goods), and food and beverage use process manufacturing to manufacture products such as chemicals, medicines, food products, and so on.
Unlike discrete manufacturing, the finished goods in process manufacturing cannot be disassembled into their original raw materials.
SAP designed two solutions—Production and Production-Process—that cater to these two industries types: discrete and process.
SAP provides three production execution methodologies:
- Production order-based manufacturing
- Repetitive manufacturing
- Process order-based manufacturing
Production order-based manufacturing is a methodology where production is executed based on orders. The materials are produced in lots or batches as the products change quite frequently. The Production order is a detailed document and contains tons of information. This is in addition to the ones available in planned orders, such as operation details, system status, user status, planned cost, actual cost, component’s overview, operations overview, and many more. There are also lots of functions available, like release, cost, availability check, capacity planning, read PP master data, technically closure of production order, and so on. You can also display goods movement, cost analysis, confirmation details, and so on.
The strength of discrete manufacturing lies in the fact that every aspect of production can be traced back with respect to the production order. To support traceability in discrete manufacturing, you use the batch management functionality.
The cost of production is settled at order level. The settlement receiver is usually a material for make-to-stock production and sales order for make-to-order production.
Repetitive manufacturing is a period-based production. The same product is manufactured over a period of time, and products do not change frequently. The planned order is a simple document containing only essential details, such as material, quantity, production dates, production version, and components. The planned order disappears forever once the backflush is posted.
The strength of repetitive manufacturing lies in the simplicity and effortlessness. Thus, it requires less effort from the business for the backflush process.
The cost of production is settled on a product cost collector, which acts as a bucket for storing the cost of production. A product cost collector is created for plant/material/production version. The settlement is carried out periodically. (Usually monthly.)
Process order-based manufacturing is similar to production order-based manufacturing but is used in discrete manufacturing. Process order-based manufacturing is used in process industries.
In PP-PI, production is executed based on process orders, which are similar to production orders. However, there are some differences between production order-based manufacturing and process order-based manufacturing.
In PP-PI, you use resources instead of work centers, master recipes instead of routing, and process orders instead of production orders.
One of the more unique features of PP-PI are the PI sheets. In a PI sheet, you can describe the entire production cycle of a product or part of a production process. If the PI sheet represents part of the production process, you usually need several PI sheets to manufacture a product. You can define the control and picking information for the individual production steps in the PI sheets. The PI sheet is used to inform the process operator about the individual production steps that need to be performed. They can interactively maintain the SAP PI sheet according to the phase sequence.
SAP manufacturing consultants often think that the industry should steer them to which type of manufacturing to use: PP or PP-PI. The decision about whether you want to implement PP or PP-PI should be based on the functionality that you want to use.
Similarly, the decision to use order-based production (discrete and process) or order less production (repetitive) depends on your business requirements. Consider requirements such as manufacturing processes on the shop floor, production reporting and data capturing, traceability, collect/report costs per order or per time period, and so on.
Conclusion: There is a misconception that there are three industry types i.e. Discrete Manufacturing, Repetitive Manufacturing and Process Industry. The fact is there are only two types of industries i.e. Discrete Manufacturing and Process Industries.
SAP has provided three provided three execution methodologies i.e. Production order-based manufacturing, Repetitive manufacturing and Process order-based manufacturing. The first two methodologies are primarily intended for Discrete Manufacturing while Process order-based manufacturing works best for Process Industries.
Excerpt from the book “Handbook for SAP PP in S/4HANA” by Himanshu Goel