SAP S/4HANA Cloud Make-to-Order (MTO) with Advance...

Mrinal_SAPLABS1 · ‎08-04-2023

In today's fast-paced and customer-centric business environment, manufacturers face the challenge of meeting unique customer demands while ensuring efficient and profitable production processes. SAP S/4HANA Cloud provides a comprehensive solution that combines Make-to-Order (MTO) production with Advanced Variant Configuration (AVC) and Embedded Analytics. This powerful combination enables businesses to deliver tailor-made products while gaining real-time insights to make smarter manufacturing decisions. This blog will explore how SAP S/4HANA Cloud's MTO with AVC and embedded analytics revolutionizes the manufacturing industry.

Let’s understand Advanced Variant Configuration (AVC), MTO & embedded analytics one by one and how these combined journeys create magic in SAP S/4HANA Cloud.

AVC is a powerful feature of SAP S/4HANA Cloud that empowers manufacturers to offer various product options and variations while streamlining production processes. The critical components of AVC are Characteristics and Classes, Dependency Relationships, Rules-Based Configuration, and Visualization and Validation which effectively integrate with other logistics modules to make a smooth business operation.

Let’s see the evolution of Make-to-Order Manufacturing

Make-to-Order (MTO) manufacturing has become increasingly popular among businesses seeking to provide customers with personalized products. Unlike Make-to-Stock (MTS) processes, where products are produced based on forecasts, MTO allows manufacturers to start production only after receiving a confirmed customer order. This strategy reduces inventory costs and minimizes the risk of excess stock.

However, managing MTO processes can be complex, especially when dealing with a wide range of product options and configurations. SAP S/4HANA Cloud's Advanced Variant Configuration simplifies this challenge by enabling businesses to define and manage complex product structures effectively.

Leveraging Embedded Analytics in Make-to-Order with Advanced Variant Configuration:

Embedded Analytics is another game-changing feature of SAP S/4HANA Cloud that allows businesses to gain real-time insights into their operations. In the context of Make-to-Order with Advanced Variant Configuration, embedded analytics provides valuable data and visualizations to optimize the manufacturing process.

Now, let's walk through the step-by-step process of SAP S/4HANA Cloud Make-to-Order with Advanced Variant Configuration and Embedded Analytics. I will try to provide the essence of embedded analytics in each and every step.

The prerequisite for the process is to create Product / BOM / Work center / Routing in the system. In the next phase, Product variant configuration has to be in place. Once the above two steps are done we can formally run the MTO process.

To start the MTO process, Customers place orders (direct or via sales representative) for specific product variants, and sales orders are created in SAP S/4HANA Cloud. The sales order captures the customer's specific requirements, including the chosen product configuration.

Sales order fulfillment helps to get a heuristic report of all sales orders.

Figure1: Sales Order fulfillment app

Next, the Plant manager performs material requirement planning (MRP) to determine the materials and components required to produce. With SAP S/4HANA Cloud, they are able to perform MRP in real-time, ensuring that the necessary materials are on hand when it is required. The plant manager comes to know from the MRP run that some BOM components are out of stock and need to be purchased right away in order to begin the production process. He immediately triggers sourcing & procurement operations to get the necessary components stock. We are keeping the sourcing & procurement process optional here and assuming all necessary BOM components are maintained with sufficient stock.

Figure 2: Monitor Material Coverage – Net and Individual Segment

Now, the creation of planned order happens, followed by conversion to production order.

This production order contains the sales order and variation configuration and includes all the necessary data for manufacture.

Figure 3: Manage material coverage: Stock / Requirement List

Figure 4: Conversion of planned order to production order

The manufacturing team produces the ordered version in accordance with the laid-out routing and work instructions. Post that production order confirmation happens and the same has been released. Real-time information on the status of the production is provided through the combination of embedded analytics and AVC.

Figure 5: Manage Production order: List view

Figure 6: Manage Production order: Detailed view

Now inbound delivery gets created and followed by Goods Receipts.

Figure 7: Post Goods Receipts for Production Order

Next Depending on the product and industry requirements, the manufactured product may undergo quality control and inspection processes (optional process).

Figure 8: Manage Usage Decision

Figure 9: Usage Decision: Results History

Once the product passes inspection, the goods are updated as “unrestricted” stock and are ready for the next warehouse activities.

Figure 10: Manage Usage Decision: Unrestricted Stock

Now the finished product needs to be delivered to the customer as per the delivery schedule in the sales order, ensuring timely fulfillment. During warehouse processes, outbound delivery gets created with reference to sales orders and followed by picking, shipping, handling unit, packing, and finally post goods issue has happened.

Figure 11: Warehouse KPIs Part 1

Figure 12: Warehouse KPIs Part 2

Figure 13: Ware House KPIs Part 3

The integration with financial modules in SAP S/4HANA Cloud simplifies the invoicing process. The customer is billed for the delivered product based on the agreed pricing and payment terms. After the creation of the invoice, the entire document flow is visible from the “Track Sales Order” app.

Figure 14: Track Sales Order

Figure 15: Track Sales Order: Overall Process Flow

Figure 16: E2E Make-to-Order (MTO) Process Flow

Make-to-Order with Advanced Variant Configuration and Embedded Analytics in SAP S/4HANA Cloud offers numerous advantages to manufacturers:

Real-Time Decision Making:

The combination of AVC and embedded analytics provides real-time insights, allowing businesses to make data-driven decisions on the fly.

Manufacturers can quickly respond to changes in demand, production, or supply chain to ensure optimal efficiency.

Streamlined Customization:

Advanced Variant Configuration simplifies the process of offering customized products, reducing the time and effort required to configure complex product structures.

Customers can easily choose from a wide range of options, while the system ensures that their selections are valid and feasible.

Improved Resource Allocation:

Embedded analytics enables manufacturers to optimize resource allocation based on real-time production data.

Manufacturers can make informed decisions to balance the workforce

Enhanced Customer Experience:

Embedded analytics allow businesses to understand customer preferences and tailor product offerings accordingly, leading to higher customer satisfaction and loyalty.

In conclusion, SAP S/4HANA Cloud's make-to-order with advanced variant configuration process, enriched by embedded analytics, empowers manufacturers to embrace agile and customer-centric custom manufacturing. By leveraging real-time insights, predictive analytics, and continuous improvement, businesses can meet customer demands for highly personalized products while optimizing production efficiency and maintaining competitiveness in the ever-evolving market. With SAP S/4HANA Cloud's integrated capabilities, manufacturers can transform their make-to-order operations, enhance customer experience, and drive sustainable growth in the dynamic world of custom manufacturing.

For more information on SAP S/4HANA Cloud, check out the following links: