SAP Concepts: SAP PP Explained: From Recipe to Reality

MM was about buying. SD was about selling. PP is about making.

In Episode 2 we tracked materials in and out of inventory. In Episode 3 we sold those materials to customers. This episode is about the bit in the middle — the manufacturing process that turns raw materials into finished goods, and the SAP module that runs it: PP — Production Planning.

PP is where Episode 2 finally cashes in. Every movement type we named — 261 (issue to a production order), 101 (goods receipt for a production order), 131 (receipt for a process order) — has been waiting for production orders to attach to. The vocabulary was the universal grammar; PP is where we use it in full sentences.

This is episode four of Season 2 of SAP Concepts, and we’re going to walk through PP in the same shape as the previous modules. What it stores, how it plans, how it executes, and what makes it different from MM and SD.

What PP is for

Start with the brief.

PP’s job is to take demand — sales orders, forecasts, planned independent requirements — and convert it into a sequence of manufacturing activities that produce goods on time, against the right resources, at the right cost. Five questions, in order:

• What do we have to make? Demand from sales orders, planned demand, safety-stock targets, replenishment for distribution centres.
• What does each finished item need? Component materials, semi-finished sub-assemblies, packaging, labels.
• How do we make it? The sequence of operations, the work centres, the machines and labour required.
• When and where do we run each step? Capacity scheduling, plant assignment, shift planning.
• How much did each unit actually cost to produce? Actuals vs standard, settled to FI/CO at the end of the run.

Every other piece of PP — the bill of materials, the routing, the work centre, the MRP run, the production order — is one of those questions in concrete form. Hold the five questions in mind as we walk through.

The Bill of Materials (BOM)

A bill of materials is the recipe.

For every finished or semi-finished material, there is a BOM that lists the components needed to make one unit. A bicycle frame’s BOM might include: two wheels, one frame, two pedals, one chain, one set of handlebars, four brake pads. A pharmaceutical batch BOM might include: 12.4 grams of active ingredient X, 88.6 grams of excipient Y, 100 ml of solvent Z. The BOM names the components and how much of each is needed per unit (or per batch) of the parent.

In SAP terms, the BOM is header data (the parent material, the BOM type, the validity dates) plus item data (the component materials, their quantities, their item categories). Item categories matter — L for stock items (consumed from inventory), N for non-stock (procured directly), R for variable-size items, D for documents (drawings attached to the operation). The BOM stores the engineering-bill structure that drives every downstream PP decision.

In S/4HANA the consolidated app is Manage Bill of Materials, replacing CS01 / CS02 / CS03 from the SAP GUI. Underneath, the data model is unchanged — same tables, same item categories, same explosion logic.

A multi-level BOM (a finished good made of sub-assemblies that are themselves made from components) cascades down: when MRP plans the finished good, it explodes the BOM, plans each sub-assembly’s components, explodes again, and so on until it reaches purchased raw materials at the bottom.

The Routing

The BOM is the recipe; the routing is the cooking instructions.

A routing lists, in order, the operations required to make one unit (or one batch) of a material. Each operation specifies a work centre, a standard time for setup and processing, and a list of components consumed at that operation. A bicycle frame’s routing might be: cut tubes (work centre MILL01, 12 minutes), weld (work centre WELD02, 18 minutes), paint (work centre PAINT01, 9 minutes), assemble (work centre ASSY01, 24 minutes). For a pharmaceutical batch the routing is the master batch record — granulate, blend, compress, coat, pack — each step at a different work centre.

The routing answers “how do we make it?” The BOM answers “what does it need?” Together, they fully specify production: BOM components flow through routing operations to produce the finished material.

In PP, the routing is the master record for work centres and standard activities. When a production order is created, the routing’s operations and times become the order’s planned cost — and the difference between planned and actual is what CO-PA will analyse next episode.

Work Centres

The work centre is where work happens.

It’s the SAP master record for a physical or logical resource — a machine, a production line, a workstation, a piece of equipment. Each work centre has a capacity (how many hours per day, with which efficiency, by which calendar), an activity type (setup time, machine time, labour time — each priced separately by CO), and a cost centre to which its activities post.

When the routing says “operation 0010 runs at work centre MILL01 for 12 minutes,” PP uses MILL01’s capacity calendar to schedule the operation, and uses MILL01’s activity rate (set by CO) to plan the operation’s cost. Both pieces — capacity and cost — flow through to the production order.

This is one of the joints where PP meets CO. Work centres carry CO’s activity rates; production-order operations consume those rates; settlement at order close pushes variances back to CO. We’ll come back to this in Episode 5.

The MRP run

We met MRP — Material Requirements Planning in Episode 2 (it lives in MM, technically). PP is where MRP earns its keep.

The MRP algorithm takes demand (sales orders, planned independent requirements, safety stock) and walks it backward against supply (current stock, open POs, open production orders). For every shortfall, it proposes a procurement element:

• Planned order (for in-house produced materials) — a proposal to make X units by date Y. Will be converted into a production order when somebody reviews and releases it.
• Purchase requisition (for purchased materials) — a proposal to buy X units by date Y. Will be converted into a purchase order, which we covered in Episode 2.

For materials that are made in-house, MRP also explodes the BOM and continues planning the components — this is the multi-level run. For purchased materials, MRP stops at the PR and hands off to MM.

In ECC, MRP was an overnight batch job. In S/4HANA, MRP Live runs in HANA — a single material reruns in seconds, a full plant in minutes. Same logic, no batch wait.

Planned Orders → Production Orders

A planned order is a proposal. It carries no commitment — it’s just MRP’s recommendation that “to meet the demand, you should plan to make 200 units by April 30 at plant 1000.”

A production order is the commitment. When somebody releases the planned order, the system creates a production order — a hard-typed record that includes:

• The material to be produced and the quantity.
• The BOM that explodes into reservations on the component materials.
• The routing that generates operations on work centres, with planned dates and times.
• The planned cost — components priced at standard, activities priced at the activity rate.
• The release status (created → released → in process → completed → settled → closed).

Once released, the order is real. Materials are reserved. Operations are scheduled on work centres. Capacity is committed. The shop floor sees the order on the work-centre dispatch list.

Goods Issue and Goods Receipt — the movement types from Episode 2

Here’s where Episode 2 cashes in.

When the production order runs and components are consumed, every component issue posts a goods issue with movement type 261. Inventory of the component goes down; cost-of-goods-manufactured (the WIP account, in real terms) goes up by the component’s value. The order accumulates the component costs.

When the order is finished and the parent material is delivered to stock, the system posts a goods receipt with movement type 101 — same movement type as we saw for purchased goods, just with the production-order number as the reference instead of a PO number. Inventory of the finished material goes up; the production order is credited at standard cost (or actual, depending on setup).

For process industries (chemicals, pharma, food) the movement types are usually 261/101’s siblings — 261 for component issue, 131 for batch receipt, with the process order as the reference. Same idea, batch-flavoured.

The point is: PP doesn’t invent its own inventory vocabulary. It reuses the movement types from MM, with production orders as the reference document. Episode 2’s table of movements is the master key to PP’s inventory postings.

Settlement to FI / CO

When a production order is completed, somebody runs settlement. The order’s accumulated costs (components consumed, activities performed) are compared against the standard cost of the produced material, and the difference — the variance — is moved to FI/CO.

If the order produced 200 units of standard cost €120 each, the order has €24,000 of credit at standard. If the actual costs were €23,500, the order over-absorbed by €500 — a favourable variance, settled to a price-difference account in FI and to CO-PA for analysis. If the actual costs were €25,200, the order under-absorbed — an unfavourable variance, settled the same way.

This is where PP, FI, and CO meet. PP provides the order, FI receives the postings, CO analyses the variance. Production-order settlement is one of the canonical end-of-period tasks for any manufacturing shop, and the variance analysis is much of what plant controllers spend their week on.

The star screen — Manage Production Orders and the Order Cockpit

In S/4HANA, the Fiori app for working with production orders is Manage Production Orders. It’s the production cousin of the Manage Sales Orders app from last episode.

Filter by plant, by order type, by status, by priority. Click an order — you get the order header (material, quantity, dates), the components reservation list with availability traffic lights, the operations list with work-centre dispatch dates, the cost overview (planned vs actual), the document flow (planned order → production order → goods issues → goods receipts → settlement). For shop-floor users there’s the Production Operator Dashboard — a lighter Fiori app that shows what’s queued at “my” work centre, lets the operator confirm completion of an operation, and posts the goods movements automatically.

The drill-down pattern from FI/MM/SD applies again. From an operation, drill to the work centre, drill to the cost centre, drill to the materials reservation list, drill to the open WIP balance. Same data, vastly different feel from ECC’s CO01/CO02/CO03 chain.

Discrete vs Repetitive vs Process — three flavours, same module

PP supports three flavours of manufacturing:

• Discrete manufacturing — units made one at a time, each tied to a production order. Cars, computers, large machinery. Order-by-order tracking, full settlement per order.
• Repetitive manufacturing — high-volume continuous flow, planned by period rather than by order. Consumer electronics, packaged food. Confirmations are made against a “production version,” not against individual orders.
• Process manufacturing — batch-driven, recipe-driven, master batch record-driven. Pharma, chemicals, beverages. Process orders instead of production orders; batch determination, electronic batch records, regulatory traceability built in.

Same module, same MRP, same work-centre and routing concepts — different order type, different transaction codes (now Fiori apps), different reporting. A single SAP installation can run all three at different plants. We’re naming the three flavours; configuration of each is a multi-week subject of its own.

What we’re deliberately not covering

PP has many more pieces:

• Long-term planning (LTP) — running MRP against a forecast scenario, not against actual demand. Used for capacity stress-testing.
• Capacity Planning and Levelling — adjusting the schedule when work centres are over-committed.
• Variant Configuration in PP — combined with SD-VC for configurable products with order-specific BOMs.
• PP-PI (Process Industries) detail — recipe management, master batch records, electronic batch records, REACH compliance.
• Subcontracting in PP — sending components to a vendor for assembly, with 541 movement type and a special-stock indicator.
• MES integration — the Manufacturing Execution System sits beside PP, capturing real-time shop-floor data. SAP MII, SAP DM, or third-party (Rockwell, Siemens, Wonderware).

If you work with PP day-to-day, you’ll meet all of these. SAP Help Portal documents each properly.

Why PP closes the operational triangle

Step back to the symmetry once more.

MM has materials and vendors; SD has materials (same masters) and customers; PP has materials (same masters again) and work centres. MM has the procure-to-pay flow; SD has the order-to-cash flow; PP has the plan-to-produce flow — MRP run, planned order, production order, goods issue, goods receipt, settlement. All three modules feed FI; all three are analysed in CO. Together they form the operational backbone of the manufacturing enterprise.

What PP adds that MM and SD don’t have is the time and capacity dimension. MM’s question is “do we have enough?”; SD’s question is “did we ship and bill?”; PP’s question is “can we make it on time, with the resources we have, at the cost we expect?” That scheduling and capacity-planning lens is unique to PP — and the production order is the document where it all comes together.

After PP, the operational triangle is complete. Next episode is CO — The Management Lens — where the financial trace of every PP, MM, and SD transaction we’ve discussed gets sliced and analysed. Cost centres, profit centres, internal orders, CO-PA, product costing. The season finale.

What’s next

That’s PP. Next episode we close Season 2 with CO — The Management Lens. Cost centres, profit centres, internal orders, CO-PA, product costing — and the CO fields inside ACDOCA that make all of this possible in S/4HANA.