Discrete Manufacturing in SAP versus Repetitive

I am seeing a positive trend within the SAP eco system, of clients better understanding what their options are when it comes to repetitive manufacturing. As we all know, SAP's Repetitive was developed much later than the original PP - the discrete system for job shops. REM was developed because the discrete model didn't fit very well for repetitive manufacturers. So now the big question is: are you a repetitive or a discrete manufacturer? And once you know that answer the decision to go to repetitive or not should be an easy one. After all, you're not using the HR module to manage your inventory, do you? In the same sense you should'nt run a repetitive manufacturing environment with discrete production orders.

So a repetitive manufacturer typically exhibits a number of telling characteristics:
- they offer a product catalog to their customers. As soon as you have a standard product in a catalog you will make that product more than once (you can still make it to stock or make it to order). You repeatedly have that product on your line and you should actually measure how many of the product you made this period, as compared to any other period (its more like a rate than a discrete quantity). This brings me to costing...
- repetitive manufacturers cost the products on a period basis. If you make widgets in lots of 1000 over a period of a year, would you want to cost out every single discrete production order or would you want to see how much production of that materials had cost you in May compared to June? I think the answer is easy and what I see happening a lot, is that companies started out on discrete (because they didn't know any better or were not told any better) and the costing people transfer all cost to spreadsheets and then normalize the cost to a parts / period basis
- repetitive manufacturers want their operations to flow. In a discrete environment, where a customer wants exactly one lot size of a thing that has two holes, a handle and is welded onto a stick, you create a discrete production order with a routing describing the exact steps to make that thing. If the plate has to be fabricated first, you might want to create a second discrete production order to fabricate the plate and then you can see how much inventory of those fabricated plates you have and how much each plate has cost you to make. If you make standard products that always look alike you want to run a thousand per day and you are not concerned about how much inventory of the fourth level intermediate you have or how much that one piece had cost you... you want to know how much WiP (work in process) is in the system and how long it takes to get a product made (if your lines flow your wip is low and cycle times are short and then your cost is low too). Flow is what makes a repetitive manufacturer tick and that is why SAP's REM provides a lot of functionality (mostly unknown) to lean and flow your production environment. To do the same with discrete is impossible.
- capacity planning! in discrete manufacturing, capacity planning is looking at a specific work center (usually the bottleneck) and compares capacity offer to capacity requirements and then levels all the orders on a bottleneck to stay within available capacity. usually a mid-point scheduling is carried out then and earlier and later operations of the order are scheduled on the respective work centers to avoid orders getting stuck. That is a novel idea and often perceived as impossible to do when a repetitive environment is managed with discrete orders in SAP  (Consultants are very quick to point out that repetitive can't do capacity planning and they then point to discrete where they feel more comfortable). Capacity planning in REM is absolutely efficient... you have much more options and you can 'flow' the lines with takt-based scheduling and integrated Kanban withdrawals. Refer to my other blog posts or read some of SAP's REM documentation for further detail. You just have to rethink your basic idea about capacity planning a little but REMs capacity planning is much more superior to discrete - at least when you operate in a repetitive environment.

I could go on for days... explore SAP REM... it's worth it and it was developed just for you because discrete doesn't work so well for you... at least if you are a repetitive manufacturer - and that you are if you don't happen to make plates with holes and handles (or you're running a jumbled job shop environment)

SAP's safety stock does NOT buffer demand fluctuations during the planning process !

Does the headline in this blog confuse you? Sorry, that is nit my intention. I just want to point out a not-so-well-known fact.

When you set a safety stock level in the MRP2 screen of the material master it is subtracted from available inventory in the MD04 stock / requirements list. Therefore the MRP run ignores that part of the inventory. Imagine the following situation: There is a forecast of 50 pieces for next month and you have maintained a safety stock of 30 pieces. The system will plan to have an inventory of 80 pieces in stock at the beginning of next month. As we are approaching the next month and actual customer orders drop in, the forecast is replaced by actual orders. Should the actual order exceed the forecast - lets say that customers demand 60 pieces instead of 50 - the MRP run will generate a new replenishment proposal for an extra 10 (instead of using the safety stock) and you end up with 90 pieces in inventory, even though you only need 60.

This type of behavior creates dead stock and misses the purpose of using a safety stock as a buffering strategy. The situation worsens if you have a rounding value or a fixed lot size.

So what can you do? Use a range of coverage profile that drives a dynamic safety stock if the situation allows for it. In a range of coverage profile you have a target safety coverage and a minimum safety coverage (in days of coverage). The MRP run can 'see' the safety levels and ONLY generates a replenishment order when the minimum safety coverage is broken. Therefore you have to make sure that the minimum safety coverage is set to 1 day and the target is higher. In that case the MRP planning run uses all the days in the target coverage as a buffer to counter demand variability.

By the way... the range of coverage also has a maximum safety coverage to keep the inventory from blowing up, should the forecast be too high.