[SAP] Production Order [Plan to Produce]

Create Production order

Today, I would like to explain how production order is created.

Production order has so many information to be filled or determined in advance, however, almost all the fields are automatically filled in the background so that manual processing of orders is minimized.

MRP will generate planned order, and production order is created by converting the planned order into production order. The contents in planned order and production order are essentially the same.

Planned orders are used to plan in-house production of a material. Planned orders have basic dates about when the production should be startedm, and end, as well as basic requirements for the components for production. Capacity would be be planned based on planned orders.

For production execution, the planned order is converted into a manufacturing order. A production order (PP) is one of manufacturing order. When planned order is converted into production order, the production order would not be adjusted anymore by MRP running, though the planned order could be adjusted by the MRP running.

You can convert planned order to production order in stock/requirements list (Tr-code: MD04) or in screen of planned order (Tr-Code: MD12)

Release Production Order

Release of production order is the basis for further processing of the production order. Production order has the status in accordance with the processing sequence, and the corresponding status is set when the order is released.

It is possible to release single operations in production order, entire order, (Tr-Code: CO02) and multiple orders simultaneously. (Tr-Code: CO05N)

Material Withdrawn / Goods Issue of components

In a production order processing, Material Withdrawn with Goods Issue (GI) posting for the required components is another milestone.

When GI is posted for the required components, following occurs.

  • Stock consumption update
    • Generation of material documents
    • Generation of accounting documents
  • Determination of actual costs
    • Generation of controlling documents

Material documents are a document describing the goods movement from warehouse management point of view, accounting documents are document describing the goods movement from accounting perspective, and controlling documents describe actual cost allocated to the production order.

Confirmation, Goods Receipt

A confirmation is used to identify internal activities performed for an order, progress check for the order, and subsequent capacity requirements planning.

GI and GR posted by confirmation

After an order has been confirmed, the subsequent functions are performed automatically. When an operation for production order is confirmed, goods issue is automatically posted for quantity assigned to the material components. This is called as backflush posting.

When you confirm the last operation, it means all the required operation for production is completed, and Goods Receipt is automatically posted for the material produced. This goods receipt can be executed separately from the production order, or attached to the production order depending on the requirements.

Functions executed by GR for Production Order

Similar to the case when GI is posted for production order, the following functions are executed when GR is posted.

  • Stock delivery update
    • Update on delivery quantity in production order
    • Generation of material documents
    • Generation of accounting documents
  • Determination of actual costs
    • CO document records credit posted to production order

As a result, target material is produced. If quality inspection is required, it is executed and once the status is confirmed as OK, the stock of the produced material would be changed from quality inspection stock to unrestricted use.


Apart from the production activity, we need to be aware of the process on cost accounting aspects. What we need to do is, period end closing activities.

WIP calculation

The first period closing activity would be the calculation of work in process, or WIP. If a manufacturing order is not fully delivered at period end, the costs posted to the order at the time of period end need to be recognized in the balance sheet. The WIP calculation determines the costs that have already been posted in FI as expenses.

Variance calculation

The second period end closing activity is variance calculation. A production variance represents the difference between planned and actual costs for the production order.

Variances are calculated for production order if it is completely delivered, and those which are not yet delivered fully would not be the target of variance calculation.

Settlement for WIP and Production variance

In the last period end activity, in both of the case that WIP calculated or Production variance calculated, settlement needs to be performed.

If the production order has not yet been fully delivered, the settlement will post WIP to the general ledger. If the production order is fully delivered, the settlement will post the production variances to the general ledger.

After costing data is created and production order is released, direct costs are initially incurred by material withdrawals. The raw materials are reduced, and expenses in the form of cost elements flow through the respective consumption accounts to the production order, which is handled as accounting object in accounting perspective.

When external services are consumed for the production, such as consulting services or else, the expenses will flow through invoices and posted directly on the order using account assignments.

The manner in which a production order is credited and debited depends on the variant of Cost Object Controlling (COC) selected in CO.

When order settlement is done, order is credited. Order settlement can be executed manually or periodically, but in most of the cases it would be periodic base.

Review in the end of the post

So, this is the end of post for production order brief explanation.What I'm feeling in my mind now is, that I understand that I don't know PP module in SAP at all.

Especially, the integration between Production, Financial accounting, and Controlling. Maybe I should study FI module next.


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