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218 CHAPTER 6 The Production Process

Demo 6.9: Review a stock / requirements list

CHAPTER SUMMARY

The production process involves the various steps and activities necessary to
manufacture or assemble fi nished goods and semifi nished goods. Organizations
utilize different manufacturing strategies depending on the type of material
being produced and the business model needed to sell those materials profi t-
ably. The two most common production strategies are make-to-stock and make-
to-order. In make-to-stock, the materials are produced and stored in inventory
for sale at a later time. In make-to-order, production occurs only after the com-
pany receives a sales order.
The most common types of production processes are discrete, repetitive,
and process manufacturing. In discrete and repetitive manufacturing, each unit
produced is distinct from other units, and the component materials from which
the unit is made can be identifi ed. In repetitive manufacturing, the same mate-
rial is produced repeatedly over an extended period of time at a relatively con-
stant rate. In discrete manufacturing, the company produces different materials
over time in batches, often alternating between materials on the same produc-
tion line.
Process manufacturing refers to the production of materials in bulk vol-
umes (liters, gallons, barrels, etc) rather than individual units. In process manu-
facturing the component materials cannot be identifi ed because they are mixed
together in the fi nal product.
The production process consists of eight key steps: request production,
authorize production, release production order, raw materials and semifi nished
goods issue, production, production confi rmation, fi nished goods receipt, and
production order completion. Each of these steps is affected by many variables
inside and outside the production process and creates or updates many docu-
ments throughout its execution.
Key master data for the production process are contained in the bill of
materials work centers, and product routings. The BOM identifi es the raw mate-
rials or semifi nished goods needed to produce one or more units of a fi nished
good. A BOM can have one level for simple goods or many levels of nested
hierarchies for more complex goods. BOMs contain detailed information on the
fi nished good as well as each of the component materials needed for production,
warehouse management, and fulfi llment.
The physical operations in the production process are carried out in work
centers. Data regarding the type of work center, the operations performed there,
and the relevant scheduling needs appear in the product routing. A product
routing contains all of the operations or tasks needed to produce a material, as
well as the sequence in which those operations must be completed. Component

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