How to Model Discrete vs Repetitive Manufacturing in SAP ERP and SAP APO

Executive Summary

• There are differences between discrete and repetitive manufacturing both in their business process and in SAP.
• We cover what is available in SAP ERP and SAP APO in this area and choose the right modeling for a complete set of factories in a supply network.

Introduction

Repetitive manufacturing is often considered to be covered by SAP because SAP has an industry solution for repetitive manufacturing. However, experiences on repetitive manufacturing implementations have us call into question the usability and value-add of this industry solution. This is because, in actual use, SAP’s repetitive functionality is much less than advertised. You will learn about discrete versus repetitive manufacturing and how repetitive manufacturing is accounted for in SAP. We cover the various production process types and the Toyota/discrete manufacturing environment’s overapplication to all others.

Our References for This Article

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Notice of Lack of Financial Bias: We have no financial ties to SAP or any other entity mentioned in this article.

• This is published by a research entity, not some lowbrow entity that is part of the SAP ecosystem. 
• Second, no one paid for this article to be written, and it is not pretending to inform you while being rigged to sell you software or consulting services. Unlike nearly every other article you will find from Google on this topic, it has had no input from any company's marketing or sales department. As you are reading this article, consider how rare this is. The vast majority of information on the Internet on SAP is provided by SAP, which is filled with false claims and sleazy consulting companies and SAP consultants who will tell any lie for personal benefit. Furthermore, SAP pays off all IT analysts -- who have the same concern for accuracy as SAP. Not one of these entities will disclose their pro-SAP financial bias to their readers. 

What is Discrete Manufacturing?

Discrete manufacturing is manufacturing, which is the type of manufacturing that makes things like computers and cars. This is the best-understood manufacturing environment and is probably the easiest manufacturing environment to schedule. Repetitive manufacturing is a type of manufacturing that is far well understood. There are many factories internationally, but not nearly as much software designed for or even books written for.

There is only one out of a print book on the topic of repetitive manufacturing on Amazon.com.

The Common Coverage on Manufacturing

In the vast majority of conversations and papers and books on manufacturing, discrete manufacturing (think assembling an iPad) tends to be the focus. However, thinking of all manufacturing problems as discrete is hugely misleading and has been at the root of many failed initiatives in repetitive manufacturing environments.

Many Lean consultants are running around and taking concepts that only would work in discrete manufacturing environments. And many executives work in repetitive manufacturing companies that don’t understand their manufacturing process and believe that discrete manufacturing approaches generalize to all the other manufacturing environments.

What is Repetitive Manufacturing?

• The same or similar products are made over a long production run (or batch).
• The production is more of a batch than a specific order.
• The products produced follow the same routing and sequence.
• The routing is simple.

Specific Differences Between the Two Manufacturing Environments

SAP has a slide with an excellent explanation of the specific differences between discrete and repetitive manufacturing. I have taken this information, placed it into the matrix below, and added row labels for improved understanding.

Repetitive Manufacturing in SAP ERP

There is an entire configuration area with SAP ERP with multiple areas customized for repetitive manufacturing. This is shown in the screenshot below:

However, while it appears to be quite significant, this functionality is not considered by some ERP consultants to be very substantial.  Many of the things have to do with how costs are collected. For instance, a functionality that is often used by repetitive manufacturing called backflushing is available if discrete or repetitive manufacturing is used. 

Repetitive Manufacturing Heuristics in SAP APO

Several heuristics are available in PP/DS specifically designed for repetitive manufacturing or would often be used with repetitive manufacturing. The repetitive manufacturing heuristics are described in this article.

Back Flushing

One of the requirements for repetitive manufacturing is backflushing. Backflushing is covered in this article.

Choosing Plants to be Repetitive and Discrete

An interesting and important fact is that each plant can be decided differently. If a company were to have 20 plants, any number could be set up as discrete, and any number can be set up as repetitive. However, setting up repetitive manufacturing for some factories and discrete others is that it is more work and requires extra training. However, it can be worth it to customize the solution per factory.

Unfortunately, the decision of whether to go with the repetitive configuration versus the discrete configuration is not as simple as merely whether the factory in question would be classified as discrete and repetitive from a purely business process perspective.

Background on Forward Scheduling and Fill to Capacity

When forward scheduling is set, the supply planning system will create planned production orders and purchase requisitions for raw materials and subcomponents. These are the outputs that are part of the BOM of the produced product are created as soon as possible.

• In the previous articles (here and here), I describe forward scheduling or fill to capacity and its effect on filling a company’s manufacturing capacity.
• Fill to capacity focuses on building forward to take advantage of all capacity.
• How to do this in a way that allows it to meet a given demand at a lower plant investment but at a higher investment in inventory.
• In some types of production processes, it makes more sense to defer production. But in many kinds of production processes, it does not. When to defer (or not produce ahead of schedule) depends upon many factors related to the production process, such as the cost of downtime, the likelihood the product produced will be sold, among other factors. Particularly in the production process of, say, lightbulb production, where the product produced on one like tends to be uniform and where the market is well established. This and products that follow a similar type of production process will tend to be set up for repetitive (high volume low variability) production. In repetitive manufacturing, the line rates are high, and the cost of changeovers is also high.

What makes this concept of fill to capacity difficult to digest, even though it is a common practice, is that most inventory theory that is commonly discussed has focused on is based upon the assumptions of discrete manufacturing. Toyota is, no doubt, a good manufacturing company. Toyota is a discrete manufacturing environment. Not all lessons from Toyota’s processes apply to other manufacturing environments. Many of their lessons are completely inapplicable outside of their environment.

The Inapplicability of Many Discrete Approaches to Other Manufacturing Environments like Repetitive Manufacturing

Lean manufacturing proponents provide the examples in what seems to be an unending stream of books. They rarely account for the repetitive manufacturing environment, and it is for a good reason. Lean would not work in repetitive manufacturing.

The authors of these books often want the books to be marketable and accepted by the largest possible reader base. So they usually do not explain the limitations of the approaches that they describe—often preferring to provide an overly simplified view of manufacturing that is easily digested as easily as it is misapplied.

The Overselling of Toyota and a Discrete Manufacturing Environment

Not every manufacturing environment is discrete. In a way, a great deal of education on inventory has been homogenized around a manufacturing environment. This is only one type of manufacturing. This criticism applies or generalizes outside of the literature on Lean manufacturing.

Repetitive manufacturing is not a “niche” manufacturing environment. It spans everything from lighting products to chemicals.[1]

Within the major manufacturing environment categories, some subcategories also change how the environments need to be planned.

• Conveyers: Many manufacturing types use conveyor belts such as coal, ores, and grains that are also operated on a continuous flow.
• Rolls: There are environments where such as paper and steel where there are rolls or reels that are continuous and do not fit into the discrete paradigm.

In these environments, there can be minimal manual involvement during the actual production run. And the production is energy and capital-intensive. It is often relatively inexpensive to produce each item. To keep this expense low and maintain manufacturing efficiency, the production runs must be long and the interruptions limited. These manufacturing environments are, by their nature, inflexible.

Many Lean manufacturing proponents like to propose converting all manufacturing environments to “flexible” settings. Many are not flexible. Flexibility is determined in the factory. Not by the desire to be flexible so that a rigid set of approaches may be placed upon the factory for its scheduling. This leads to a later point I will cover related to interactive supply and production planning.

Conclusion

The problem is that while a factory can be categorized as repetitive, it does not necessarily mean that it should be set up in SAP ERP and SAP APO as repetitive. This is because the repetitive solution in SAP does not provide that much advantage over modeling a repetitive plant as discrete. It has some significant downsides, including having less visibility with costing (which sometimes fits the repetitive requirement and sometimes not depending upon the company). To make a decision one way or another, it’s crucial to analyze the functionality provided by ERP and PP/DS and to match the requirements against the exact differences in each application. However, this is a fair amount of work to do. Getting a comprehensive list of everything different in repetitive manufacturing versus discrete in both modules is not as easy as reviewing the SAP documentation in each area. Some of the documentation can appear to be a bit grey.

Another issue is that SAP has not done very much to enhance repetitive manufacturing functionality throughout the SAP ERP or SAP APO years. However, some of the repetitive manufacturing functionality documentation at SAP Help can result from building up expectations in this area. While I am not privy to the SAP sales process, certainly SAP sales build up the expectations of repetitive manufacturing capability with potential clients.