Production Cost in SNP optimization

Production cost is one of the most important expenditures to consider in finding the best solution in the SNP optimizer. Most of the industry has alternative production plants and work centres. Variable and fix production cost can be used in the SNP optimizer. Variable cost is multiplied by production plan quantity. Fixed production cost is added to total planning cost to the planning order without consideration of quantity. The per unit production cost depends on the work centre or plant, as the technological efficiency affects costs. The production cost is calculated based on the activity price, which are defined by the cost module (SAP-CO) at ERP.

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The SNP optimizer selects the optimal work centre considering other optimizer costs and constraints. If the production due date is not compromised, the work centre with minimum cost per unit production will be selected. A higher cost production can be selected in case of due date delays or other work impediment. Current orders or maintenance effects the availability of the plant. High production per unit cost affects the total cost of the product and the total cost of the product should be lower than the sales price of the product. In this case the optimizer may elect to reject this production request.  

The Optimized plan is the plan created in consideration of all costs and constraints. Production cost has a significant effect on the optimized plan and is vital for industries with alternative production plants and work centres. Production cost is as important to companies with very few or no alternative production centres. Total costs are considered by the optimizer when selecting the production process for a profitable product.