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This blog continuation to previous one – S/4HANA Extended Production Engineering and Operations (PEO) Part 3 – Enhancements

The major focus on this blog is to cover S/4HANA 1909 release PEO features.

  1. External Processing

  2. Manage Project for End Item BOM

  3. Manufacturing Order Change Management

  4. Manufacturing Substitute

  5. Rework and Disassembly

  6. Planning and Shop Floor BOM and Routing

  7. Unitized Effectivity Handling

  8. Work Assignment - Genealogy

External Processing

S/4HANA Manufacturing for Production Engineering and Operations PEO supports different external processing scenarios as follows,

  • On-site external processing

  • Off-site external processing

On-site external processing

In on-site external processing the service of performing a production is operation is purchased from an external service provider. The service provider's production operators perform the service on-site. If external production operators do not have access to PEO, then the necessary data must be recorded by internal production operators or the production supervisor after the fact using retroactive posting.

Off-site external processing

In off-site external processing, the production team will send the goods to the outsourcing vendor (subcontractor) to perform the work like plating, galvanizing, painting activities. Once subcontractor work activities completed again material will be transferred back to the manufacturer's location.

External processing operation control key with the following settings.

  1. External Processing = +

  2. Confirmations = 2

Manage Project for End Item BOM

SAP Production Engineering and Operations (PEO) allows us to effectively plan and manage complex product structures. Every End Item is managed using SAP Project System (PS) module.

The end items and major assemblies are planned in the project system, whereas the production or procurement of regular finished materials, semi-finished materials, and raw materials is planned and executed in production planning.

Installation kits are the interface between the project system and production planning.  The project system creates component demand for installation kits and production planning creates installation orders (special shop floor orders for execution in PEO) to cover the component demand.

After MBOM created for End Item, major Assemblies and Installation Kits, the corresponding project to be created and linked to MBOM.

  1. Create a matching Project structure manually and then run the BOM-PS Interface (Transaction: CN33_N) to link the Installation Kits with Network Activities.

  2. Create the Project structure automatically based on the MBOM structure created for the End-Item.

A Major Assembly represents a large section of the product such as a wing or system module.

An Installation Kit is an organizational breakdown of the major assembly; cutting the large BOM and the immense work that needs to be done to produce the major assembly into portions that are easier to be handled.

Installation Kits have MBOMs and routings. Shop floor production orders are created for installation kits. Major Assemblies do not have routings. They are produced by the sum of all their installation kits.

Manufacturing Order Change Management

S/4HANA Manufacturing for Production Engineering and Operations (PEO) in 1909 FPS0 release provides the functionality to initiate and apply changes to the working orders.

The following are the key process steps involved.

  1. Identify the in-process order change

  2. Create order specific Routing creation

  3. Reassign and add additional components if required for order-specific BOM

  4. Update order with new master data changes


  1. Increase flexibility to incorporate engineering changes during in-process order

  2. Adhoc maintenance of order specific routing without the impact of master routings

  3. Increase the over in-process order change management

Manufacturing Substitute

Manufacturing Substitute is a substitute component that is used at the time of production instead of the original component specified in the product design. A manufacturing substitute may be needed if the production engineer finds that the original item is not suitable or results in recurring problems at the time of production.

For example, consider the situation where a production worker faces recurrent problems while trying to align the plate PN: Item#A with its counterpart. A production engineer can choose to solve this problem by creating a manufacturing substitute item, plate PN: Item #B.

Rework and Disassembly

Enhanced rework functionality allows the quality engineer, who has made the decision to rework a serialized product, choose a rework routing based on the defect recorded by production operator. Also, the quality engineer has now a flexibility to decide where rework steps are to be placed in the production order that is being processed by the production operator. Finally, at rework, there is a
possibility to record unplanned consumption of material components that have not been initially planned.


  1. Increase product quality through timely rework and repair

  2. Avoid unnecessary costs by reducing the amount of scrap

  3. Assemble a material not originally planned for assembly

Planning and Shop Floor BOM and Routing

The classic production engineering, planning, and execution process is sequential. Production engineering starts after product design was completed. Production planning starts after release of shop floor BOM and routing. Production execution can start only after engineering, planning, and the
procurement of components is completed. Sequential processing leads to long overall lead times.

Differentiating between planning BOM and shop floor BOM and between planning routing and shop floor routing has the following advantages:

  1. It helps reduce lead time.

  2. It provides tools and a process to translate phantom BOMs used in engineering and production planning into flat shop floor BOMs.

  3. It provides tools and a process to translate date-effective engineering and planning BOMs into version-controlled shop floor BOMs.

EBOM -> PBOM -> MBOM is the sequence of master data creation and processing of engineering, planning and execution.

Unitized Effectivity Handling

Maintain the effectivity for BOM components and routing operations and activities without specifying an upper limit for the range parameter.

Work Assignment - Genealogy 

The production operator is able to search with respect to Plant/Work Center/Production Order/Status to check the Genealogy report.

From the Genealogy report, assign the new operation activity or unassign the activity to the operator.

From the Genealogy report, able to change the duration of the activities.


Production Engineering and Operations (PEO) S/4HANA 1909 release version brings good features to its functionalities, effectively manages engineering, planning and detailed manufacturing execution processes.

Best Regards,

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