2/23/24, 10:04 PM SAP S/4HANA Cloud Make-to-Order (MTO) with Advance...

- SAP Community

Community

SAP Community  Products and Technology  Enterprise Resource Planning  ERP Blogs by SAP

 SAP S/4HANA Cloud Make-to-Order (MTO) with Advance...

Enterprise Resource Planning Blogs by SAP

Get insights and updates about cloud ERP and RISE with SAP, SAP S/4HANA and SAP S/4HANA Cloud, and more
enterprise management capabilities with SAP blog posts.

All community  What are you looking for today?

SAP S/4HANA Cloud Make-to-Order (MTO) with Advanced Variant

Configuration Process with Embedded Analytics: Driving Smart
Decisions on Custom Manufacturing

Mrinal_SAPLABS1
Associate

‎08-04-2023 3:57 PM

 5 Kudos

In today's fast-paced and customer-centric business environment, manufacturers face

the challenge of meeting unique customer demands while ensuring efficient and
profitable production processes. SAP S/4HANA Cloud provides a comprehensive solution
that combines Make-to-Order (MTO) production with Advanced Variant Configuration
(AVC) and Embedded Analytics. This powerful combination enables businesses to deliver
tailor-made products while gaining real-time insights to make smarter manufacturing
decisions. This blog will explore how SAP S/4HANA Cloud's MTO with AVC and
embedded analytics revolutionizes the manufacturing industry.

Let’s understand Advanced Variant Configuration (AVC), MTO & embedded analytics one
by one and how these combined journeys create magic in SAP S/4HANA Cloud.

AVC is a powerful feature of SAP S/4HANA Cloud that empowers manufacturers to offer
various product options and variations while streamlining production processes. The

https://community.sap.com/t5/enterprise-resource-planning-blogs-by-sap/sap-s-4hana-cloud-make-to-order-mto-with-advanced-variant-configuration/… 1/19
2/23/24, 10:04 PM SAP S/4HANA Cloud Make-to-Order (MTO) with Advance... - SAP Community

critical components of AVC are Characteristics and Classes, Dependency Relationships,

Rules-Based Configuration, and Visualization and Validation which effectively integrate
with other logistics modules to make a smooth business operation.

Let’s see the evolution of Make-to-Order Manufacturing

Make-to-Order (MTO) manufacturing has become increasingly popular among businesses

seeking to provide customers with personalized products. Unlike Make-to-Stock (MTS)
processes, where products are produced based on forecasts, MTO allows manufacturers
to start production only after receiving a confirmed customer order. This strategy reduces
inventory costs and minimizes the risk of excess stock.

However, managing MTO processes can be complex, especially when dealing with a
wide range of product options and configurations. SAP S/4HANA Cloud's Advanced
Variant Configuration simplifies this challenge by enabling businesses to define and
manage complex product structures effectively.

Leveraging Embedded Analytics in Make-to-Order with Advanced Variant Configuration:

Embedded Analytics is another game-changing feature of SAP S/4HANA Cloud that

allows businesses to gain real-time insights into their operations. In the context of Make-
to-Order with Advanced Variant Configuration, embedded analytics provides valuable
data and visualizations to optimize the manufacturing process.

Now, let's walk through the step-by-step process of SAP S/4HANA Cloud Make-to-Order
with Advanced Variant Configuration and Embedded Analytics. I will try to provide the
essence of embedded analytics in each and every step.

The prerequisite for the process is to create Product / BOM / Work center / Routing in the
system. In the next phase, Product variant configuration has to be in place. Once the
above two steps are done we can formally run the MTO process.

To start the MTO process, Customers place orders (direct or via sales representative) for
specific product variants, and sales orders are created in SAP S/4HANA Cloud. The sales
order captures the customer's specific requirements, including the chosen product
configuration.

Sales order fulfillment helps to get a heuristic report of all sales orders.

https://community.sap.com/t5/enterprise-resource-planning-blogs-by-sap/sap-s-4hana-cloud-make-to-order-mto-with-advanced-variant-configuration/… 2/19
2/23/24, 10:04 PM SAP S/4HANA Cloud Make-to-Order (MTO) with Advance... - SAP Community

Figure1: Sales Order fulfillment app

Next, the Plant manager performs material requirement planning (MRP) to determine the
materials and components required to produce. With SAP S/4HANA Cloud, they are able
to perform MRP in real-time, ensuring that the necessary materials are on hand when it is
required. The plant manager comes to know from the MRP run that some BOM
components are out of stock and need to be purchased right away in order to begin the
production process. He immediately triggers sourcing & procurement operations to get
the necessary components stock. We are keeping the sourcing & procurement process
optional here and assuming all necessary BOM components are maintained with
sufficient stock.

https://community.sap.com/t5/enterprise-resource-planning-blogs-by-sap/sap-s-4hana-cloud-make-to-order-mto-with-advanced-variant-configuration/… 3/19
2/23/24, 10:04 PM SAP S/4HANA Cloud Make-to-Order (MTO) with Advance... - SAP Community

Figure 2: Monitor Material Coverage – Net and Individual Segment

Now, the creation of planned order happens, followed by conversion to production order.

This production order contains the sales order and variation configuration and includes
all the necessary data for manufacture.

https://community.sap.com/t5/enterprise-resource-planning-blogs-by-sap/sap-s-4hana-cloud-make-to-order-mto-with-advanced-variant-configuration/… 4/19
2/23/24, 10:04 PM SAP S/4HANA Cloud Make-to-Order (MTO) with Advance... - SAP Community

Figure 3: Manage material coverage: Stock / Requirement List

Figure 4: Conversion of planned order to production order

The manufacturing team produces the ordered version in accordance with the laid-out
routing and work instructions. Post that production order confirmation happens and the
same has been released. Real-time information on the status of the production is
provided through the combination of embedded analytics and AVC.

https://community.sap.com/t5/enterprise-resource-planning-blogs-by-sap/sap-s-4hana-cloud-make-to-order-mto-with-advanced-variant-configuration/… 5/19
2/23/24, 10:04 PM SAP S/4HANA Cloud Make-to-Order (MTO) with Advance... - SAP Community

Figure 5: Manage Production order: List view

https://community.sap.com/t5/enterprise-resource-planning-blogs-by-sap/sap-s-4hana-cloud-make-to-order-mto-with-advanced-variant-configuration/… 6/19
2/23/24, 10:04 PM SAP S/4HANA Cloud Make-to-Order (MTO) with Advance... - SAP Community

Figure 6: Manage Production order: Detailed view

Now inbound delivery gets created and followed by Goods Receipts.

https://community.sap.com/t5/enterprise-resource-planning-blogs-by-sap/sap-s-4hana-cloud-make-to-order-mto-with-advanced-variant-configuration/… 7/19
2/23/24, 10:04 PM SAP S/4HANA Cloud Make-to-Order (MTO) with Advance... - SAP Community

Figure 7: Post Goods Receipts for Production Order

Next Depending on the product and industry requirements, the manufactured product
may undergo quality control and inspection processes (optional process).

https://community.sap.com/t5/enterprise-resource-planning-blogs-by-sap/sap-s-4hana-cloud-make-to-order-mto-with-advanced-variant-configuration/… 8/19
2/23/24, 10:04 PM SAP S/4HANA Cloud Make-to-Order (MTO) with Advance... - SAP Community

Figure 8: Manage Usage Decision

Figure 9: Usage Decision: Results History

Once the product passes inspection, the goods are updated as “unrestricted” stock and
are ready for the next warehouse activities.
https://community.sap.com/t5/enterprise-resource-planning-blogs-by-sap/sap-s-4hana-cloud-make-to-order-mto-with-advanced-variant-configuration/… 9/19
2/23/24, 10:04 PM SAP S/4HANA Cloud Make-to-Order (MTO) with Advance... - SAP Community

Figure 10: Manage Usage Decision: Unrestricted Stock

Now the finished product needs to be delivered to the customer as per the delivery
schedule in the sales order, ensuring timely fulfillment. During warehouse processes,
outbound delivery gets created with reference to sales orders and followed by picking,
shipping, handling unit, packing, and finally post goods issue has happened.

https://community.sap.com/t5/enterprise-resource-planning-blogs-by-sap/sap-s-4hana-cloud-make-to-order-mto-with-advanced-variant-configuratio… 10/19
2/23/24, 10:04 PM SAP S/4HANA Cloud Make-to-Order (MTO) with Advance... - SAP Community

Figure 11: Warehouse KPIs Part 1

Figure 12: Warehouse KPIs Part 2

https://community.sap.com/t5/enterprise-resource-planning-blogs-by-sap/sap-s-4hana-cloud-make-to-order-mto-with-advanced-variant-configuratio… 11/19
2/23/24, 10:04 PM SAP S/4HANA Cloud Make-to-Order (MTO) with Advance... - SAP Community

Figure 13: Ware House KPIs Part 3

The integration with financial modules in SAP S/4HANA Cloud simplifies the invoicing
process. The customer is billed for the delivered product based on the agreed pricing and
payment terms. After the creation of the invoice, the entire document flow is visible from
the “Track Sales Order” app.

Figure 14: Track Sales Order

https://community.sap.com/t5/enterprise-resource-planning-blogs-by-sap/sap-s-4hana-cloud-make-to-order-mto-with-advanced-variant-configuratio… 12/19
2/23/24, 10:04 PM SAP S/4HANA Cloud Make-to-Order (MTO) with Advance... - SAP Community

Figure 15: Track Sales Order: Overall Process Flow

Figure 16: E2E Make-to-Order (MTO) Process Flow

https://community.sap.com/t5/enterprise-resource-planning-blogs-by-sap/sap-s-4hana-cloud-make-to-order-mto-with-advanced-variant-configuratio… 13/19
2/23/24, 10:04 PM SAP S/4HANA Cloud Make-to-Order (MTO) with Advance... - SAP Community

Make-to-Order with Advanced Variant Configuration and Embedded Analytics in SAP

S/4HANA Cloud offers numerous advantages to manufacturers:

Real-Time Decision Making:

The combination of AVC and embedded analytics provides real-time insights,

allowing businesses to make data-driven decisions on the fly.

Manufacturers can quickly respond to changes in demand, production, or supply

chain to ensure optimal efficiency.

Streamlined Customization:

Advanced Variant Configuration simplifies the process of offering customized

products, reducing the time and effort required to configure complex product
structures.

Customers can easily choose from a wide range of options, while the system
ensures that their selections are valid and feasible.

Improved Resource Allocation:

Embedded analytics enables manufacturers to optimize resource allocation based

on real-time production data.

Manufacturers can make informed decisions to balance the workforce

Enhanced Customer Experience:

Embedded analytics allow businesses to understand customer preferences and

tailor product offerings accordingly, leading to higher customer satisfaction and

https://community.sap.com/t5/enterprise-resource-planning-blogs-by-sap/sap-s-4hana-cloud-make-to-order-mto-with-advanced-variant-configuratio… 14/19
2/23/24, 10:04 PM SAP S/4HANA Cloud Make-to-Order (MTO) with Advance... - SAP Community

loyalty.

In conclusion, SAP S/4HANA Cloud's make-to-order with advanced variant configuration

process, enriched by embedded analytics, empowers manufacturers to embrace agile
and customer-centric custom manufacturing. By leveraging real-time insights, predictive
analytics, and continuous improvement, businesses can meet customer demands for
highly personalized products while optimizing production efficiency and maintaining
competitiveness in the ever-evolving market. With SAP S/4HANA Cloud's integrated
capabilities, manufacturers can transform their make-to-order operations, enhance
customer experience, and drive sustainable growth in the dynamic world of custom
manufacturing.

For more information on SAP S/4HANA Cloud, check out the following links:

SAP S/4HANA Cloud release info here

SAP S/4HANA Cloud Early Release Series Webinars here

Latest 2308 SAP S/4HANA Cloud Release Blogs here

Product videos on our SAP S/4HANA Cloud and SAP S/4HANA YouTube playlist

SAP S/4HANA Cloud, Public Edition Early Release Series here

SAP S/4HANA Cloud for User Experience and Cross Topics, Public Edition
Continuous Influence Session here

Inside SAP S/4HANA Podcast here

openSAP microlearning for SAP S/4HANA here

Inside SAP S/4HANA Podcast here

Best practices for SAP S/4HANA Cloud here

SAP S/4HANA Cloud Community: here

https://community.sap.com/t5/enterprise-resource-planning-blogs-by-sap/sap-s-4hana-cloud-make-to-order-mto-with-advanced-variant-configuratio… 15/19
2/23/24, 10:04 PM SAP S/4HANA Cloud Make-to-Order (MTO) with Advance... - SAP Community

Feature Scope Description here

What’s New here

Help Portal Product Page here

Implementation Portal here

Please Check out my latest Blogs on SAP S/4HANA :

E2E journey of Make to Stock (MTS) Logistics in SAP S/4HANA Cloud, public
edition

Capabilities of Solution Order Management in S/4HANA Cloud, public edition 2302

release

Configuration & Business Case of SAP S/4HANA Advanced ATP (AATP) with
Business Process Scheduling (B...

Harnessing Artificial Intelligence (AI) for SAP S/4HANA Sales Order Extraction from
PDF

Optimizing Procurement Processes with Artificial Intelligence (AI) in SAP S/4HANA

Central Invoice Ma...

SAP S/4HANA Cloud Make-to-Order (MTO) with Advanced Variant Configuration

Process with Embedded Anal...

Enhancing Sales Efficiency- AI powered Sales Order Autocomplete in SAP S/4HANA

Cloud, Public Edition...

A Deep Dive into SAP S/4HANA Cloud’s end to end Solution for Service Orders,
Subscription Billing, a...

Follow me on mrinalkanti.chanda#overview & LinkedIn

https://community.sap.com/t5/enterprise-resource-planning-blogs-by-sap/sap-s-4hana-cloud-make-to-order-mto-with-advanced-variant-configuratio… 16/19
2/23/24, 10:04 PM SAP S/4HANA Cloud Make-to-Order (MTO) with Advance... - SAP Community

SAP Managed Tags:

RISE with SAP, SAP S/4HANA Cloud for Manufacturing,

SAP S/4HANA Cloud for Sales, SAP ERP, SAP S/4HANA,
SAP S/4HANA Public Cloud

Labels:

Expert Insights

Tags:

Make to Order (MTO)

1 Comment

cosmo83
Active Participant

‎12-03-2023 1:32 AM

 0 Kudos

Hi mrinalkanti.chanda

Good to see the blog. One small problem we are struggling is with the Quality
Management. Can you suggest us on how do we maintain the MICs per variant ? Is the
functionality supported in S/4HANA Cloud, Public ?

https://community.sap.com/t5/enterprise-resource-planning-blogs-by-sap/sap-s-4hana-cloud-make-to-order-mto-with-advanced-variant-configuratio… 17/19
2/23/24, 10:04 PM SAP S/4HANA Cloud Make-to-Order (MTO) with Advance... - SAP Community

 You must be a registered user to add a comment. If you've already registered,

sign in. Otherwise, register and sign in.

Comment

Labels In This Area

Artificial Intelligence (AI) 1 Business Trends 363 Business Trends​7

Digital Transformation with Cloud ERP (DT) 1 Event Information 462

Event Information​14 Expert Insights 114 Expert Insights 72 Life at SAP 418

Life at SAP​1 Product Updates 4,689 Product Updates 108

Roadmap and Strategy 1 Technology Updates 1,505 Technology Updates 48

Related Content
SAP B1 - Italy Localization configuration guide for 10.0 
in Enterprise Resource Planning Q&A a week ago

Deletion of Master and Transactional Data (ILM) in SAP S/4HANA Cloud,Public

Edition-Link Collection 
in Enterprise Resource Planning Blogs by SAP 2 weeks ago

Sustainability with SAP S/4HANA Cloud Public Edition 2402 

in Enterprise Resource Planning Blogs by SAP 2 weeks ago

Is it posible to bypass the restriction of the need for cost calculation of a material in a
prod ord 
in Enterprise Resource Planning Q&A 2 weeks ago

SAP S/4HANA Cloud Public Edition 后勤常见热点问题汇总FAQ 

in Enterprise Resource Planning Blogs by SAP 2 weeks ago

Popular Blog Posts

https://community.sap.com/t5/enterprise-resource-planning-blogs-by-sap/sap-s-4hana-cloud-make-to-order-mto-with-advanced-variant-configuratio… 18/19
2/23/24, 10:04 PM SAP S/4HANA Cloud Make-to-Order (MTO) with Advance... - SAP Community

Useful documents on SCN

Nancy
Product and Topic Expert

 133264  123  219

Follow

Privacy Terms of Use

Copyright Legal Disclosure

Trademark Newsletter

Support Cookie Preferences

https://community.sap.com/t5/enterprise-resource-planning-blogs-by-sap/sap-s-4hana-cloud-make-to-order-mto-with-advanced-variant-configuratio… 19/19