In-house manufactured parts are estimated based on the labor standards - namely set up hours per lot, and processing hours per unit - to produce that part. These standards are normally defined in your SAP routing for the selected supply site or SAP plant. They are set by manufacturing engineers or based on actual production history. When you cost the consolidated bill of material, estimating LABOR records are compiled for each work-center and activity type combination - or labor resource group - involved in producing that part.

• Labor standards from the SAP routing are multiplied by the resource activity rate for the fiscal year when production is anticipated
• The total effort for each operation or work-center is calculated as the set-up time + ( processing time per unit x required quantity x complexity x realization factor )

You can view the results of a manufactured part estimate by double-clicking on any record in the consolidated material list, or by clicking on the pencil. If the part is made in-house i.e. not purchased the information below will appear.

1. The table in the LABOR COST tab of the material proposal popup lists the unique work-centers or resource groups involve in producing this assembly. Use the + or - to add or delete a resource, selecting the resource involved from the list or by typing in part of the resource name
2. The supply site or SAP plant code is read from the SAP routing and can be changed. Changing the supply site does not automatically change the resource to an equivalent resource in the new supply site, you have to re-select the new resource separately
3. You can view and edit the set-up and run hours/unit. The total time is calculated automatically as set-up + ( run hours/unit x qty x complexity x realization factor )
4. Realization factors represent the efficiency of the supply site or group making this part, and are normally determined based on historical actuals / labor standards. Realization factors greater than 1 are less efficient, and realization factors less than 1 are more efficient:
   • Realization factors also represent the learning curve factor, with higher realization scores at the start of a longer production run, or the inverse of earned value management cost performance index or 1 / CPI
   • Realization factors default to 1 but can be manually edited. You can also add business logic to calculate realization factors automatically based on the resource group and/or production learning curves
5. The rate per hour comes from the resource master, not from the SAP routing. Resource rates are normally imported from SAP's cost-center/activity type planned rates. Total cost is simply the rate x total time
6. The total effort and total cost for all operations to produce this part is displayed at the top. While individual labor records are created for each operation in the cost model, the total cost is used to determine the unit cost for one make-part
7. The primary supply site for this part is also displayed, normally based on the SAP bill of material and special procurement key. Not all operations have to come from the one supply site, and changing the supply site in the top right corner does not modify any of the individual resources.

The PRODUCTION HISTORY tab of this popup plots each historical production order for this part number, from your SAP or manufacturing execution system, based on the average time to produce one unit vs. the date or sequence of each production orders completion. Actual vs. planned finish dates are used.

In the example below there are three historical production orders for this part to produce lot-sizes of 17, 40 and 50 parts respectively in May 2017 and November 2018. The actual labor booked to these production orders, ranging from 0.061 to 0.258 hrs per unit, compares favorably to the SAP routing standard of 0.19 hours per unit as shown below.

1. Historical production orders are shown on a Y axis of hours per unit and an X axis of either date or order sequence, depending on which radio button is selected. Order sequence ignores the time-span between orders, plotting them in a linear progression to show the learning curve effect graphically. Mousing over any of the production order "points" on the chart provides the production order number, total labor hours booked to the entire production lot, and actual finish date, as shown above
2. Historical production orders for this part are also shown in the table below. You can add/hide columns and sort this table based on any column.
   • Unit time is calculated as the total hours booked to this production order divided by the lot-size or quantity
   • While there are separate columns for set-up and processing labor hours, most companies do not distinguish between set-up and running when clocking labor confirmations on the shop floor; consequently the set-up hours for the historical production order table is often blank
3. This proposal, together with any other in-house production proposals for the same part in the same bid, are displayed in the middle table called "Material Orders for Proposal". Most of the time, especially when consolidating requirements through the bill of material based on proposal and part number, this table has just one row pertaining the current proposal or popup. However:
   • If you have optional line items or phases, or choose to organize production lot-sizes based on fixed or periodic lot-size as opposed to a consolidated lot, then there many be several in-house production proposals for this part in this proposal
   • Key information about this proposal is displayed in columns, though the same information is actually editable in the ADDITIONAL DATA tab

The ADDITIONAL DATA tab of the make-part proposal popup lets you edit key information, as follows:

1. The part code and description (below part code) are displayed. They are derived from the bill of material and can only be edited in the BOM view
2. While the proposal description defaults to the part description, you can edit it here or in the BOM view. It represents what you are specifically making, which may or may not be the same as (rather, similar-to) the part code/text used for estimating purposes
3. The complexity and realization factors are editable, though both factors are applied to every operation in the LABOR COST tab
   • Complexity factor is common to all operations in this proposal and represents the complexity or similar-to factor of what is proposed vs. the part number (1) used to derive routing labor standards. Editing it here adjusts the total time ( run hours ) on every operation
   • Realization factor is unique for each work-center, resource or operation in the LABOR COST tab, with the weighted average realization factor being displayed here. Adjusting the realization factor here sets every single operation in the labor cost tab to the new value
4. This part is produced in-house. You can only change the make-buy decision in the proposal bill of material. Part's manufactured at vendor are treated like purchased parts for cost estimating purposes but have a bill of material
5. The estimating source derived by the system is normally based on routing standards. You can change it to a routing with realization, discrete effort estimate or manual cost estimate, with confidence calculated based on the estimating source selected
6. The lot-size and set-up quantity rule are displayed. They are defined in the product master estimating parameters imported from SAP
7. The cost element, which is used for proposal P&L reporting and to determine what overhead rates to apply, is normally derived from the SAP valuation class on the material and its account determination. You can manually select a cost element from the list
8. The total quantity for this make-part is displayed. This is either the sum of all consolidated requirements for this part-number in this proposal or based on the lot-size rule specified. Each required quantity in the proposal line items or bill of material can be adjusted by a scrap factor defined in the proposal BOM
9. The earliest requirement date for this part is displayed. The earliest requirement date, normally calculated based on the lead-time offset for this assembly within the proposal line item deliverable, determines in which calendar and fiscal month these labor costs will be incurred
   • Individual make part proposals are assumed to never span more than one month or fiscal period
10. The total cost for this proposal (sum of set-up + run hrs/unit x qty x complexity x realization for each operation) is displayed, along with the unit cost which is simply total cost / quantity. The total or extended cost cannot be edited here, instead edit the hours in the LABOR COST tab
11. The WBS these costs are assigned to can be changed to any other WBS within the same BOE or basis of estimate
    • The WBS defaults to the BOE WBS but can be modified to a lower level WBS below the BOE in the proposal line item, the proposal BOM or here in this popup. Only choose WBS elements in the same BOE
12. Often tags are defined for your proposal, with tag values inherited automatically from the proposal, WBS or BOM in priority order of BOM, then WBS, and lastly from the proposal. If tags have been set up you can edit the tag values here
13. Last but not least, any change to this proposal checks the box to "Retain unit cost and costing source document"
    • Checking this box means that your changes will be saved and copied forward to any new in-house part proposals when you click on Update & Cost Consolidated BOM in future, even if the bill of material requirement dates and quantities are changed
    • Unchecking this box means that next time you update & cost the consolidated BOM any manual edits will be lost and replaced by labor standards derived from the SAP routing as explained above, even if no routing can be found.