Target Buying

'Purchase Planning' (PPS190) supports a streamlined process of target buying a group of items (a product line) on an aggregated level. To support purchasing products on a regular basis, a time interval called the review cycle is used.

(PPS190) displays a list of product lines for which a buyer is responsible, with information about what needs to be purchased at what point in time, and how much of the purchasing targets that are met. Purchasing targets are set up per product line and warehouse in 'Purchase Planning Settings. Open' (PPS195). Purchasing targets can be expressed as target costs, weights, or volumes.

For each product line and warehouse, the buyer can review the planned purchase orders at item level through 'Purchase Planning Details. Open' (PPS191). From (PPS191), the user can create more planned orders (if required to meet targets), access various information related to the items and planned orders, or release a selection to a purchase order.

You can also view a history of past purchases per product line and warehouse in 'Purchase Release History. Open' (PPS194).

This functionality is activated per supplier by enabling the level of purchase planning setting on 'Supplier. Define Purchase & Financial' (CRS624/E).

Terms used in this document

Term

Description

Target buying

Aggregating the purchase planning process over a group of similar items to meet a determined purchasing target in terms of weight, cost, or volume.

Product line

A logical grouping of items purchased together on the same purchase order from the same supplier into the same warehouse.

Review cycle

The time frame (in calendar days) between the releases of purchase orders.

Target fill-up

Creating new planned orders until a target value is reached.

Line buy

A purchase order to buy all items included in a product line, with quantities to cover the demand for an entire review cycle.

Emergency buy

A purchase order for a single or a few items within a product line, purchased to avoid a shortage before the next planned line buy.

Target value

The total cost, weight, volume, or quantity (depending on the selected target type) that should be met per purchase order or load.

A supplier may require that a load carrier be filled to a certain limit to allow an order to be placed, or to avoid extra delivery charges. For example, a truck must be filled with at least 18 pallets, or a certain minimum cost must be reached to get a discount.

Actual value

The cost, weight, volume, or quantity (depending on the selected target type) of the planned purchase order. The total actual value per combination of supplier, product line, and warehouse is compared to the target value and the maximum value.

Maximum value

A limit for how large an order can be, usually affected by physical nature. For example, a weight limit for a truck load.

Limitations

Before you start

  1. Define product lines in 'Product Line. Open' (CRS099).

  2. Assign product lines to items on 'Item. Open' (MMS001/F). Only items that have a product line are subject to the target buying process.

  3. Set 'Planning level' to 1-'Prod line, whs' on 'Supplier. Define Purchase Financial' (CRS624/E) for each supplier that should be used for target buying.

  4. Create settings in 'Purchase Planning Settings. Open' (PPS195) for each combination of supplier, product line, and warehouse that should be used for target buying. See settings descriptions below. (PPS195) can be accessed from (CRS624) via related option 22.

  5. Configure the planning parameters in 'Item. Connect Warehouse' (MMS002).

  6. In 'Purchase Planning Priority Rules. Open' (PPS197), define a sequence of rules for how priority should be displayed in (PPS190), (PPS191), and (PPS192). When creating a new sequence, select a rule, specify a value (depending on the rule) and a planning priority number between 1 and 5.

    Note: You can define different rules that all lead to the same priority number. See Priority Rule Example for more details.

    Settings descriptions

    Program ID

    Field heading

    Description

    (CRS624/E)

    Planning level

    This value must be set to 1-'Product line, whs' to use this supplier for target buying and to create entries in (PPS195) for the supplier.

    (CRS780/H)

    55 Batch origin – purchase planning

    The batch origin policy that will be used when creating purchase orders from (PPS191).

    (MMS001/E)

    Product line

    Define in which product line the item number is included.

    (MMS001/F)

    Gross weight

    If target weight is used, a gross weight per basic U/M must be defined for each item.

    (MMS001/F)

    Volume

    If target volume is used, a volume per basic U/M must be defined for each item.

    (MMS015/B)

    Alt U/M type, Alt U/M

    If target quantity is used, the unit of measure entered on (PPS195/E) must be defined with type 1 for each item.

    (MMS002/E)

    (MMS002/F)

    Lead time

    Order quantity

    Annual demand

    If an order quantity is specified, it will be used as the order quantity for the target fill-up generated planned orders.

    If no order quantity is specified, the target fill-up will calculate it as the daily demand (annual demand / work days per year) multiplied by the number of lead time days.

    (MMS002/G)

    Buyer

    The buyer is used as the default buyer for planned purchase orders and should match the buyer responsible for the product line on (PPS195/E).

    (PPS195/E)

    Target type

    These are the valid alternatives:

    • 1 - Weight
    • 2 - Volume
    • 3 - Cost
    • 4 - Quantity

    This determines the target value to be used by the purchase planning programs (PPS190) and (PPS191) and how the total or actual value is calculated.

    (PPS195/E)

    Target weight

    Target volume

    Target cost

    Target quantity

    Depending on the target type, this target value should be met. The target fill-up will continue until the actual value of the planned orders exceeds the target value. See also Fill-up logic.

    (PPS195/E)

    Maximum weight

    Maximum volume

    Maximum cost

    Maximum quantity

    A limit for how large an order can be, often affected by physical nature, for example a weight limit for a truck load. If several values are specified, all are checked. Maximum value = 0 means that there is no limit.

    (PPS195/E)

    Currency

    The currency used for 'Target cost', 'Maximum cost', and the calculated total or actual cost in (PPS190) and (PPS191).

    (PPS195/E)

    Unit of measure

    The unit of measure used for 'Target quantity', 'Maximum quantity', and the calculated total or actual quantity in (PPS190) and (PPS191).

    (PPS195/E)

    Buyer

    The buyer for the product line for the supplier in the warehouse.

    This buyer will override (MMS002) as the default buyer for planned purchase orders.

    Note: Only items that are connected to this buyer in (MMS002) are included in the target fill-up.

    (PPS195/E)

    Order type

    This purchase order type will be proposed for the purchase orders released from (PPS191).

    If left blank, the released purchase orders will get the order type of the planned purchase order. This may result in the purchase order being split into several, one per order type.

    (PPS195/E)

    Review cycle

    The planned number of days between PO releases. By default, only planned POs with a release date within one review cycle will be included in the (PPS191) selection.

    (PPS195/E)

    Fill-up logic

    This field determines when the target fill-up stops. These are the valid alternatives:

    • 1 - Below max

      The fill-up will continue until the target value is reached (actual value ≥ target value), but stop before any maximum value is exceeded.

    • 2 - Disregard max

      The fill-up will continue until the target value is reached (actual value ≥ target value), and will not check maximum values. If a maximum value is exceeded, (PPS191) will display a warning message.

    (PPS195/E)

    ABC type

    This field is used to define the type of the ABC class range, which limits the items used by the target fill-up.

    (PPS195/E)

    ABC class (from/to)

    If specified, only planned purchase orders for items in this ABC class range will be generated by the target fill-up.

    (PPS195/E)

    Priority

    This is the (PPS170) order priority (PRIP) that will be assigned to planned orders that are generated by the target fill-up.

    (PPS195/E)

    Auto fill-up

    Determines if (PPS690) will create planned POs if the target level is not met. These are the valid alternatives:

    • 0 = No automatic fill-up. Automatic target fill up is not performed.
    • 1 = Fill up if over the threshold. Automatic target fill-up will be performed if the target threshold is exceeded.
    • 2 = Fill up always. Automatic fill-up will always be performed.

    (PPS195/E)

    Fill to next multiple

    When to allow fill-up to a multiple of the target value. Alternatives:

    • 0 = Not used
    • 1 = Yes, manually. If the maximum value is exceeded, the system will perform target fill-up to the next multiple of the target, when used by (PPS191).
    • 2 = Yes, automatically. This alternative is similar to alternative 1, but is also used by (PPS690).

      This parameter can be used, for example, when the current load does not fit in a single load carrier, but can fill 2 loads instead.

      Example: If the target value is 8, with a maximum of 10, the actual value is 11 (greater than maximum), and this setting is enabled, fill-up will continue to the next multiple of the target value, 8 * 2 = 16, with a new maximum of 20. If this double maximum is exceeded, the next multiple would be 3, and the target value 8 * 3 = 24, and so on.

    (PPS195/F)

    Release below target

    Whether to release the planned purchase orders if the target value is not met. Alternatives:

    • 0 = Allow all. Release of all planned purchase orders is allowed regardless of the target value fulfilment.
    • 1 = Allow per item line. Release of all planned purchase orders below the target value is not allowed, but release of purchase order per item line is always allowed.
    • 2 = Do not allow. No release of planned purchase orders below the target value is allowed.

    (PPS195/F)

    Auto release

    Controls if (PPS690) may automatically release a purchase order. If set to 0, no purchase order will be created. If greater than 0, it indicates which purchase planning priority the target buying must have to qualify for automatic release.

    For example, if 'Auto release' = '2-High priority', and at least one planned PO in the selection has priority 1 or 2, the priority is sufficient for automatic release. On the other hand, if the highest priority planned PO in the selection had priority 3, the target buying would not be a candidate for release.

    (PPS690) will release a purchase order if:

    • Auto release > 0 and the target buying has sufficient priority,
    • The target threshold is reached (see below),
    • The target is fulfilled, and
    • No maximum value is exceeded.

    If 'Fill to next multiple' = 2-'Yes, automatically', the target multiple is taken into consideration when checking the target and maximum.

    (PPS195/F)

    Target threshold

    A threshold as a percentage of the target value used to determine if automatic release is allowed. To pass, the current actual value for a portion of the included planned orders must exceed the target multiplied by this percentage. See 'From priority'.

    Valid values are 0-100.

    (PPS195/F)

    From priority

    The field indicates which planned orders that are included when the target threshold is checked.

    Example: With a target value of 80, a target threshold of 50 % and 'From priority' set to 3, the threshold is passed if the actual value of all planned orders of priority 1, 2, and 3 is equal to or greater than 40 (80 * 50 %).

    By setting this priority, it is possible to exclude low-priority planned orders (such as those generated by target fill-up or suggested by MRP for deletion) from the auto fill-up or release check, to prevent the automatic release of a purchase order where only a small portion of the order quantity is required.

Priority rule example

The priority assigned in (PPS197) is an internally used planning priority, which primarily signals to the buyer how important it is to take some action for the product line in (PPS191).

Rules are parsed in sequential order. When a matching rule with a priority number is found, no further rules will be evaluated. If no matching rule is found, priority 5 (lowest) is automatically assigned.

If two or more sequences must both be evaluated as true to get a priority number, use the "AND" operator on the first sequence, and assign a priority number to the last sequence.

Assume that these priorities should be assigned:

This can be set up in (PPS197) as follows:

Sequence number

Rule

Value

AND

Priority

Comment

10

01-Action message

B7

 

5-Low

B7 = Delete order

20

01-Action message

A1

 

1-High

A1 = Release and reschedule

30

03-Origin

23

AND

 

23 = From customer order

40

02-Priority higher than

3

 

1-High

True for order prio 1, 2, 3

50

04-Order referenced

   

2-Normal

Rule 04 requires no value

60

01-Action message

A2

 

3-Normal

A2 = Release order

Flowchart

Follow these steps

Use this process to work with target buying, that is aggregated purchase planning on a product line level.

  1. Launch (PPS190). M3 will default the active user as the buyer. The program will list all product line/warehouse combinations that are connected to the buyer in 'Purchase Planning Settings. Open' (PPS195). Aggregated information about the planned purchase orders will be displayed, such as target values, target fulfilment, priority, and number of planned orders. By default, (PPS190) will order the lines by priority, with the highest on top.

    The information in (PPS190) provides a basis for deciding on a course of action. Examples:

    • The 'Planned release date' shows when the next line buy is planned according to the review cycle.
    • If the target is fulfilled, this may indicate that it is time to make a line buy.
    • If the 'Release date' is reached, at least one of the included planned orders must be released or it will be late.
    • Depending on the setup, the planning priority may also indicate that planned orders require urgent attention.
  2. Select a product line in the list. Use alternative 11='Details' to access 'Purchase Planning Details' (PPS191). The item numbers included in the product line for the selected supplier and warehouse will be displayed, along with aggregated information about the planned purchase orders per item number.

    Planned purchase orders with a planned release date earlier than one review cycle from the current date will be included in the selection by default.

    (PPS191) also has a number of related options to use included planned orders, display on-hand inventory information, review planning setting in 'Item. Connect Warehouse' (MMS002), perform MRP calculations, display forecasts and statistics, and so on.

  3. If planned orders are late or risk becoming late, decide whether to perform an early line buy or an emergency buy.

    • A line buy is appropriate if the current planned orders have reached the purchasing targets, or are so close that the extra carrying costs for ordering more than needed are lower than the extra ordering costs for an emergency buy. Go to step 4.
    • An emergency buy is appropriate if the current planned orders are far from the purchasing targets (for example, if early in the review cycle or there is plenty of stock left of the other items in the product line) and the carrying costs for a full line buy ahead of schedule are higher than the extra ordering costs associated with buying a single item. Go to step 6.
  4. Perform a line buy

    If the target value is not reached, use F15 'Create planned orders' to perform a target fill-up. (PPS191) will try to create planned orders until the selected target value is exceeded. Use the fields 'Target type' and 'Target value' to control the target fill-up.

    In 'Purchase Planning Settings. Open' (PPS195), you can define maximum values for purchasing cost, weight, or volume. If such a value is exceeded, decide if a line buy should be made below purchasing targets (respecting the maximum value) or if the maximum value can be ignored in favor of meeting the purchasing target.

    The field 'Fill-up logic' controls whether the fill-up should stop before it exceeds any maximum (1), or continue until the target is reached regardless of limits (2).

    The action 'Delete planned orders' (F18) will delete all planned orders that have been generated by the target fill-up.

    Item numbers can be excluded from the line buy by deleting the corresponding line in (PPS191). This does not affect any existing planned orders.

  5. To perform a line buy, release the planned orders into a purchase order by selecting the action 'Release all' (F19).

  6. Perform an emergency buy

    To perform an emergency buy, select the item to purchase and select alternative 19='Release one line' to create a purchase order.

  7. Follow up

    Optionally, review the newly created purchase order, using alternative 12='History' in (PPS190). 'Purchase Release History. Open' (PPS194) will be displayed, listing all released purchase orders for the product line and warehouse, with the most recent release on top. Alternative 11='Purchase order lines' will launch 'Purchase Order. Display Lines' (PPS220).

  8. Repeat the steps up to "Perform an emergency buy" until all purchase orders are created.

Target buying as a submitted job

'Purchase Planning. Generate' (PPS690) can be used to perform target buying automatically as a batch job. For each product line, it can be included in the selection:

  1. Perform fill-ups to target level.

  2. Create line buys (purchase orders based on the included planned POs).

These actions depend on the settings in 'Purchase Planning Settings. Open' (PPS195). In addition to these settings, (PPS690) can only create purchase orders if:

The outcome of (PPS690) is equivalent to performing the corresponding actions in (PPS191).

Selection of included planned POs

The selection fields in (PPS690) controls which product lines and planned POs that are included in the job selection. (PPS690) can only perform target fill-up and release for a product line or warehouse if at least one planned PO is included in the selection.

Field heading Selection type Description
Responsible Range Selects planned POs based on their responsible/planner, which is defaulted from (MMS002).
Product line Range Selects planned POs based on the product line of the item.
Warehouse Range Selects planned POs based on the warehouse.
Supplier Range Select planned POs based on supplier.
Release date Upper limit

The latest release date that at least one included planned purchase order should have for the product line to qualify for automatic fill-up or release. Use this field to avoid performing fill-up or release of purchase orders that are not yet due for release.

Note that regardless of the value in this field, planned purchase orders with a release date within the review cycle will be included in the selection.

See the corresponding field help for more information and examples.

Outcome

Related topics