Example: source allocation in order planning

In LN, you must define a sourcing strategy if you want to use more than one source of supply.

In a sourcing strategy, per supply source, you can define the minimum and a maximum volume that LN can use to cover requirements. LN then distributes the requirements over the specified supply sources.

If you define a sourcing strategy in the Sourcing Strategy (cprpd7110m000) session, you must choose between two source allocation rules:

Percentage
Priority

According to these rules, LN distributes the required demand over the selected sources.

Source allocation rule: Percentage

Suppose you set the Source Allocation Rule field in the Sourcing Strategy (cprpd7110m000) session to Percentage, and specify the following source values:

Production: 30%.
Purchase: 20%.
Distribution: 50%.

You record an item's demand forecast in the item master plan and subsequently generate planned orders based on this forecast.

The following table shows the demand forecast:

Plan period	1	2	3	4	5	6
Forecast	100	100	100	100	100	100

If you clear the Allow Multiple Sources per Req. check box in the Generate Order Planning (cprrp1210m000) session or the Generate Order Planning (Item) (cprrp1220m000) session, LN generates a single planned order for each requirement. In other words, LN generates one planned order per plan period.

The following table shows a possible distribution of the planned orders over the available types:

Plan period	1	2	3	4	5	6
Planned production orders	-	100	-	-	100	-
Planned purchase orders	-	-	100	-	-	-
Planned distribution orders	100	-	-	100	-	100

The resulting distribution is:

Order type	Target percentage	Total volume	Actual percentage
Production	30%	200	33%
Purchase	20%	100	17%
Distribution	50%	300	50%

Source allocation rule: Priority

If you set the Source Allocation Rule field in the Sourcing Strategy (cprpd7110m000) session to Priority, you can define the priority for each source. The priority source-allocation rule only applies to order planning. In master planning, a priority source-allocation rule is interpreted as a Percentage source-allocation rule.

Suppose you define the following priorities:

Production: 0.
Purchase: 30.
Distribution: 70.

First, LN tries to cover the demand with planned distribution orders. If the quantity that internal suppliers can deliver is insufficient, LN generates purchase orders to supply the remaining quantity.