Sources of supply: production, purchase, or distribution

Sourcing is the method to determine the source of supply for a plan item to satisfy demand. Sourcing can be defined on two levels:

  • The sourcing strategy
    This determines if the item is produced, purchased or distributed. Defining a sourcing strategy is not required, if a sourcing strategy is not defined the default source from the Items - Planning data is taken.
  • The supply strategy
    This determines the rules that specify which suppliers and warehouses must be selected for purchasing and distribution. For production, no second level applies in the sourcing Business Object. The supply strategy is not mandatory. If a supply strategy is not defined the suppliers are selected based on the priorities in the Item Purchase Business Partner session. The warehouses are then selected based on the priorities in the supplying relationship session.

The supplying relationships between clusters can be defined. These relationships represent the possible supplies between warehouses. Enterprise Planning always translates the cluster to the default warehouse in that cluster. The supplying relationships are selected based on the supply strategy, if no supplying strategy is applicable, they are based on the priorities in the supplying relationships.

Three sources of supply

Enterprise Planning works with three sources of supply:

  • Production – manufacture goods at a production facility
  • Purchase – acquire goods from a business partner
  • Distribution – acquire goods from elsewhere in your company or from an affiliated company

You can use the following methods to determine from which source a plan item is supplied:

If a plan item has a valid sourcing strategy, LN ignores the plan item's default supply source.

Default supply source

If you want a single permanent supply source, a default supply source is enough and you do not need sourcing strategies.

If no valid sourcing strategy is present, LN checks the value of the Default Supply Source field in the Items - Planning (cprpd1100m000) session.

This default supply source is independent of the value that you specified in the Item Type field in the Items - General (tcibd0501m000) session.

The Default Supply Source field can have the following values:

  • Distribution
    If the default supply source is Distribution, Enterprise Planning generates only planned distribution orders.
  • Production/Purchase

    If the default supply source is Production/Purchase, Enterprise Planning searches the Date-Effective Item Data (tcibd0510m000) session, and uses the item type specified for the order finish date.

    If the default supply source is Production/Purchase and no valid date effectivity lines are present for the order finish date, LN falls back on item type that you defined in the Items - General (tcibd0501m000) session.

You can use date-effective item data to change an item's item type from manufactured item to purchased item and vice versa on exactly defined dates.

Sourcing strategy

Sourcing strategies allow you to use a combination of multiple supply sources at the same time, or one after another.

Example

You can specify that 60% of a requirement is supplied by production orders, 30% by distribution orders and 10% by purchase orders.

You can also specify that LN must first try to cover the requirements with production orders, and if that is not possible, use purchase orders.

Suppose you want to start to manufacture a component that you used to buy from an outside supplier. Then, you can also specify that LN must generate purchase orders up to, for example, May 15th, and after that date generate production orders.

The use of sourcing strategies

If you generate a master plan or planned orders, LN first searches for a valid sourcing strategy in the Sourcing Strategy (cprpd7110m000) session.

You can link a sourcing strategy directly to a plan item, or link the sourcing strategy indirectly, via a cluster or item group.

If LN finds no effective sourcing strategy, LN uses the default supply source.

For more information, refer to Sourcing strategies.

Note

LN generates a signal if you define a sourcing strategy for a plan item for which a date effectivity definition exists.

Relevant sessions and fields

You can set up the date effectivity in the following sessions and fields:

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