Sourcing strategies

This topic contains an overview of the functionality of sourcing strategies.

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
Default supply source

Per item you can define a default supply source in the Items - Planning (cprpd1100m000) session. If you want to use one permanent supply source, this is enough. This default supply source is independent of the value that you specified in the Item Type field in the Items - General (tcibd0501m000) session.

Note

Sourcing strategies have priority over the default supply source. If an applicable sourcing strategy exists, Enterprise Planning uses the sourcing strategy, and ignores the default source.

Sourcing strategy

If you want to use more than one source of supply, or deviate from the default source in one particular scenario, you must define a sourcing strategy for the item involved.

You can define sourcing strategies in the Sourcing Strategy (cprpd7110m000) session.

Scenario and validity period

A sourcing strategy is valid for a particular scenario.

A sourcing strategy is valid for a particular time period. You can enter an effective date and an expiry date for a source strategy to determine for which time period the sourcing strategy is valid.

Sourcing strategies for clusters and item groups

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

For more information, refer to To search sourcing strategies

Unit effectivity

In addition, you can define a unit effective sourcing strategy, which means that you link an exception the sourcing strategy. In this way, you can model (small) deviations from a standard sourcing strategy for a specific period.

For more information about unit effectivity, see Unit effectivity in Enterprise Planning.

Source allocation rule

When you define a sourcing strategy, you must choose between the following:

  • Percentage
  • Priority
Source allocation rule: Percentage

If the source allocation rule is Percentage, you define the percentage for each source in the Sourcing Strategy (cprpd7110m000) session.

In master-based planning, LN distributes the supply plan according to these percentages for each plan period.

In order-based planning, the percentages can be used in two ways:

  • If you select the Allow Multiple Sources per Requirement check box in the Generate Order Planning (cprrp1210m000) session or the Generate Order Planning (Item) (cprrp1220m000) session, LN uses the percentages to divide a single requirement over the various sources.
  • If you clear the Allow Multiple Sources per Requirement check box, LN tries to approximate the percentages as closely as possible, but assigns each requirement to one source. In other words, LN does not split planned orders.

For more information about source allocation in order planning, refer to Example: source allocation in order planning.

Source allocation rule: Priority

If the source allocation rule is Priority, you 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.

For more information about sourcing allocation rule Priority, refer to online manual topic Example: source allocation in order planning.

Note

If LN has first attempted to cover a requirement by selecting the source Purchase, and this source cannot fulfill the requirement, the next step depends on the question whether the plan item's supplier is a single-source supplier.

The behavior depends on the Preferred field in the Items - Purchase Business Partner (tdipu0110m000) session:

  • Preferred is set to Single Source
    If the supplier cannot fulfill the required demand, LN uses the lower-priority supply sources ( Production or Distribution) from the sourcing strategy.
  • Preferred is set to Preferred
    If the supplier cannot fulfill the required demand, LN generates a planned production order with an empty supplier field.
Minimum and maximum volume

Per supply source you can define minimum and maximum volumes, and specify the time period for which these limits apply.

If the order volume for a specific source exceeds the maximum volume (within the specified time period), LN can move part of the volume to another source.

If the order volume for a specific source drops below the minimum volume, LN can use a larger part from the required quantity to generate planned orders for that source. As a result, the total ordered quantity for other sources will be reduced.

Note

Do not confuse the minimum volume fields with the minimum order quantity defined in the item data. LN does not create orders for more than the required quantity, even if the order volume falls below the minimum volume.

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