Supply planning by supplier

This topic contains an overview of how LN supports the situation where a supplier performs the supply planning for a customer.

A company can outsource the supply planning for some purchased items. In this case, the company does not send the supplier orders to delivery-specific quantities on specific dates and times. Instead, the supply planning is delegated to the supplier who decides when to deliver what quantity. The customer and supplier have a terms and conditions agreement that specifies all relevant planning parameters. This terms and conditions agreement is linked to a valid sales contract or purchase contract.

Vendor managed inventory

Supply planning by the supplier is an aspect of vendor managed inventory (VMI). To give the supplier control over the inventory, the supplier defines the warehouse at the customer's site as warehouse in the supplier's LN system.

The supply planning by supplier can be applied in three scenarios as shown in the following table:

Scenario	Owner of the supplied goods at the customer's site	Responsible for managing the warehouse at the customer's site	Responsible for the supply planning
Full VMI	Supplier	Supplier	Supplier
Planning by supplier	Customer	Customer	Supplier
Warehouse management by customer	Supplier	Customer	Supplier

For more information, refer to the Vendor managed inventory online manual topic or to User's Guide for Vendor Managed Inventory (U9501A US).

Order-based planning and VMI

The main difference between regular order-based planning and supply planning by supplier is the following:

Regular order-based planning
In general, if regular order-based planning is applied, Enterprise Planning generates planned purchase orders for the items that must be delivered by a supplier.
Supply planning by supplier
If the supplier of an item is a valid VMI supplier, Enterprise Planning does not generate purchase orders for the item. Instead, Enterprise Planning can generate a forecast that is sent to the supplier. The supplier performs the supply planning based on the forecast or the actual inventory levels at the customer. In general, the replenishment is accomplished by using warehouse transfers.

Overview

The following diagram shows the general information flow and the goods flow for the setup where the supplier takes care of the planning.

Forecast

In the general case, the customer sends the supplier a forecast of the demand for an item. The supplier can use that forecast as input for its order-based planning process.

If the customer does not send a forecast for an item, the supplier can base the supply planning on the actual inventory levels.

The customer aggregates the forecast to forecast periods. For example, the forecast can be defined by week.

Enterprise Planning can generate the forecast, but the customer can manually modify the forecast before sending it to the supplier.

For more information, refer to Forecast (VMI)

Confirmed supply

Depending on the setup, the supplier sends the customer a confirmed-supply message.

Enterprise Planning can generate the confirmed supply, but the supplier can also use other methods to determine the confirmed supply. If Enterprise Planning generates the confirmed supply, the supplier can manually modify the confirmed supply before sending it to the customer.

For more information, refer to Confirmed supply (VMI)

Revisions

Each forecast the customer sends to the supplier gets a revision number. The corresponding confirmed supply is identified with the same revision number.

You can store past revisions for future reference. You can define the number of revisions LN retains in the Planning Parameters (cprpd0100m000) session. For example, you can set up LN to store the 10 most recent revisions.

Restrictions

The forecast and confirmed supply do not include effectivity units. If an item is setup for unit effective supply, the item cannot be supplied by a VMI supplier.

For VMI planned items, an item master plan is not available.

Example

The following diagram shows how the situation is represented in the supplier's system.

In this example, the supplier defined the following entities:

Cluster CL, that represents the customer's site.
Warehouse A; this warehouse is located at the supplier's own site.
Warehouse B, an external warehouse linked to cluster CL.
Item 1500J, an item manufactured by the supplier and sold to the customer.
Plan item 1500J, with default warehouse A. Note: the cluster segment of the item code is empty, or else it differs from CL.
Plan item CL - 1500J, with default warehouse B. Note: the cluster segment of the item code is CL.

The customer in this example regularly sends a forecast to the supplier. Based on this forecast, the supplier generates planned distribution orders to deliver plan item CL - 1500J to warehouse B (at the customer) and planned production orders for 1500J and its components.

The planned orders for plan item CL - 1500J can be translated to confirmed supply. The confirmed supply is the delivery quantity that the supplier commits to. Optionally, the supplier can change the confirmed supply, before sending the confirmed-supply data to the customer.

Finally, the supplier replans the supply, based on the confirmed supply sent to the customer. Because the confirmed supply can deviate from the received forecast, this planning run creates planned orders which can differ from the planned orders that were based on the forecast.

Procedures

For instructions on how to set the system up and how to run the planning and replenishment, refer to the following topics: