The borrow/loan and payback process

The borrow/loan and payback process constitutes the temporary transfer of inventory between two projects. LN can temporarily transfer cost pegged items from one project, the lending project, to another, the borrowing project, to fulfill an urgent demand. After the inventory is replenished, the borrowing project transfers the borrowed item quantities back to the lending project.

If more than one project is available from which to borrow inventory, LN selects the project with the latest demand date. This is to prevent shortages for the lending project.

However, if other projects have excess inventory, LN creates permanent transfers first. If none of the projects for which the setup allows cost peg transfers has sufficient ATT or excess inventory, LN creates an inventory shortage report.

Sometimes incidents, such as damages inflicted during movement to the docking area, cause inventory shortages just before shipping. Therefore, when an item for a project peg is issued from inventory to fulfill an order, and the outbound process detects a shortage, a borrow/loan transfer is automatically created to transfer inventory from another project to compensate for the shortage. The project that borrowed the inventory can then issue the items to fulfill the order.

The borrow/loan transfer is created only if the conditions described previously apply.

LN creates the borrow/loan transfer together with payback records during the creation of outbound advice. The borrow/loan transfer is carried out immediately. After the borrowing project is replenished with new items, LN performs a payback transfer based on the payback records.

The lending project is replenished by a payback that transfers the borrowed inventory quantity back to the lending project. LN creates and carries out a payback transfer after the borrowing project is replenished, for example, after receiving a replenishment order created by the planning engine from Enterprise Planning.

The Enterprise Planning replenishment order is based on the borrowing project’s replenishment lead times and inventory present after the issue, minus the borrowed inventory. The planning engine does not consider the borrowed inventory. The planning engine does not create replenishment orders for lending projects, because the lending projects are replenished by the payback transfers from the borrowing projects.

For a borrowing project, multiple outstanding paybacks to various lending projects can be present. After a receipt of project pegged items is confirmed, LN checks if there are any outstanding paybacks.

If found, LN first creates a payback transfer for the lending project with the earliest demand date. This is because the most urgent demand must be fulfilled first.

If the received quantity is smaller than the borrowed quantity, LN processes a partial payback for the lending project. The payback quantity still outstanding is fulfilled after the borrowing project has received one or more consecutive replenishment orders. These follow-up paybacks are distinguished by higher sequence numbers.