Example: source allocation in order planning
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:
- Job Shop: 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 Demand 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:
- Job Shop: 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.