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.

Borrow/loan

Sometimes incidents, such as damages inflicted during the 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 a shortage is detected, a borrow/loan transfer can be 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.

Borrow/loan transfers are created together with payback records. When the borrow/loan transfer record is processed, the inventory is transferred from the lending project to the borrowing project.

After the borrowing project is replenished with new items, LN performs a payback transfer based on the payback records.

Payback

The lending project is replenished with 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.

Note: Positive adjustments or cycle counting orders do not trigger payback transfers.

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.

Partial paybacks

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 identified by higher sequence numbers.

Conditions for creating borrow/loan and payback transfers

Parameter settings in the Project Pegging Parameters (tcpeg0100m000) session are used to determine how borrow/loan and payback transfers are created:

  • Automatically if the Borrow/Loan and Payback check box is selected.
  • Automatically and manually if the Borrow/Loan and Payback and the Allow Manual Borrow/Loan Cost Peg Transfers check boxes are selected.

Borrow/loan transfers are generated if:

  • The parameters and transfer rules are defined.
  • Available to transfer (ATT) or excess inventory is available for one or more projects.

  • The potential lending project can be paid back before the original demand is due.

Note: You can ignore the lending project's replenishment lead times by selecting the Ignore ATT Time Fence during Outbound check box in the Project Pegging Parameters (tcpeg0100m000) session.

Automatic creation of borrow/loan transfers

LN creates the borrow/loan transfer together with payback records when outbound advice is created. The borrow/loan transfer is processed immediately. After the borrowing project is replenished with new items, LN performs a payback transfer based on the payback records.

Manual creation of borrow/loan transfers

If manual creation of borrow/loan transfers is allowed, you can specify borrow/loan transfers in the Generate Project Cost Peg Transfer (whinh1240m000) and Project Cost Peg Transfer Lines (whinh1145m000) sessions.

Manual borrow/loan transfers are allowed if the Allow Manual Borrow/Loan Cost Peg Transfers check box is selected in the Project Pegging Parameters (tcpeg0100m000) session.

To launch the transfer process, you must process the borrow/loan transfer in the Process Project Cost Peg Transfers (whinh1240m100) session.

You can specify and process manual borrow/loan transfers anytime, regardless of the presence of outbound advice. For example, you can specify a borrow/loan transfer to transfer inventory to a project with a shortage before outbound advice is present.

Inventory allowed for transfers

For all borrow/loan transfers, ATT inventory can be transferred.

Excess inventory is only allowed for manually created borrow/loan transfers if the Allow Manual Borrow/Loan Cost Peg Transfers and the Payback for Excess Inventory check boxes are selected in the Project Pegging Parameters (tcpeg0100m000) session.

Excess inventory not allowed for borrow/loan transfers

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

However, if excess inventory is available in other projects, 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.

Excess inventory allowed for borrow/loan transfers

If manual borrow/loan transfers are allowed and excess inventory is allowed for manual borrow/loan transfers, LN first selects available to transfer (ATT) from the lending project. If not available, LN selects excess inventory. If insufficient ATT inventory is available, LN selects the available ATT inventory and adds excess inventory to attain the required quantity.