Supply Chain Rebuild

This document includes a description of the process of changing the receiving warehouse on a purchase order (PO) line and how this can trigger a supply chain rebuild (SCR). This means rebuilding a supply chain when working with purchase orders depending on the warehouse to which the delivery will be shipped, so that the goods always reach their intended destination. Three business scenarios are supported:

  • Ad Hoc change with supply chain rebuild

    In this case, the warehouse where the goods will be shipped is not known in advance. The ship-to warehouse can be entered after the purchase order has been created, during purchase order confirmation or at shipment advice. This will trigger a supply chain rebuild if a DO type for SCR is entered on the PO type.

    For more details, see Workflow - Supply Chain Rebuild in this document.

  • Inventory bypass

    In this case, it is known in advance where the goods will be shipped, depending on the warehouse to which they are ordered. Inventory bypass is triggered during the initial order creation and involves no extra confirmation for the new warehouse. It will always automatically trigger a supply chain rebuild.

    For more details, see Inventory Bypass in this document.

  • Ad Hoc change without supply chain rebuild

    In this case, the ship-to warehouse is changed after the purchase order has been created due to a change in the point of demand. In this case, a supply chain rebuild is not desired, as the goods should stay at the ship-to warehouse, or be distributed to the final goods destination by some other means. In this case, no DO type for SCR should be entered on the PO type. It is only applicable to POs that are not part of any supply chain.

Background

After a purchase order has been created, there is a possibility that the supplier delivers to another warehouse than the warehouse entered on the purchase order line. This means that the supply chain may require some adjustment. Furthermore, the planner may request a change of ship-to warehouse due to the demand point having changed.

Limitations

  • The ordering warehouse and the goods receiving warehouse must belong to the same division.
  • All purchasing activities (such as quality inspection) must take place in the ship-to warehouse.
  • This functionality is not available for PO lines that are connected to a customer order line, service order line, or rental agreement line of line type 2 (direct delivery).
  • This functionality is only available for purchase order category 20.
  • The warehouse may not be changed on PO lines that generate fixed assets.
  • DO type for SCR must exist on the PO type to enable a supply chain rebuild.
  • For inventory bypass, only acquisition code 2 (Purchasing) is allowed.
  • PO connected to a supply chain does not allow a change of ship-to warehouse if a DO type for SCR is missing on the PO type.

Before you start

  1. Set 'Allow change of ship-to-warehouse' = 1 in 'M3 Settings - Purchase' (CRS780/H) for your division.

  2. Create a normal PO type (category 20) in 'Purchase Order Type. Open' (PPS095).

  3. If supply chain rebuild should be enabled, select an appropriate DO type in the '750 DO type for supply chain rebuild' setting in (PPS095/K).

  4. Enable the '760 Inventory bypass' setting in (PPS095/K), depending on whether you will use inventory bypass instead of confirming a new ship-to warehouse.

Workflow - supply chain rebuild

When a PO line is updated with the new warehouse where the goods will be received, the supply chain may have to be rebuilt to avoid undesired effects, such as unwanted planned purchase orders. In general, distribution orders (DOs) will be generated to transfer the goods to the warehouse where the demand arose. Such distribution orders that are generated by a supply chain rebuild are called SCR distribution orders.

Example:

  • If a purchase order is generated by the MRP due to a planned shortage, but the goods receipt is moved to another warehouse, MRP might generate a new planned PO unless we transfer the original purchase order to the original warehouse.
  • If a purchase order is part of a supply chain, but the goods receipt is moved to another warehouse, the supply chain will break unless we adjust it using new distribution orders.

To enable this, a DO type must be entered in (PPS095/H) in the '750 DO type for supply chain rebuild (P750)' field. This DO type will be used in the creation of SCR distribution orders.

A supply chain rebuild can be triggered during the following events:

  • PO line creation. In the case of inventory bypass, see the following chapter.
  • Purchase order confirmation, when changing the ship-to warehouse.
  • Manual shipment advice, when changing the ship-to warehouse.
  • EDI shipment advice (MHS850 message type 29), if the message states a different warehouse than is indicated on the PO line.

The aim of a supply chain rebuild is always to move goods between two warehouses, and it tries to use a distribution chain. Searching for a suitable distribution chain is as simple as possible: The first chain with a matching From and To warehouse will be used. If one is found, the order type of the SCR distribution orders will be determined by the sequences in the chain. If no suitable distribution chain is found, a single SCR distribution order is generated from the ship-to warehouse to the top-level warehouse.

All distribution orders that are generated will get generation reference 52, 'Planned distribution order, generated via supply chain rebuild'. These distribution orders will be order-initiated, and there will be an order reference from the PO line to the DO line. This means that the connection between the PO line and SCR distribution order line will always be one-to-one.

How the distribution orders are generated depends on whether the purchase order is part of a supply chain and the type of supply chain.

  • Unreferenced PO

    The simplest scenario is when a purchase order has no relation to other orders. It could be manually created or generated by MRP. It lacks preallocation and an order reference. In this case, SCR distribution orders will be shipped from the ship-to warehouse to the ordering warehouse of the PO line.

  • PO with order reference

    A purchase order that has an order reference, which it does when created from a CO line of type 1 or due to planning method 3 (Order-initiated), will act differently. Orders that refer to each other can form a supply chain, and there will always be a one-to-one relationship between order lines. If the supply chain contains distribution orders, it can to some degree actually be rebuilt to better fit the new situation after a warehouse change.

    A supply chain rebuild will remove any existing distribution orders that are supplied by the purchase order, until either the top level or another order category is found (which will then be considered to be the top level). The rebuild will then generate SCR distribution orders between the ship-to warehouse and the top-level warehouse.

    If the ship-to warehouse of the PO line is found in an existing distribution order, no complete rebuild is necessary. The purchase order will simply set a reference to that distribution order, and any obsolete distribution order on lower levels will be deleted. See the examples in the following figures:

  • PO created by supply model

    When the purchase order is created by a supply model (CTS100 or CTS200), the supply chain rebuild will act in the same way as for a purchase order with an order reference, attempting to rebuild the supply chain using a distribution chain.

    In a supply chain created by a supply model, preallocations are used, but there is still a one-to-one relationship between order lines.

  • PO created by orders connected to a supply chain

    In this case, another order holds a preallocation against the purchase order. The supply chain rebuild will behave similarly as in the case with the unreferenced purchase order, generating SCR distribution orders from the ship-to warehouse to the ordering warehouse of the PO line. The SCR distribution order line will get a preallocation to the level above in the supply chain, taking the PO line's place.

    If a purchase order has been generated by a supply model or an order initiation, the supply chain rebuild will try to rebuild all distribution orders (if any) that the purchase order supplies, but this behavior is not possible in the case with a supply chain order. A supply chain order is very flexible and may be very complex; a single PO line can supply several orders on the higher level, and a higher level can be supplied by several orders on the lower level. It can also be regenerated at any time.

    Due to this complexity, the supply chain rebuild may not alter any existing distribution orders in the supply chain. It will just add a new one to re-link the purchase order into the supply chain order.

  • Multiple warehouse changes

    If further warehouse changes are made after a supply chain rebuild (e.g. reconfirmation after noticing a mistake, or a confirmation to another warehouse on a purchase order that involves an inventory rebuild), the existing SCR distribution orders will be removed and regenerated to fit the new situation.

  • Reversing transactions

    Reversing a transaction that changed the ship-to warehouse (e.g. through deleting a confirmation or advice transaction in 'Purchase Order. Display Line Trans' (PPS330)) will restore the original warehouse and trigger a supply chain rebuild to that warehouse. In most situations, this means that all SCR distribution orders will be removed.

  • Date and quantity changes

    When the PO quantity is changed by the line being edited or a different quantity being confirmed/advised, this will also update the SCR distribution orders. An update to the planned/confirmed receipt date will also update the date of the SCR distribution orders, according to the rules for the specific supply chain type.

  • Splitting PO lines

    PO lines can be split when a partial quantity is confirmed or advised without the line being flagged as complete. Limitation: This is only allowed when there is no order-initiated, one-to-one relation somewhere in the supply chain that is being rebuilt.

    When a line is split, two lines can be created, potentially with different ship-to warehouses. The supply chain will be rebuilt for both subnumbers, if required. This works even if a supply chain was rebuilt prior to the split, e.g. in the inventory bypass scenario. Afterwards, any preallocation that existed for the PO line (or SCR distribution order line) will be split between the two subnumbers.

Inventory bypass

During inventory bypass, a different ship-to warehouse is automatically assigned immediately when a purchase order is manually created or released, triggering a supply chain rebuild. You can use inventory bypass when you know that a purchased item normally ships to another warehouse than the one where it was requested. As the default ship-to warehouse, the 'Supplying warehouse' (SUWH) field in 'Item. Connect Warehouse' (MMS002/E) is used. The warehouse and the supplying warehouse must belong to the same division (this is a limitation in the MUC scenario); however, this is not verified in (MMS002).

To use inventory bypass, enable '760 Inventory bypass' in 'Purchase Order Type. Open' (PPS095/K).

When a PO line is created, M3 verifies that the following settings are defined:

  • Inventory bypass = 1 and the DO type for supply chain rebuild is defined in (PPS095).
  • The item/warehouse record is set to acquisition code = 2 (Purchased).
  • (MMS002) contains a valid supplying warehouse.

If all this is true, the ship-to warehouse of the PO line will be updated, triggering a supply chain rebuild that will generate distribution orders from the supplying warehouse to the ordering warehouse.

Follow these steps

This work flow describes the process of confirming a new ship-to warehouse:

  1. Open 'Purchase Order. Confirm' (PPS250), filter on your purchase order number, and click 'Change' on the desired PO line.

    • You can confirm a purchase order with several lines from the F panel (function key F14).
  2. The E panel shows the default information from the line including the 'Ship-to warehouse' field. In this field, specify the desired warehouse in which the goods are to be received and click Enter.

    • A confirmation of a new ship-to warehouse will move the material demand to this warehouse. This is reflected in 'Material Plan. Open' (MMS080), 'Purchase Order. Lines' (PPS201) and 'Purchase Order Transactions' (PPS330).
    • The supply chain will be rebuilt, taking the new ship-to warehouse into consideration. This is where the goods are received and where subsequent PO activities take place before shipment to the ordering warehouse.

      A distribution order is automatically created from this warehouse back to the ordering warehouse using the order type specified in (PPS095/K). You can view the reference order number in (PPS201/E).

    • Confirming a ship-to warehouse always triggers a recalculation of purchase order charges. In addition, the geographic code or VAT code found for the item/warehouse will be retrieved again depending on the tax settings. No new prices will be retrieved according to the new warehouse.
    Note:  'Item. Connect Warehouse' (MMS002) must contain a valid record for the items that are confirmed to a new ship-to warehouse.
  3. Open (MMS080). A filtering on the ordering warehouse will show that the purchase order has been moved to the new confirmed ship-to warehouse in which the goods will be received. Distribution orders are also created in the affected warehouses in order for the goods to be finally received in the ordering warehouse if supply chain rebuild is enabled.

Reverse the purchase order in (PPS330)/(PPS250)

  1. Perform the steps in (PPS250) and (MMS080) as described above.

  2. Delete the PO transaction from (PPS330). The demand is moved back to your ordering warehouse in (MMS080), and any related distribution orders are also deleted.

    • When reversing a transaction with a status of 35, the warehouse is always updated by the value from the ordering warehouse.
    • The same result is achieved from (PPS250).

Perform goods receipt

  1. Receive your purchase order in 'Purchase Order. Receive Goods' (PPS300) by entering your ship-to warehouse on panel A and your order number.

  2. On panel B, click 'Change' to access panel E. From there, receive the goods by entering the received quantity and then clicking Enter.

    Receiving the goods will capture statistics for both the ordering and receiving warehouses, which can be viewed in 'Item Statistics. Display' (MMS090/E). The 'Ordered purchase quantity' will be updated at the ordering warehouse, regardless of where it was delivered. The PO goods receipt will also update the 'Purchased quantity' of the receiving warehouse.

Outcome

  • The purchase order has been received at the ship-to warehouse.
  • The supply chain is rebuilt according to the new ship-to warehouse if applicable, which means the goods will be distributed to the point of demand.

Settings descriptions

Program ID Field heading Description
(CRS780/H) 57 Allow change of ship-to warehouse If this setting is disabled, it is not possible to change the ship-to warehouse at confirmation or shipment advice, and inventory bypass is disabled.
(PPS095/K) 750 DO type for supply chain rebuild The DO type that will be used by the distribution orders generated by a supply chain rebuild (unless this is overruled by distribution chain settings).
(PPS095/K) 760 Inventory bypass Enable this to activate inventory bypass when applicable.
(MMS002/E) Acquisition code Inventory bypass is only applicable for items with 'Acquisition code' = 2 (Purchased).
(MMS002/E) Supplying warehouse If inventory bypass is used, this will be the default ship-to warehouse.