Setting Make - Purchase to Order Items
The make to order capability is easily accommodated in DemandCaster. This document will first describe how to set an items stock designation followed by the different models that can be applied to accommodate requirement planning if the item has or does not have a bill of material.
Stocking Analysis: Stock versus Non Stock
The fist step is to set the items stock designation. The designation can be viewed in many locations including the items options tab, but the most direct location is the Stocking Analytic.
- Click on Analytics in the top menu bar
- Click on Stocking in lower menu bar
- The stock designation is located in the column named Order/Stock, Order designates that the item is make or purchase to order, and stock means the item is stocked.
- To access the Item Detail of an item click on the details icon. You may also do the same from the Item Selection page or any UI where the item is listed.
When clicking on the details icon referenced above, it will take the Item Detail view where you can click on the options tab to change the stocking setting option.
Changing Stock Designation
- To change the stock designation of the item, scroll down to Planning Settings.
Go to Stock or Order options and select one of the following options based on the designation you would like to set.
- ERP: This is the setting uploaded from the ERP
- Use System Defined: This is the setting set by DemandCaster as part of the stocking analysis
- User Defined: This is the option to allow the user to set the stocking status
- System Calculated: This is the same as "Use System Defined" but gives the user the details of the system calculation.
- In this example, we are going to change the "User Defined" stock setting to "Order." Once an item’s stock designation is changed to “order,” the items safety stock calculation automatically changes to 0 since make or purchase to order items do not require a safety stock.
An item in which its stock designation is changed to "order" will always have a safety stock automatically set to "0."
If you manually override the safety stock to a value other than "0" within the items option tab, the next requirement plan will automatically change the safety stock of the item back to "0." If you require the item to carry a safety stock, you must change the item to "stock."
Set Planning Model
There are three primary models available to manage make/purchase to order items. These options are what is termed as consumption types in DemandCaster. They are located in the options tab or in the consumption type drop down of the forecast detail view. A detailed review of each consumption type is described in the article What are the Different Consumption Types in Requirement Planning. For the make versus stock option, we will review the following:
- Make/Purchase to Order
- MTO - Order/Forecast
- MTO - Forecast
Make / Purchase to Order
The Make/Purchase to Order consumption type as shown above is applied when items are not inventoried thus there is no forecast or safety stock calculated. As orders arrive a shop or purchase order is created to fulfill the requirement taking into consideration any minimum order or order increment requirements.
This model is primarily applied when the item is a purchased item or does not have a bill of material. In this case, if there is an open customer order during the lead time or beyond the lead time, an associate work or purchase order is created to fulfill the requirement as shown in the image below.
If the item does have a bill of material, there are two consumption options available specific to the finished goods and sub-assembly levels to allow the requirement to flow down to ensure the stock components have enough inventory to meet future demand.
These two options should be used only when there is NO blanket order available at the finished goods level to drive component demand through the cumulative lead time.
MTO - Forecast and MTO - Order/Forecast Consumption Types
MTO - Forecast and MTO - Order/Forecast are a hybrid of make to order and forecasting. These models apply the make to order model within the items lead time or a user defined period of time and then applies a best fit or user adjusted forecast beyond the items lead time. The replenishment order plan will, in turn, trigger planned orders that will be driven through the items BOM.
In the example below, the area bounded by the red box and up to the green line in the table is the make to order portion of the plan. Any open customer orders that come in during this period will be treated as make to order. Beyond the red box and beyond the green line, DemandCaster generates a forecast to simulate future demand. DemandCaster then creates planned orders as shown in orange to drive component demand only. The exception to this is the blue colored orders which will be a firm order that needs to be cut because there is an open customer order beyond the lead time.
The planned and firm replenishment orders maintain the ending on hand quantity at 0 since the item is not stocked.
Explosion of Requirements
The resulting suggested order quantities are then driven down through the items DRP and/or BOM offset by the lead time at each location or component at each level. The next level down in the BOM hierarchy has its dependent demand column populated with the items upper level BOM suggested orders. These orders in turn generate replenishment orders that are further driven down the BOM or ordered.
You can see in the pop-up bounded by the red box above what we call "parent work orders." These are planned orders at the upper level BOM that create a requirement at the component level. These requirements in turn set the replenishment quantities in the replenishment order column.
Example of How Planned Dependent Demand Is Exploded to Components
During the lead time of a make to order item, we only pass the 'FIRM' firm requirements to the components as dependent demand that requires a replenishment order at the components lead time. In the example below, that quantity is 15 since there is 9 on hand to meet the first 9 unit dependent demand requirement.
Thereafter, we create a requirement just beyond the lead time for all the other planned requirements to ensure there is enough inventory on hand and on order during the components lead time to meet the future predicted requirements for the finished goods.
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