Finite Heuristic - Source of Supply selection/prioritization based on Stock exist or not

[SatishWaghmare]

Dear IBP Experts,

How do we change the behavior of Finite Heuristic based on if Stock exist or not at internal DC? We need Finite Heuristic to recognize inventory at our internal DC and use that to fulfill the demand before buying or producing the material.

We want to use inventory from internal DC before either buying the material from external Supplier or producing the material at our Production Plant.The Source of Supply priority will require to vary(needs to be dynamic) based on Stock exist or not at internal DC. If Stock exist at internal DC, then it needs to have the higher priority compare to Supplier or Production Plant. I understand how priorities are derived from the costs of demand and sources of supply.

Scenario#1: Material A's Demand exist at L1 ,Material-A has stock at L2(internal DC) ,Material A can be purchased from SUP01 (external Supplier).

If material is purchased from Supplier and if the inventory exist at internal DC, then we expect inventory at internal DC is completely depleted to fulfill the demand before purchasing the material from Supplier.

Scenario#2: Material B's Demand exist at L1 ,Material-B has stock at L2(internal DC) ,Material B can be produced at PLANT1 (Production Plant)

Similarly if material is produced in-house and if the inventory exist at internal DC, then we expect inventory at internal DC is completely depleted to fulfill the demand before producing the material at Production Plant.

<<We are not interested in Supply Planning Optimizer.>>

Ship-From Location ID Material

--------------------------------------------------------------

L2 L1 Material-A

SUP01 L1 Material-A

L1 L2 Material-A

==========================================

L2 L1 Material-B

PLANT1 L1 Material-B

L1 L2 Material-B

==========================================

Please let me know incase above scenario or requirement is not clear enough.

Awaiting your reply.

Thank you

Satish Waghmare

[piyush_parekh · Accepted solution]

Hi Satish,

Finite heuristic assigns source of supply priority basis sourcing costs or combination of sourcing costs viz., Transport, Production, Procurement

For scenario #1, maintain transportation cost for L1 - L2 lower than transportation cost for L1 - SUP01 + external receipt cost at SUP01.

Similarly, for scenario #2, maintain transportation cost for L1 - L2 lower than transportation cost for L1 - SUP01 + production cost at PLANT1.

If there is no stock at L2 and further no source of supply defined for L2, finite heuristic will always pick alternate source (production at PLANT1). If there is any other source of supply at L2 (for e.g. another transportation lane L2-L3) depending on the business criteria, you need to model sourcing costs.

Hope this helps!!

Regards,

Piyush

[SatishWaghmare · Accepted solution]

Thanks Piyush. Please take a look at the Source of Supply again for Scenario#1 :

1. L1 can buy from L2 or SUP01.
2. L2 can buy from L1

There is no Transportation Cost Rate(TCR) maintained between L1 and L2 or vice versa, so it can be assumed as 0 or NULL. We do have External Receipt Cost at SUP01 ($100) and TCR of $1 for SUP01-> L1.

Supply Chain Path L1-SUP01 total cost equals $100 + $1= $101

Supply Chain Path L1 ->L2->L1->SUP01 total cost equals $0+$0 + $100 + $ 1= $101

There a tie between both possible Source of Supply(L2 or SUP01). There is no clear winner or so called high priority source of supply.

The problem is Demand always flows in this direction L1 ->L2->L1->SUP01 and it never follows this path of L1->SUP01 (without L2 in the path). It always transfers the independent demand from L1 to L2,uses any inventory from L2 to fulfill that demand, and for remaining dependent location demand(received from L1) it creates dependent location demand from L2 back to L1 and then finally creates demand location demand at SUP01.Basically, Planned Purchase Receipts and Demand gets doubled at L1.

Please let me know if this help clarify question. Awaiting your reply.

[piyush_parekh · Accepted solution]

Hi Satish, as per my understanding you cannot maintain different transportation cost for L1->L2 and L2->L1 t-lanes. So the only option I see is to disable L2->L1 to avoid double counting of net demand. This will still consume stock at L2 and rest will be sourced from SUP01. Any specific reason why L2->L1 lane is created?

[SatishWaghmare · Accepted solution]

L1 -> L2 T-lane needs to exist, because only L1 can buy material from SUP01 (Supplier). L2 can have its own independent demand and it can be fulfilled by supply coming from L1. However if L1 has the demand and L2 has stock, L2's stock should be used to fulfill any demand at L2 as well as L1 before buying the material from Supplier. The reason L1->L2 T-lane cannot be marked as invalid and why Location Sources are defined accordingly(as specified in my original question). Thanks for your help.

[sandeeplondhe1 · Accepted solution]

Hello Experts , I want to know how Pull Horizon, Push deployment horizon , SNP checking horizon mapped into IBP Order based planning,Thanks