Manufacturing and Distribution Inventory

Types of Warehouses

Within MAC-PAC, there are two types of warehouses:  manufacturing warehouses and distribution warehouses.  Each plant must contain a single manufacturing warehouse.  Each plant can also have one or more distribution warehouses, although distribution warehouses are not required.  Warehouses are defined through the Plant/Warehouse Description Maintenance conversation within Design Engineering.  When you define a warehouse, you must specify several flags that will determine how inventory and sales orders at that warehouse are processed:

·    Relief code default

·    Sales Order Planning flag

·    Available for Planning flag

This section discusses how these three warehouse flags are used.  Note that the Order Planning and Distribution flags that are defined for each balance type work in conjunction with the three warehouse flags to determine how inventory within a particular balance type is handled at a particular warehouse.

Relief Code and Sourcing Warehouse

Whenever you enter a customer sales order into MAC-PAC, you must specify where the inventory will come from to fill that order.  There are three options:

·    Distribution inventory at a distribution warehouse.  This inventory includes all items stored in a balance type where the Distribution flag is Yes.

·    Distribution inventory at a manufacturing warehouse.  This inventory includes all items stored in a balance type where the Distribution flag is Yes.

·    Manufacturing inventory at a manufacturing warehouse.  This inventory includes all items stored in a balance type where the Order Planning flag is Yes.

The source of the inventory is specified through the Warehouse and Relief Code fields on the order entry screens.  The relief code is specified once for the order (on the header screen).  A different warehouse can be specified for each order line. 

·    If the selling location is a distribution warehouse, the relief code is always D (for distribution). 

·    For a manufacturing warehouse, you can specify a relief code of M (manufacturing) or D (distribution).  The relief code field will default to whatever value you have specified for the warehouse on the Plant/Warehouse Description File.  You can change this default when you enter the order.  Note, however, that the default relief code can only be changed before any sales order lines have been entered.  Once the first line has been entered, the relief code cannot be changed.

Inventory Reservation

The relief code and sourcing warehouse you specify for a customer sales order determines how that order will be processed:

·    If the relief code is D, inventory reservation processing is performed. 

During inventory reservation, Order Processing checks to see if inventory is available to fill the sales order.  It reserves the available inventory so it is not used to fill another order, then places any remaining items on backorder.  Inventory can be reserved at several levels (warehouse, stockkeeping location, and lot).  In addition, inventory is only reserved for orders that meet certain criteria, such as passing a credit check and falling within a window for future orders.  For more information on how inventory reservation works, refer to the Inventory Reservation key concept in the Order Processing User Manual.

·    If the relief code is M, inventory is allocated rather than reserved.

Inventory reservation and backorder processing do not occur.  Instead, the quantity of inventory marked as allocated for sales orders at the plant is increased by the order quantity.  During the Master Scheduling/Requirements Planning process, the allocated inventory is added to the total demand for the item and netted against available inventory.  Goods will be manufactured (or purchased) as necessary to meet demand.

Note:    Relief code D fills the order from an inventory balance where the Distribution flag on the balance type = Y.  Relief code M fills the order from an inventory balance where the Order Planning flag on the balance type = Y.  When both flags are Y, you can use either relief code D or relief code M to fill orders from the inventory.  You should use a relief code of D when inventory should be reserved and a relief code of M when inventory should be allocated.

Effect on Planning Modules

Master Scheduling and Requirements Planning compare demand with inventory that is available to meet that demand.  Production is scheduled (or purchase orders are created) to handle any unmet demands.  The relief code, balance type, and warehouse flags affect these calculations in two ways:  they determine whether a particular customer sales order is included in the demand calculations, and they determine whether a particular inventory balance is included in the calculation of available inventory.

·    Sales order considered by planning modules.

-     If the relief code is M, the sales order is considered as demand by the planning modules. 

-     If the relief code is D at a distribution warehouse, the sales order is not considered by the planning modules. 

-     If the relief code is D at a manufacturing warehouse, the sales order will be considered depending on a flag that is defined on the Plant/Warehouse Description File.  This flag is called the Sales Order Planning flag.  If the flag is Y, the sales order will be considered by the planning modules; if the flag is N, the order will not be considered.

·    Inventory available for planning.

-     At a manufacturing warehouse, inventory is considered available for planning based on the flags defined for the balance type.  If the Order Planning flag on the balance type is Y, the inventory is included; if the Order Planning flag is N, the inventory is not included.

-     At a distribution warehouse, inventory is considered available for planning based on a flag that is defined on the Plant/Warehouse Description File.  This flag is called the Available for Planning flag.  If the flag is Y, distribution inventory at the warehouse will be included in the availability calculations.  If the flag is N, distribution inventory at the warehouse will not be included.  Note that this flag applies only to inventory in distribution balance types (where the Distribution flag on the balance type is Y).  Any inventory at a distribution warehouse that is not available for distribution is ignored by the planning modules.

Note:    If you decide to make the inventory at a distribution warehouse available for planning, you must make sure that you update demand forecasts regularly so that they accurately reflect actual sales activity for the inventory.  This step is important, because sales orders sourced from distribution inventory at a distribution warehouse are not considered directly by Master Scheduling and Requirements Planning.

Summary of Relationships between Flags

The figure below shows the relationship between relief code and warehouse type.  The next figure shows the relationship between balance type and warehouse type.

  Processing Affected by Relief Code and Warehouse Type

   How Warehouse and Balance Type Affect Planning Modules

Manufacturing Inventory at Distribution Warehouse

The previous sections discussed distribution inventory at distribution warehouses, distribution inventory at manufacturing warehouse, and manufacturing inventory at manufacturing warehouse.  It is also possible to have manufacturing inventory at a distribution warehouse.  This situation occurs when inventory at the distribution warehouse is in a balance type where the Order Planning flag = Y and the Distribution flag = N.  MAC-PAC will keep track of this inventory on stock status reports.  However, the inventory will not be included in any system calculations.  Thus, it is "invisible" to the system, as follows:

·    The inventory cannot be used to fill customer sales orders.  This restriction occurs because you cannot use a relief code of M at a distribution warehouse. 

·    The inventory cannot be used by MS and RP.  The Available for Planning flag for the distribution warehouse affects only inventory in balance types where the Distribution flag = Y.  The Order Planning flag on the balance type affects only inventory at manufacturing warehouses. 

Note that inventory is "invisible" to the system in another case as well:  when both the Order Planning and Distribution flags on the balance type are N.  Placing manufacturing inventory in a distribution warehouse has the same effect as moving it into a balance type where both Order Planning and Distribution flags are N.