Monday, March 24, 2014

The Sales Order Availability Check: With or Without Total Replenishment Lead Time ?

If you look at the 'Scope of Check' that was setup for your Sales Order Availability Check, you'll see a choice that says: 'Check without RLT?'

Besides the question being a bit confusing (when I check it on, is it with or without RLT??), the decision has many, some hidden, implications. First off: when the choice is checked, your availability check performs its routine without the Total Replenishment Lead Time.

So what is the difference between the two? Let's look at an example:

Assuming you have nothing in inventory today and a customer orders 100 pieces with a desired shipment sometime in the near future. There are 50 pieces coming from the production line BEFORE the customer wants to pick up 100, and 50 coming in AFTER the customer wishes to pick up 100 - the last 50 are coming after the end of the Replenishment Lead Time.

If our sales availability check performs with Total replenishment Lead Time (the option in the 'Scope of Check' is unchecked), the following happens:

The system checks ONLY within the Replenishment Lead Time and ignores all receipts outside of it. It also assumes unlimited availability at the end of the TRLT. Therefore 50 pieces can be confirmed to the customer's requested delivery date and 50 are confirmed just after the end of TRLT.

This has the following implications: First, the sales order will confirm ANY quantity, no matter how crazy the request is, right after the TRLT, and second, it confirms quantities that are not on the schedule or even on the plan at that moment. Only after MRP is run, there will be a planned order to meet the new demand. This is a very unreliable and noisy way to do business and, in my personal opinion, only makes sense of you run MRP every day, or in a Make To Order situation, where there is no stock, nor any receipts.

On the other hand, when you check without Total Replenishment Lead Time, the system checks the entire planning horizon for receipts, but doesn't let you confirm if there aren't any.
Doing this right is imperative to business success, leveling demand, reducing noise in the production program and increasing visibility on what's demanded for the production scheduler and what's available for the customer sales representative.