Defining Reservation and Backorder Rules

This chapter provides an overview of reservation and backorder rules and discusses how to:

• Set up reservation and backorder rules.

• Apply reservation and backorder rules.

• Default rules to sales orders.

Understanding the Reservation, Backorder, and Shortage Processes

Reservation and backorder rules can automate many of the rules that required manual decisions. You can configure a set of rules at the line and order level to define at what point the demand line or order is ready to move forward in the fulfillment process. The rules are applied at the reservation and shipping stages of fulfillment. Reservation and backorder rules do not apply to work order demand lines from PeopleSoft Maintenance Management.

See Fulfilling Work Orders from Maintenance Management.

Reservations

The default setting of the Reserve Materials process and online reservations processes is to soft-reserve partial quantities for a demand line and hold the line in the unfulfilled state. The demand line can go through the Reserve Materials process multiple times and could soft-reserve more stock each time. The demand line will be set to the releasable state when the full quantity is soft-reserved and it is within reservation lead days. This default setting can be overridden by using:

• Reservation and backorder rules.

• The check boxes for Partial Qtys Can Ship, Cancel Backorder, and Partial Orders Can Ship.

Use the reservation rules to tell the system when to release a demand line or order to the releasable state. Using reservation rules, the system can:

• Set the demand line or order to the releasable state.

• Notify the proper user of an issue needing manual attention (such as a shortage situation).

• Not reserve or promise available inventory stock to the demand line based on the rule. This changes the default setting of the reservation process.

Based on the criteria on the reservation rule, a demand line could be put to the releasable state even if all or part of the requested quantity cannot be reserved; for example, if the rule says Set to Releasable when 90 percent of the line is reserved. If this case, a shortage would be created, then the backorder rule would determine what should be done about the shortage. The reservation rules determine the demand line's shortage quantity to be used by the backorder rules.

Based on the criteria that you establish on the backorder rule, the Reserve Materials process or the online reservation processes can:

• Create a backorder.

• Cancel a backorder.

• Hold the demand line and notify the proper user in order to let the user make a manual backorder decision.

• Release the shortage to the releasable state. This essentially lets the shortage flow downstream so that the backorder decision can be made at shipping time rather than during the reservations process

The reservation and backorder rules for the reservation stage of fulfillment are invoked by the following:

• The Reserve Materials process.

• The Shortage Workbench.

• The online reservation processes for sales orders in PeopleSoft Order Management.

• The online reservations for stock requests using the Create/Update Stock Request component.

Shipping

Backorder rules are also be used at shipping time to determine what to do with shortages that were released to picking and shipping but by shipping time still cannot be fulfilled. Based on the criteria that you establish on the backorder rule, the shipping processes can:

• Create a backorder.

• Cancel a backorder.

Understanding Backorders

Backorders can be created, based on the check boxes or the backorder rules, by the Reserve Materials process, the Shipping/Issues component, the Shortage Workbench, the Picking Confirmation process (for autoship orders), and shipments processed by the fulfillment engine. Backorders are also created for the unallocated portion of partially lot-allocated sales order lines.

If a backorder needs to be created for just part of a demand line then the demand line is split. The backordering process adds a demand line for the unfulfilled quantity; the only change in the demand key for the second demand line is the demand line number (line number 2).

The following check boxes on the Setup Fulfillment and Setup Item Fulfillment pages, still apply to backorders created by backorder rules:

Setting Up Reservation and Backorder Rules

Reservation and backorder rules are used by the Reserve Materials process and online reservations to determine when the demand line of an order is ready to be moved downstream to the releasable state. Backorder rules are also used at shipping time to determine what to do with shortages that cannot be fulfilled. The reservation and backorder rules are:

During reservations, the rules are evaluated in the following order:

1. Line-level reservation rules.

2. Line Reservation-Backorder rules.

3. Order-level reservation rules.

   Once a demand line has passed the set releasable criteria for the line-level reservation rule, the line must also pass the set releasable criteria for the order-level reservation rule.

4. Backorder rules at release.

   Once a demand line has passed the set releasable criteria of both the line-level reservation rule and the order-level reservation rule, the backorder rule at release determines how any unreserved quantities (shortages) are handled.

Note. If there are no reservation and backorder rules established for the demand line, then the system uses the Partial Qtys Can Ship, Cancel Backorder, and Partial Orders Can Ship check boxes to determine releases and backorders.

Common Elements Used in This Section

Pages Used to Set Up Reservation and Backorder Rules

Defining Line-Level Reservation Rules and Line Reservation- Backorder Rules

Access the Reservation/Backorder Rules-Reserve Line page (Inventory, Fulfill Stock Orders, Fulfillment Rules, Reservation/Backorder Rules. Select a Rule Type of Line Reservation Rule).

Defines the specific criteria that must be satisfied by an individual demand line before the demand line is moved to the releasable state. For example, a line reservation rule might be that the reserved quantity must equal or exceed 90 percent of the requested quantity on the line before it is set to the releasable state.

This page defines reservation rules to be applied as line-level reservation rules and line reservation-backorder rules. Whether the rule defined here is applied to a backordered demand line or not, depends on where you add this rule code. The rule code defined here can be applied to the Line Reservation Rule field or the Line Reservation-Backorder field on the Setup Fulfillment-Reservation page or the Create/Update Stock Request-Reservation /Backorder Rules page.

Reservation Actions

Select the action to be performed when the criteria are met by the demand line. Within the Reservation Rules and Actions group box, you can select the Add button just below the title bar and add additional action combinations for this Rule Code. Each combination is evaluated independently.

Note. The actions of Set releasable when and Do not make reservation when are mutually exclusive since the system always holds the reservation when the releasable action is taken. The Notify action can be used in combination with the other actions. For example, if you release the demand line, then you might want to notify a customer service representative or other individual.

Rule Sets

Within the Rule Sets group box, you can define one or more List of Criteria group boxes for each rule action by selecting the Add button just below the Rule Set title bar. Each List of Criteria group box is evaluated as an OR condition. For example, if you add two List of Criteria group boxes, the action is taken if criteria 1 or criteria 2 are met. Within an individual List of Criteria group box the separate rows are evaluated as AND conditions; both rows must be met to initiate the action.

For example, the above page shot displays a rule that enables you to release a demand line if it is 3 days before the scheduled ship date and at least 90 percent of the quantity has been reserved or if it is past the scheduled ship date then release whatever quantity is reserved.

Note. If the Use Closure Calendar check box is selected on the Setup Fulfillment- Reservation page, then the system takes closure dates into consideration when comparing today's date to the date on the demand line.

Defining Order-Level Reservation Rules

Access the Reservation/Backorder Rules-Reserve Order page (Inventory, Fulfill Stock Orders, Fulfillment Rules, Reservation/Backorder Rules. Select a Rule Type of Order Reservation Rule).

Defines the specific criteria that must be satisfied by an entire order or grouping of demand lines (unit of work) before the individual demand lines are moved to the releasable state. For example, an order-level reservation rule might be that all the lines in an order must reserve 100 percent of their reserved quantity before the order can move downstream. Order-level reservation rules are evaluated after line-level reservation rules. A demand line must pass both rules to be set the releasable state.

Reservation Actions

Select the action to be performed when the criteria are met by the unit of work. Within the Reservation Rules and Actions group box, you can select the Add button just below the title bar and add additional action combinations for this Rule Code. Each combination is evaluated independently.

Rule Sets

Within the Rule Sets group box, you can define one or more List of Criteria group boxes for each rule action by selecting the Add button just below the Rule Set title bar. Each List of Criteria group box is evaluated as an OR condition. For example, if you add two List of Criteria group boxes, the action is taken if criteria 1 or criteria 2 are met. Within an individual List of Criteria group box the separate rows are evaluated as AND conditions; both rows must be met to initiate the action.

Defining Backorder Rules for the Release Step

Access the Backorder Rule-Release page (Inventory, Fulfill Stock Orders, Fulfillment Rules, Reservation/Backorder Rules. Select a Rule Type of Line Backorder Rule).

Once a demand line has passed the set releasable criteria of both the line-level reservation rule and the order-level reservation rule, the backorder rule at release determines how any unreserved quantities are handed.

Release Backorder Action

Select the action to be performed for shortage demand lines being set to releasable status.

Backorder Conditions

If you have selected Cancel Backorder using the When option, then enter the criteria to determine when the Cancel Backorder action should be taken.

Defining Backorder Rules for the Shipping Step

Access the Backorder Rule-Shipping page (Inventory, Fulfill Stock Orders, Fulfillment Rules, Reservation/Backorder Rules. Select a Rule Type of Line Backorder Rule. Select the Shipping tab).

Once a shortage (Release as Shortage option on the Backorder Rule-Release page) has been sent downstream to shipping if there is still no quantities to ship, then this rule determines what happens to the demand line.

Ship Backorder Action

Select the action to be performed for shortage demand lines at shipping.

Summary

Applying Reservation and Backorder Rules

In this section, we discuss:

• Apply rules to different types of items.

• Default rules to material stock requests.

Applying Rules to Different Types of Items

Reservation and backorder rules are applied differently to soft-reserve, non-soft-reserve, ATP, and lot-allocated items. There are also special considerations for product kits and demand lines that have been pegged.

Soft Reserve Items

Reservation and backorder rules are applied to soft-reserve items. The demand line must pass the rule criteria to be set to the releasable state.

Non-Soft Reserve, Non-ATP Items

For non-soft-reserve items that are not ATP items, the setting in the Non-Reserved State field on the Setup Fulfillment page determines how the reservation and backorder rules are applied.

• If the field is set to Unfulfilled, then the reservation and backorder rules are applied.

  However, since no quantity is soft-reserved, the quantity and percentage checks of the reservation rules are not applied. The date checks on the line-level reservation rule and any order-level reservation rules are applied and the demand line must pass the criteria to be set to the releasable state.

• If the field is set to Releasable, then the reservation and backorder-release rules are not applied.

  The demand line has already moved past the unfulfilled state; however, the backorder-shipping rules are applied.

ATP Items

Reservation and backorder rules are applied to ATP items. The demand line must pass the criteria to be set to the releasable state. However, the promised quantity of the demand line is used instead of the reserved quantity (since an ATP item is not soft-reserved) to compare to the quantity and percentage checks of the rules.

If the ATP item is within the ATP lead days but outside the reservation lead days, then the system promises the quantity only if all of the requested quantity is available. If the item is within the reservation lead days, then the system can promise partial quantities, but a backorder decision is not made until the demand line passes any line-level and order-level reservation rules. Each time the Reserve Materials process or online processes are run for the demand line, the system will again check to see if it can promise the unpromised portion of the demand line but the system does not reevaluate the whole requested quantity.

Lot-Allocated Items

Reservation and backorder rules do not apply to lot-allocated items. Partial lot allocations result in splitting the demand line; lot-allocating one demand line and no allocated quantity on the second demand line. Both demand lines are left in the unfulfilled state.

Product Kits

For product kits on sales orders from PeopleSoft Order Management, the reservation and backorder rules are determined based on Order Management's backorder/shortage engine. The rules are defaulted to the product kit and then default to the individual components that are sent to PeopleSoft Inventory for order fulfillment. Product kits can also be adding directly to a material stock request in PeopleSoft Inventory. For both sales orders and material stock requests, during order fulfillment:

• If the Release Multiple Kits check box on the Setup Fulfillment page (inventory business unit level) is not selected, then the system applies the reservation and backorder rules to each individual component.

• If the Release Multiple Kits check box on the Setup Fulfillment page (inventory business unit level) is selected, then only multiples of complete kits are set to the releasable state.

  For example; suppose that product kit X consists of 2 units of item A and 1 unit of item B. The demand line requests a quantity of 10 product kit X. Available stock includes 22 units of item A and 4 units of item B. The system can reserve 20 units of item A and 4 units of item B, then 8 units of item A and 4 units of item B (4 complete kits) are set to releasable status and passed downstream for picking. For any quantities initially reserved, promised, or lot-allocated but could not be set to releasable, in this case, 12 units of item A, the system follows the reservation rules to determine if a notification should be sent and/or the items be unreserved, unpromised, or unallocated, but does not allow the lines to be set to releasable.

Before reserving product kit components, you may want to run the Kit Re-Explode process. This process gives you to ability to synchronize the product kits on a sales order or material stock request with the latest product kit definition on the Product Kit Summary page. Changes to the kit definition are applied to the order by adding, modifying, or deleting demand lines containing kit components.

See Re-Exploding Product Kits.

Defaulting Rules to Material Stock Requests

For material stock requests, the reservation and backorder rules can be manually entered on the demand line or default to the demand line from the Setup Item Fulfillment-Reservation / Backorder Rules page (the item/business unit level) or the Setup Fulfillment-Reservation page (business unit level).

If there are no reservation and backorder rules established for the demand line, then the system uses the Partial Qtys Can Ship, Cancel Backorder, and Partial Orders Can Ship check boxes located on the Setup Item Fulfillment page or the Setup Fulfillment page to determine releases and backorders. Demand lines with no reservation rules refer to the Partial Qtys Can Ship check box. Demand lines with no backorder rules refer to the Cancel Backorder check box.

The Partial Quantities Can Ship and Cancel Backorder check boxes work together to determine the reservation and backorder decisions. The following actions are taken depending on the settings:

• If the Cancel Backorder check box is not selected and the Partial Quantities Can Ship check box is selected, then partial quantities are reserved and a backorder created for the shortage.

• If the Cancel Backorder check box is not selected and the Partial Quantities Can Ship check box is not selected, then either the full requested quantity is reserved and released or no quantity reserved and released. A backorder is created for the full quantity if no quantity is reserved

• If the Cancel Backorder check box is selected and the Partial Quantities Can Ship check box is selected, then a partial quantity is reserved and the backorder is canceled for the shortage.

• If the Cancel Backorder check box is selected and the Partial Quantities Can Ship check box is not selected, then full quantity is canceled if it is not available to be reserved.

At shipping time, if the Partial Orders check box on the Setup Fulfillment page is not selected, then the shipping processes do not allow any of the lines on the order or unit of work to be shipped unless all of the lines within the order or unit of work can be shipped.

Defaulting Rules to Sales Orders

For sales orders from PeopleSoft Order Management, an arbitration plan is defined to determine the default hierarchy used by the reservation/backorder engine (within PeopleSoft Order Management) to assign rules to the lines of a sales order. The reservation and backorder rule defaults can be defined at multiple combinations such as customer ID, customer ID/product ID, customer ID/item ID, and so on. For example, look for rules at customer ID/product ID combination first before customer ID. The Arbitration Plan ID is associated with the ship-from business unit for the sales order schedule line. This field is defined on the Inventory Definition-Business Unit Definition page.

To define reservation backorder arbitration plans and rules, use the Reservation/Backorder components under the Set Up Financials/Supply Chain menu.

Take the following steps to set up reservation backorder, arbitration plans and rules:

1. Establish the arbitration plans on the Arbitration Plan page.

   1. Use the Arbitration Plan page to define the arbitration plan.

   2. Define the keys that the arbitration plan will use on the Key Fields page.

2. Define the rules.

   1. Select the key fields from the arbitration plan and assign values.

   2. Set up the breaks for reservation backorders on the Reservation Backorder Rule Details page.

This section discusses how to:

• Establish reservation backorder arbitration plans.

• Identify key fields for reservations and backorders.

• Create reservations and backorder defaults.

• Select reservation backorder rule keys.

• Establish reservations and backorder details.

Reservation and Backorder Rule Prerequisites

Before the system can consider reservation backorder arbitration plans and rules, complete the following steps:

1. Establish default reservation backorder rules and rules codes from the Fulfillment Rules menu.

2. Establish customer groups, product groups, and region codes for reservation backorders if you are using these values as keys on the arbitration plan.

3. Assign the arbitration plan to the Inventory Business Unit Definition page.

Pages Used to Default Rules to Sales Orders

Establishing Reservation Backorder Arbitration Plans

Access the Arbitration Plan page (Set Up Financials/Supply Chain, Common Definitions, Fulfillment Definitions, Reservation/Backorder Defaults).

Default	To establish a default arbitration plan, select the check box. After selecting this option and saving the default arbitration plan, the check box no longer appears on this page for other arbitration plans. The system uses the default plan when there isn't an arbitration plan assigned to the PeopleSoft Inventory Business Unit.
Sequence	Displays the sequence number which is automatically generated by the system. You can change this number as long as you do not select a number that has already been used. The sequence number indicates the order in which the system searches the reservation and backorder arbitration plans.
Rule Keys	Click to access the Key Fields page where you can select the combination of elements that determines a match. The keys that you select display in the Key Set group box.

Identifying Key Fields for Reservation and Backorders

Access the Key Fields page (Click the Rule Keys link on the Arbitration Plan page).

Select any number of fields from the available options. The system searches the rules of the arbitration plan for reservations and backorders and applies the rules that match the combination of values that you select.

The key fields available for selection on the arbitration plan are:

• Customer group

• Order group

• Product ID

• Product group

• Region code

• Shipping priority code

• Ship to customer

• Sold to customer

• Source code

Creating Reservation Backorder Rule Keys and Formulas

To setup reservation backorder rules, use the Rule Defaults (TRFT_SET_GBL) component.

Access the Reservation / Backorder Rule Keys and Formulas page (Set Up Financials/Supply Chain, Common Definitions, Fulfillment Definitions, Reservation/Backorder Defaults, Rule Defaults).

You must first establish an arbitration plan before you can create a rule.

Note. If you are adding a new rule, you will first be directed to the Select Key Fields to add key fields to the rule.

Selecting Reservation Backorders Rule Keys

Access the Select Key Fields page (Click the Select Key Fields button on the Reservation / Backorder Rule Keys and Formulas page).

Select

Use the check box to select the sequence that contains the key fields that you want to define for the rule.

Establishing Reservation and Backorder Rule Details

Access the Reservation/Backorder Rule Formulas page (Click the Assign Reservation/Backorder Formulas button on the Reservation / Backorder Rule Keys and Formulas page).

Start Date, End Date	Enter the dates for the rule.
Status	Choose whether the rule can be Active or Inactive. Only rows with an Active status can be used.
Default Rule	The reservation and backorder rules options are: Backorder Line Reserve Line Backorder Rule Line Reservation Rule Order Reservation Rule
Rule Code	Add a rule code for the reservation and backorder rule.

Note. The default rules and rule codes are defined in the Fulfillment Rules menu.

See Also

Pages Used to Set Up Reservation and Backorder Rules