1. Using Backlog Management
  2. Sourcing Rules and Bills of Distribution in Backlog Management

Sourcing Rules and Bills of Distribution in Backlog Management

To define the sources of supply for your supply chains and to define your date-effective sourcing strategies, create sourcing rules and bills of distribution in the Backlog Management work area. Within each sourcing rule or bill of distribution, you define one or more supply and a combination of rankings and quantity-based sourcing specifications for each source to define priorities across the supply sources. For each source, you also select one of three source types, and you specify the value for the attributes applicable to the selected source type.

This table lists the three replenishment source types, the definition of the source type, and the attributes to specify for each source type.

Source Type

Source Type Definition

Attributes to Specify

Buy from

Sourced from an external supplier.

Specify the supplier and supplier site.

Make at

Sourced from an internal organization that manufactures the item.

Specify the manufacturing organization.

Transfer from

Sourced through an interorganization transfer.

Specify the organization from which items will be transferred.
Note: When you create sourcing rules and bills of distribution, you specify how you will replenish items. You don't specify what items that you will replenish. To specify which sourcing rules or bills of distribution that you will use to replenish what items, you create assignment sets.

You define the following aspects of sourcing rules and bills of distribution to define your sources of supply and your sourcing strategies:

  • Global sourcing rules

  • Local sourcing rules

  • Bills of distribution

  • Effectivity dates

  • Source ranks, quantity-based sourcing specifications, and allocation percentages

Tip: When first designing your sourcing rules and bills of distribution, start by envisioning your assignment set. Determine what set of global sourcing rules, local sourcing rules, bills of distribution, or combinations of rules and bills that you need to implement your assignment set while minimizing the number of rules or bills to maintain. For example, you may be able to define a global sourcing rule in such a way that you will need only a few local sourcing rules to assign for exceptions to the global rule.

Global Sourcing Rules

Global sourcing rules can specify two of the source types: the buy-from or transfer-from source types. Any organization can potentially replenish items by buying from any of the suppliers specified in the buy-from sources, or transferring from any of the organizations specified in the transfer-from sources. For example, if you create a global sourcing rule with a buy-from source with Super Supply Company specified for the supplier, any of your organizations can potentially buy from Super Supply Company.

If you have a source that's applicable to most of your organizations, create a global sourcing rule for that source and local sourcing rules for the organizations for which the source isn't applicable. For example, if there are 20 organizations in your company, and 19 of the organizations transfer supply from the Munich organization, create a global sourcing rule specifying transfer-from the Munich organization, and create a local sourcing rule specifying where the Munich organization gets supply from.

Local Sourcing Rules

Local sourcing rules can specify all three source types. Because a local sourcing rule is applicable to one, and only one, organization, you specify which organization the rule is being created for when you create the rule. The replenishment sources defined in the rule are applicable only to the organization for which the rule was created. For example, if you create a local sourcing rule with M1 as the organization for which the rule is being created, and you add a buy-from source to the rule with XYZ Supply Company specified for the supplier, and you have no other sourcing rules or bills of distribution with XYZ Company specified for the supplier, then only the M1 organization can buy from XYZ Supply Company.

Bills of Distribution

If you have designed multiple local sourcing rules with material flowing through three or more organizations, you can choose to create one bill of distribution to implement the sources instead of creating multiple local sourcing rules. Choosing to create a bill of distribution instead of sourcing rules is a personal or organizational preference. Any scenario that you can implement by creating a bill of distribution, you can also implement by creating multiple local sourcing rules.

For example, the following sourcing scenario could be implemented by three local sourcing rules or one bill of distribution:

  • Organization M1 sources items by purchasing from a supplier, XYZ Supply.

  • Organization M2 sources items by transferring from M1.

  • Organization M3 sources items by transferring from M2.

Effectivity Dates

Use sourcing effectivity dates to modify sourcing rules and bills of distribution when sources change, such as a new supplier contract is established or a manufacturing facility is shut down. Each rule or bill can have multiple, non-overlapping ranges of effectivity start dates and end dates, with a different set of sources specified for each range. For example, if you have a sourcing rule that currently specifies a buy-from source with Acme Supplier specified for the supplier, but your company has decided to start buying from Winter Widgets instead, you would modify the sourcing rule by specifying the applicable end date, the date you will no longer buy from Acme Supplier, for the current effectivity date range. You add a new effectivity date range, specifying the date when you will start buying from Winter Widgets for the start date, and then you add a buy-from source for the new effectivity date range with Winter Widgets specified for the supplier.

Source Ranks, Quantity-Based Sourcing Specifications, and Allocation Percentages

For each source in a sourcing rule or bill of distribution, you designate a rank to specify the order in which the sources within the rule or bill will be considered by the backlog planning process when the rule or bill is applied during a supply chain availability search. The source with the lowest number rank will be considered first, and the source with the highest number rank will be considered last. If your sourcing strategy includes using specific sources for specific quantities, you designate a from quantity, a less-than quantity, or both, for one or more sources.

Note: Because sourcing rules collected from some source systems might include split allocations for planning purposes, multiple sources that include the same rank and quantity range might exist, but the allocation percentages must add up to 100 percent. The backlog planning process doesn't split the quantity when it determines availability.

The backlog planning process checks the source with the highest allocation percent first within a group of sources with the same rank. If the source with the highest allocation percent has enough supply, that source is used for the entire requested quantity. If the source with the highest allocation percent doesn't have enough supply, then the source with the next highest allocation percent will be checked for the entire quantity. Because split allocations aren't applicable to backlog management sourcing strategies, the examples provided here don't include split allocations.

The following table is an example of a sourcing rule with three ranks. Quantity-based sourcing isn't being used in this example. If a supply chain search is conducted using this rule, the backlog planning process checks if organization M2 can make the desired quantity first. If organization M2 can't make the desired quantity, the backlog planning process will then check if there is enough quantity at organization V1 for an interorganization transfer. If there isn't enough quantity at organization V1, then the backlog planning process will check if the desired quantity can be bought from supplier Winter Widgets.

Replenishment Source and Applicable Attribute Value

Rank

Allocation Percent

Make at manufacturing organization M2

1

100

Transfer from organization V1

2

100

Buy from supplier Winter Widgets

3

100