How FIFO Pegging Is Used in Supply Chain Planning

Pegging is a process that the planning calculations use to link the supply with the demand, and the demand with the supply. FIFO is first in, first out. In FIFO pegging, demands are linked to supplies on a day-by-day basis.

The planning processes sort demands by day, demand type, and supply quantity in ascending order. The planning processes sort supplies by day, supply type, and supply quantity in ascending order.

For all reserved demands and supplies, the planning processes first pegs demands with reservations (existing or recommended) to the reserved supply without regard to the demand type, the supply type, and dates. Pegging always respects reservations. For unreserved demands and supplies, the planning processes sort demands day by day in the following sort order:

• Past due sales orders

• All sales orders

• Manual demands

For all other demands, including forecasts and dependents demands, the planning processes sort supplies day by day in the following sort order:

• On hand

• Past-due supplies (firm by definition)

• Existing firm supplies

• Existing non-firm supplies

• Planned orders

During demand and supply netting in planning calculations, if safety stock levels are specified for an item organization, then the netting is performed considering the daily safety stock level. The planning calculations do not use the notion of safety stock demand. As there is no concept of safety stock demand, there is no pegging of a supply to a safety stock demand. The planning calculations do not peg some or all of a supply to anything when some or all of the supply is used to meet the required safety stock level. A supply, which meets a safety stock level, pegs to either future demand or is not pegged. Excess supplies because of order modifiers can peg to nothing at the end of the planning horizons.