Policy - Manufacture Orders

Raw materials are allocated to manufacture orders at the start of the job. If this setting is unchecked, manufacture orders will be propagated through the bill of material (BOM) explosion.

When a recommended order quantity (ROQ) is calculated for a finished good (FG), a planner can raise a manufacture order or work order (WO) knowing that the raw materials (RM) have been planned by the app so that manufacturing can begin immediately.

The app uses the bill of material (BOM) links and ratios from the FG to each directly linked RM to calculate the BOM forecast for the RMs, proceeding level by level to the lowest level in the BOM.

⚙️ Note: This calculation applies to each replenishment cycle (RC) over the demand horizon of every stocked FG item. In this way, RM items with a long lead time can be optimally planned.

This parameter is relevant to the two approaches used to manage raw materials when a manufacture order is raised.

In this approach, when a WO is raised against the FG for the quantity to be manufactured, a kit of components is allocated or issued to the manufacture order, and the RM stock on hand quantities are reduced immediately.

When the manufacturing process is completed, the WO is closed and the FG stock on hand is increased.

In this case, the parameter must be enabled.

When enabled, because the components have been consumed, there is no need for the WO quantity to create demand (BOM forecast) against the RM. It is ignored by the bill of materials calculation.

If the WO quantity is less than the ROQ, the shortfall quantity will create a BOM forecast.

Example:
Suppose the ROQ was 100 units and the WO is for 70. Assuming nothing else has changed, the ROQ will have dropped to 30. The ROQ of 30 will then create demand against the components.

In this approach, the kit is issued to the WO, but the RM stock on hand is not reduced.

When the WO is complete and the actual component consumption is known, the quantities consumed are back-flushed to reduce the RM stock on hand.

The WO is closed, and the FG stock on hand is increased.

In this case, the parameter must not be enabled.

The FG item’s ROQ is reduced by the WO quantity as described above. Because the components have not yet been consumed, the demand for the components must still be recognized.

When this setting is not enabled, the WO quantity is used to create demand (BOM forecast) against the RM, in addition to a possible shortfall quantity when the WO quantity is less than the original ROQ.