Site Sourcing Policies

Internal Table Name: SourcingPolicies

Use Site Sourcing Policies to define the sourcing from one site to another. Site Sourcing Policies are considered unique based on the combination of Site, Product and Source.

Evaluation of policy records depends on the use of groups and filters for the columns listed above. For more information, see Group precedence.

Site

Technology: NO IO S

Table: SourcingPolicies

Internal Name: SiteName

Type: Short Text (100)

Enter the site or site group for which the sourcing policy is being applied to.

Product

Technology: NO IO S

Table: SourcingPolicies

Internal Name: ProductName

Type: Short Text (100)

Enter the product or product group for which the sourcing policy is being applied to.

Source

Technology: NO IO S

Table: SourcingPolicies

Internal Name: SourceName

Type: Short Text (100)

Choose a site or site group that can fill this replenishment order.

Sourcing Policy

Technology: NO IO S

Table: SourcingPolicies

Internal Name: SourcingPolicy

Type: Short Text (50)

Enumerated list.

Choose a sourcing policy. The following Sourcing Policy types are available:

Policy Parameter

Technology: NO IO S

Table: SourcingPolicies

Internal Name: SourcingPolicyParameter

Type: Short Text (50)

Used in conjunction with the "Multiple Sources" sourcing policies.

• Multiple Sources (Order of Preference) – The site selects the source based on the sequence defined in the Policy Parameter field.
• Multiple Sources (Most Inventory) – For Simulation, if the inventory level is the same at possible sources, the Policy Parameter value can be set as a priority that acts as a tie breaker.
• Multiple Sources (Probability) – For Simulation, the source for the site’s order is selected randomly based on the probabilities specified in the Policy Parameter field. For Optimization, the order is divided based on the percentages specified in the Policy Parameter field, and then sourced out to the respective sources. As an example, enter 50 to represent 50%. The Policy Parameter values should add up to 100, which represents 100%. However, if the sum is greater than or less than 100, they will be adjusted.
  • If the value is non-zero, use the exact value. For example, if you enter 50, then 50% is sourced using this record. The Policy Parameter values should add up to 100, which represents 100%, however if the inputs do not add up to 100, the values will be scaled to 100 automatically.
  • If the value is 0, this is treated as 0% and this record is not considered (similar to setting Status = “Exclude”).
  • If the value is null, this record is considered “free”. In the case that all records with non-zero parameter values add up to less than 100%, the solver can determine the percentage for any free records. In the case that the non-zero parameter records add up to 100%, the free records are not considered (similar to Status = “Exclude”).

• Multiple Sources (Split By Ratio) – For Simulation, the order is split according to the value you set in the Policy Parameter field. For Optimization, values specified in the Policy Parameter field are used to establish ratios, and then sourced out to the respective sources in the percentages driven by the ratios.
  • If the value is non-zero, use the exact value to establish the ratio. For example, if you enter 6 for one record and 2 for the other, then 75% is sourced using the first record and 25% sourced using the second.
  • If the value is 0 or null, this record is not considered (similar to setting Status = “Exclude”).

• Multiple Sources (By Order Number) – For Simulation, the customer first selects a source following the sequence defined in the Policy Parameter field where each item in the multi-line order can be fulfilled from one location. If the order must be split, the customer selects the source for each item in the multi-line order following the defined sequence.

Default: null

Unit Sourcing Cost

Technology: NO S

Table: SourcingPolicies

Internal Name: UnitSourcingCost

Type: Short Text (255)

This field specifies the average cost of sourcing a single unit of the sourcing policy's product between the source site and destination site. Sourcing costs are generally any cost associated with using the lane such as tariffs, fees, or other overhead costs, but not the cost of physically transporting the product.

Alternatively, instead of having a simple constant cost, you can set up a cost schedule using step costs. You can define these step costs in the Step Cost Definitions and Step Costs tables. You can also define the step cost using the Step Cost Builder on the field. The builder creates values with a bracketed format, using quantity break points and different costs such as <0|1.50> <5000|1.25> <10000|1.00>. In this example, if you are using incremental discounts, the sourcing cost per unit is 1.50 for units 0 through to 5,000, 1.25 for units 5,000 through to 10,000, and 1.00 for units 10,000 and up. For an order consisting of 20,000 units, the total cost will be: (5,000-0)*1.50 + (10,000-5,000)*1.25 + (20,000-10,000)*1.00 = 23,750.

Simulation and optimization handle costs differently. Simulation costs are calculated on a per order basis for each individual order (using the Fixed Order Cost value). Optimization costs are calculated using the aggregate flow quantity for the time period (using the Unit Sourcing Cost value). Thus, when using quantity-cost break points, you will use different break points for simulation and optimization.

The Unit Sourcing Cost is reflected in Total Sourcing Cost in several Network Optimization output tables including the Network Summary.

Default: 0

Fixed Order Cost

Technology: IOS

Table: SourcingPolicies

Internal Name: FixedSourcingCost

Type: Short Text (100)

Enter the cost of sourcing an order from this site.

Alternatively, instead of having a simple constant cost, you can set up a cost schedule using step costs. You can define these step costs in the Step Cost Definitions and Step Costs tables. You can also define the step cost using the Step Cost Builder on the field. The builder creates values with a bracketed format, using quantity break points and different costs such as <0|1.50> <50|1.25> <100|1.00>. In this example, the Fixed Order Cost is 1.50 if the number of orders is between 0 and 50, 1.25 if the number of orders is between 50 and 100, and 1.00 for numbers of orders greater than 100.

If you populate the Fixed Order Cost in the Site Sourcing Policies or Production Policies tables, Safety Stock Optimization calculates EOQ and the Cycle Stock (batch size) is calculated as follows:

Batch Size = max [MOQ (Min Order Qty), EOQ (Economic Order Qty), DBR * Demand Mean ]

Cycle Stock = 1/2 Batch Size

EOQ is computed as:

where:

D = Annual demand (units)

S = Fixed Order Cost ($)

C = Cost per unit ($)

I = Holding cost (%)

H = Holding cost ($) = I x C

Source Lead Time

Technology: IO S

Table: SourcingPolicies

Internal Name: SourceLeadTime

Type: Short Text (50)

Enter a value, then optionally select a time unit of measure. If you do not select a unit of measure, the default Time Unit Of Measure from Model Settings is used.

Safety Stock Optimization: Enter the time it takes to issue an order. For example, it may take 2 hours to do the paperwork for an order.

You can enter a normal distribution for the Source Lead Time. While other types of distributions can be entered, only Normal is supported with Safety Stock Optimization.

Simulation: Source Lead Time can be used as the planning time for when shipments are expected at the destination.

Unit Sourcing Time

Technology: S

Table: SourcingPolicies

Internal Name: UnitOrderProcessingTime

Type: Short Text (50)

Defines the amount of time taken per unit before an order is evaluated after it is received at the source. Enter a value, then optionally select a time unit of measure. If you do not select a unit of measure, the default Time Unit Of Measure from Model Settings is used. This time is elapsed and considered only in Simulation.

Default: 0

Fixed Order Time

Technology: S

Table: SourcingPolicies

Internal Name: FixedOrderProcessingTime

Type: Short Text (50)

Defines the amount of time taken before an order is evaluated after it is received at the source. Enter a value, then optionally select a time unit of measure. If you do not select a unit of measure, the default Time Unit Of Measure from Model Settings is used. This time is elapsed and considered only in Simulation.

Default: 0

Guaranteed Service Time

Technology: NO IO S

Table: SourcingPolicies

Internal Name: GuaranteedServiceTime

Type: Short Text (150)

The Guaranteed Service Time is used to determine if the Source site can provide the Product to the Destination within this time frame. If this is not possible, the order is considered to have been missed and the Fill Rate may decrease. The Guaranteed Service Time is in terms of days. It is calculated on a Source-Destination-Product basis. It is used to simulate the results of Safety Stock Optimization for BOM components.

Due Date in Simulation is defined for customer facing sites. For customer facing sites, Safety Stock Optimization gives a Guaranteed Service Time of zero by default. If the customer order is shipped within the Guaranteed Service Time, it is not considered late. The concept of Due Date can be modeled in Safety Stock Optimization as a Max Service Time constraint from the customer facing site to customer.

Maximum Sourcing Distance

Technology: NO

Table: SourcingPolicies

Internal Name: MaxSourcingDistance

Type: Short Text (100)

In this number field, enter the maximum distance allowed between source and destination sites for the product. In an optimization, the software will limit the sourcing alternatives to those within the maximum distance radius. Enter a value, then optionally select a distance unit of measure. If you do not select a unit of measure, the default Distance Unit Of Measure from Model Settings is used. In an optimization, the software will limit the sourcing alternatives to those within the maximum distance radius. Please note that the behavior of this column is dependent on the selected setting under Run Options > General > Network Optimization options.

Entering 0 or leaving Maximum Sourcing Distance blank does not impose any constraint.

Simulation: Maximum Sourcing Distance is not used.

Minimum Order Quantity

Technology: NO IO S

Table: SourcingPolicies

Internal Name: MinimumOrderQty

Type: Short Text (100)

This is the order quantity used when calculating Cycle Stock and for use in Demand Analysis and Safety Stock Optimization. Enter a value, then optionally select a quantity, weight or volume unit of measure. If you do not select a unit of measure, the default Quantity Unit Of Measure from Model Settings is used.

When calculating Cycle Stock, provide a Minimum Order Quantity or populate the Replenishment Frequency field in the Transportation Policies table, or both. The Replenishment Frequency is multiplied by the average daily flow to the site. Cycle stock is then calculated by taking the maximum of this product and the Minimum Order Quantity, if specified, and dividing by two.

In Demand Analysis, if you do not specify a Minimum Order Quantity in the Sourcing Policies table, a default of 1 is used for demand propagation. If Minimum Order Quantity or Replenishment Frequency or both are not specified, Safety Stock Optimization uses Type 1 service to set the safety stock since the batch size is not known. In Safety Stock Optimization, Type 2 and Type 3 service require either the Minimum Order Quantity (Sourcing Policies) or one of Replenishment Frequency (Transportation Policies) or Production Frequency (Production Policies) to recommend a batch size.

Simulation: Requirements are rounded to Minimum Order Quantity if they are less than Minimum Order Quantity.

Default: 0

Order Lot Size

Technology: S

Table: SourcingPolicies

Internal Name: OrderLotSize

Type: Short Text (100)

Denote the lot size from this source.

Simulation: Requirements are rounded to the nearest multiple of Order Lot Size. For example, if the requirement is for 17 and the lot size is 5, an actual requirement of 20 is used when the order is initiated.

Enter a value, then optionally select a quantity, weight or volume unit of measure. If you do not select a unit of measure, the default Quantity Unit Of Measure from Model Settings is used.

Default: 0

Probability of Balking

Technology: S

Table: SourcingPolicies

Internal Name: ProbabilityOfBalking

Type: Number (Double)

Simulation: Represents the probability that an order that cannot be filled will be rejected (rather than backordered; assuming this is allowed) resulting in lost demand.

Allow Back Orders

Technology: S

Table: SourcingPolicies

Internal Name: AllowBackOrders

Type: Bit

One of Yes, No. (Actual database values are 1,0.)

Choose whether the location with the requirement will allow a back order at the potential sources. If a source does not have enough inventory to fill the order:

• Yes – holds the unfilled orders until they can be filled; this is a back order.
• No – deletes orders that cannot be filled. This will result in lost revenues at the customer level.

Default: Yes

Ignore When Down

Technology: S

Table: SourcingPolicies

Internal Name: IgnoreWhenDown

Type: Short Text (10)

One of Yes, No.

Not available in Classic Simulation. When a sourcing decision has to be made, a potential source is ignored if that source is 'down'. A location's status between 'up' and 'down' is managed through use of the Annual Schedule and Weekly Schedule fields in the Sites table or by using scripting. This input is ignored if there is only one potential source.

You can control whether or not sources are considered 'up' or 'down' based on the hours of operation for the site as defined in the Business Hours table when using the "Simulation" problem type.

This option can be set to one of:

• Yes – Potential sources are ignored if the source is ‘down’ at the time a sourcing decision has to be made.
• No – Potential sources are not ignored (they are still considered) if the source is ‘down’ at the time a sourcing decision has to be made.

Default: Yes

Status

Technology: NO IO S

Table: SourcingPolicies

Internal Name: SourcingPolicyStatus

Type: Short Text (25)

One of Include, Exclude.

In this field, choose whether you want to include or exclude this Sourcing Policy for simulation and optimization.

Default: Include

Notes

Technology: NO IO S

Table: SourcingPolicies

Internal Name: SourcingPolicyNotes

Type: Memo

Enter optional descriptive notes about the sourcing policy.