Priority-based Planning in D365F&O

 

Priority-Based Planning

Topic: - Introduction to Priority-based planning in Dynamics 365 F&O.

Pre-requisites: -

1.       Before you install the Planning Optimization Add-in, the following prerequisites must be in place:

·       You must be running Supply Chain Management on an LCS-enabled high-availability environment, tier 2 or higher (not a OneBox environment), with Dynamics 365 Supply Chain Management version 10.0.7 or later. If you try to install the add-in on a OneBox environment, the installation will not complete, and you will need to cancel the installation.

·       Your system must be set up for Power Platform integration. 

2.       Enable the Planning Optimization license

3.       Install the Planning Optimization Add-in

4.       Integrate Planning Optimization with your system

5.       Connection status

6.       The Use Planning Optimization option

7.       Integration with the setup

Agenda: -

1.       What is Priority-based planning?

2.       Benefits of priority-based planning

3.       With priority-based planning, organizations gain the capability to

4.       Where and how planning priorities are assigned

5.       Types of priority calculation methods

6.       Pre-requisite

7.       Business scenarios

 

1.      What is priority-based planning?

Priority-based planning can help businesses optimize their supply chain while increasing service levels and reducing inventory levels. Priority-based planning enables Planning Optimization to generate planned orders that are driven by planning priorities instead of requirement dates.

 

2.      Benefits of priority-based planning: -

·     This feature adds support for demand-driven planning, which is one of the five steps related to demand-driven material requirements planning (DDMRP). With priority-based planning, the optimization of supply to cover demand is based on priorities, not requirement dates, which are used in classic material requirements planning (MRP).

·     Priority-based planning lets you prioritize replenishment orders to ensure that urgent demand is prioritized over less important demand. For example, a stockout replenishment order will be prioritized over a standard refill replenishment order. The system can automatically split larger orders into separate smaller orders where order lines are grouped by priority. It can then process all high-priority orders first.

·     On top of this, the system can automatically split large refill orders into separate, smaller orders, with different priorities assigned to each order. This approach provides coverage of the critical portion of an inventory refill, instead of simply refilling warehouses to the maximum with a single supply. This minimizes the risk of stockout by optimizing the use of available supply.

·     Another benefit of priority-based planning is that priority can be used to compare the importance of relevant orders across products and locations during execution planning.

 

3.      With priority-based planning, organizations gain the capability to: -

·       Calculate, manually edit, or default on planning priorities.

·       Control replenishment by setting reorder point parameters.

·       Split and optimize distribution orders using planning ranges.

·       Group planned orders at firming.

·       Utilize customizable planning priority ranges.

·       Apply planning priority capabilities to intercompany orders.

 

4.      Where and how planning priorities are assigned?

Planning priority information about supply and demand is the backbone of priority-based planning. Planning priority defines the importance of a demand or supply line. Planning optimization uses it when the coverage code field is set to priority.

The planning priority is usually a number between 0 (zero) and 100, where 0 represents the highest importance. It is shown and set in the Planning priority field. You can find this field on the following pages

a)       Demand forecast lines 

b)      Sales order details 

c)       Purchase order details

d)      Transfer order details

e)      Planned order details

When the coverage code field for the relevant item or coverage group is set to Priority, planning optimization balances supply with demand by using a demand-driven approach as it calculates the planning priority and, for each released product, considers the values that are set for the minimum, reorder point, and maximum fields on the item coverage page.

 

5.      Types of priority calculation methods

Each planning priority model has a priority calculation method setting that controls how master planning applies priority to planned orders. The available values are Percent of maximum inventory quantity and Priority ranges. Priority ranges represent a more advanced version of the Percent of maximum inventory quantity method.

·       Percent of maximum inventory quantity: -

In the percent of maximum inventory quantity calculation method, the supply priority calculation finds the current total available inventory (net flow) as a percentage of the maximum inventory quantity value that is set for an item. A single planned order is then created per item and vendor (unless the maximum order quantity is used to force a split). The planning priority of the order is calculated as a percentage of the maximum.

The following formula is used:

Percentage of maximum = (Net flow position × 100) ÷ Maximum inventory quantity value from the item coverage

In this formula, the net flow position is calculated in the following way:

Net flow position = On-hand + On-order – Qualified demand

On-order is the expected supply.

Qualified demand represents the net requirements that have the requirement date within the planning time fence.

During the master planning run, new planned orders are created when the net flow position is less than the reorder point quantity for an item. The planned order quantity is the difference between the maximum inventory quantity value that is set at the item level and the net flow position. The planned order priority is calculated as a net flow position percentage of the maximum inventory quantity value.

 

·       Priority ranges: -

The priority ranges calculation method is more advanced than the percent of maximum inventory quantity method and is configured at the level of the planning priority model. Several new planned supply orders can be created to fulfil the demand per item. The priorities of the planned supply follow the values that are defined in the planning priority ranges grid on the Planning priority models page.

The following additional rules become effective when the priority calculation method field is set to Priority ranges:

§  If the considered demand priority option for the planned priority model is set to Yes, a priority that is set on each demand line will limit the priority range bucket. The priority of any new planned order for supply will be no lower than the demand's priority. The range's upper value is considered a threshold that the demand's priority value compared. If the demand's priority is exactly in the middle between the upper threshold values of two ranges, the range that has the highest priority (that is, the lowest priority value) will be selected.

§  If the planned order creation field for the planned priority model is set to a Single supply with the most important priority, only one supply will be created to fulfil up to the maximum. The priority will be set to the priority of the first range that will trigger a supply.

§  If there is no on-hand inventory, no supply, and no demand, the line in the Planning priority ranges grid, where the from quantity field is set to Zero, will be used.

§  If there is demand, but there is no on-hand inventory or expected supply, the line in the Planning priority ranges grid, where the from quantity field is set to Zero or less, will be used.

§  When the range that the demand is part of is evaluated, the setting of the Consider demand priority option will still have an effect.

 

6.      Pre-requisites: -

·       We need to enable the “Planning Optimization” functionality within the feature management.

·       In Feature management, turn on “(Preview) Priority driven MRP support for Planning Optimization.”

·       Set up your first planning priority model: -

Planning priority models are assigned to coverage groups and control the planning priority for planned orders. They define the logic that determines how the planning priority value is calculated for each planned order, and how priority is assigned to planned orders, supply lines, and demand lines.

To work with the planning priority models, go to Master planning > Setup > Planning priority models. As was previously discussed, one of a model's most important settings is the priority calculation method value. This setting controls the calculation used when master planning assigns a priority value to planned orders.

 

 

 

 

·       Coverage Group: -Set up a coverage group that includes your planning priority model.

·       Item Coverage: -Set up item coverage for items with the newly created coverage groups as needed to drive the minimum/maximum values and new reorder point values to trigger the planned order during the Master Plan run. The reorder point creates an opportunity to use the minimum value as a true safety stock value to ensure less opportunity for stock out in future business.

 

When sales orders, transfers, purchase orders, and demand forecasts are created, the planning priority field will generate automatically per the defaults set in the planning priority model. These default values can be overridden within the order line details.  Master planning will generate new planned purchase orders, demand forecasts, and transfer order suggestions when the projected on-hand value falls below the reorder point. The value and number of planned orders will be determined by the planning priority model and item coverage of the released product. In standard D365 operation, net requirements will update once master planning has been run again. Within net requirements, the planner can see a new column with the calculated planning priority. The planning priority value provides the planner with an additional data point when allocating current inventory, and existing or future supply-to-demand orders.

Run master planning and try out the planning priority model setup to see the impact of the calculated planning priority on planned orders.

7.      Business scenarios: -

·      Scenario 1 for the maximum priority percentage: -

For the item, Mouse11 warehouse W001 is the main central warehouse, and it has W002, and W003 two local warehouses replenished by central warehouses (W001). W001 the minimum quantity of 10 (safety stock) is then added to get a reorder point of 50 and the maximum quantity is 100. When this setup is used, supply will be suggested when the projected on-hand level is below 50. The order priority will be based on the planning priority setup.

The maximum inventory level for an item in local warehouse W002 is 80 pieces, the minimum inventory qty is 10 pieces and the reorder point is 35. the projected on-hand inventory is 50 and therefore gets assigned a priority of (20/80) *100=25. In another local warehouse, W003 is 70 pieces, and the reorder point is 30, the projected on-hand inventory is 15 and therefore gets assigned a priority of (15/70) *100=21.43. The warehouse W003 is considered at a higher risk of stock-out and gets replenished before the warehouse in W002.

 

Item coverage group table

Warehouse	Minimum	Reorder Point	Maximum	On hand
W001	10	50	100	100
W002	10	35	80	20
W003	10	30	70	15

                                   

 

According to the above table, W002 requires 60 pieces and W003 55 pieces from the central warehouse W001. Warehouse W001 has 100 pieces in the warehouse but to fulfilling the local warehouses and their own need central warehouse will create planned purchase order of 115 pieces.

 

 

                              Net requirement table

Warehouse	Planned order type	Required Qty	Planning priority Percentages
W001	Purchase	115	0 %
W003	Transfer	55	21.43%
W002	Transfer	60	25%

 Planning priority percentages are calculated based on a project on hand qty.

 

 

 

·      Scenario 2 for the priority ranges for single planned order creation type:

For the item, Mouse12 warehouse W001 is the main central warehouse, and it has W002, and W003 two local warehouses replenished by central warehouses (W001). W001 the minimum value of 10 (safety stock) is then added to get a reorder point of 50 and the maximum quantity is 100. When priority ranges setup is used, supply will be suggested when the projected on-hand level is in between priority ranges. The order priority will be based on the planning priority setup.

 

 

The maximum inventory level for an item in local warehouse W002 is 80 pieces, the minimum inventory qty is 10 pieces and the reorder point is 35 pieces. the projected on-hand inventory is 20 pieces according to the priority ranges set up the project on-hand qty is between minimum inventory qty to reorder point qty and therefore it gets assigned a priority of 50 %.

In another local warehouse, W003 is a maximum inventory level of 70 pieces, a minimum is 10 pieces, and a reorder point is 25, the projected on-hand inventory is 0 according to the priority ranges set up for the project on hand qty between zero qty to minimum order qty and therefore it gets assigned a priority of 30 %. The warehouse W003 is considered at a higher risk of stock-out and gets replenished before the warehouse in W002.

 

                         Item coverage group table

Warehouse	Minimum	Reorder Point	Maximum	On hand
W001	10	50	100	100
W002	10	35	80	20
W003	10	25	70	0

According to the above table, W002 requires 60 qty and W003 70 qty from the central warehouse W001. Warehouse W001 has 100 qty in the warehouse but to fulfilling the local warehouses and his own need central warehouse will create planned purchase order of 130 qty

In the central warehouse, W001 is a maximum level inventory of 100 pieces, and the reorder point is 50, the projected on-hand inventory is below 0 according to the priority ranges set up for the project on hand qty is between from zero qty to zero or less qty and therefore it gets assigned a priority of 10 %.

 

                                Net requirement table

Warehouse	Planned order type	Required Qty	Planning priority Percentages
W001	Purchase	130	10 %
W003	Transfer	70	30%
W002	Transfer	60	50%

 

 

·      Scenario 3 for the priority ranges for split planned order creation type:

For the item, Mouse13 warehouse W001 is the main central warehouse, and it has W002, and W003 two local warehouses replenished by central warehouses (W001). W001 the minimum value of 10 (safety stock) is then added to get a reorder point of 50 and the maximum quantity is 100. When priority ranges setup is used, supply will be suggested when the projected on-hand level is in between priority ranges. The order priority will be based on the planning priority setup.

The maximum inventory level for an item in local warehouse W002 is 80 pieces, the minimum inventory qty is 10 pieces and the reorder point is 35 pieces. the projected on-hand inventory is 20 pieces it requires 15 pieces to match the reorder point according to the priority ranges set up the project on hand qty is between from minimum inventory qty to reorder point qty and therefore it gets assigned a priority of 50 %. The match the maximum inventory of 80 pieces we require 45 pieces qty which is between, from reorder to maximum inventory priority range therefore it gets assigned a priority of 70 %

In another local warehouse, W003 is a maximum inventory level of 70 pieces, a minimum is 10 pieces, and a reorder point is 25, the projected on-hand inventory is 0 pieces it requires 10 pieces to match the minimum inventory according to the priority ranges set up the project on hand qty is between from zero qty to minimum qty and therefore it gets assigned a priority of 30 %. To match the reorder point of 25 pieces we require 15 pieces qty which is between, from minimum to reorder priority range therefore it gets assigned a priority of 50 %. To match the maximum of 70 pieces we require 45 pieces qty which is between, from reorder point to the maximum inventory level priority range therefore it gets assigned a priority of 70 %

Item coverage group table

Warehouse	Minimum	Reorder Point	Maximum	On hand
W001	10	50	100	100
W002	10	35	80	20
W003	10	25	70	0

According to the above table, W002 requires 60 qty and W003 70 qty from the central warehouse W001. Warehouse W001 has 100 qty in the warehouse but to fulfilling the local warehouses and his own need central warehouse will create planned purchase order of 130 qty

In the central warehouse, W001 is a maximum level inventory of 100 pieces, and the reorder point is 50.

·       To match the maximum qty 100 it will go in the first range from reorder to max the max is 100 pieces and reorder point is 50 pieces (100-50=50) the projected on-hand qty is 50 pieces, therefore it gets assigned a priority of 70%.

·       The reorder point is 50. To match the reorder point qty 50 it will go in the second range from minimum to reorder the reorder is 50 pieces and the minimum is 10 pieces (50-10=40) the projected on-hand qty is 40 pieces, therefore it gets assigned a priority of 50%.

·       To match the minimum qty 10 it will go in the third range from zero to minimum the minimum is 10 pieces (10-0=10) the projected on-hand qty is 40 pieces, therefore it gets assigned a priority of 30%.

·       The rest qty 30 pieces will go in the fourth range from zero or less to zero the projected on-hand qty is 0 pieces, therefore it gets assigned a priority of 10%.

 

Net requirement table

Warehouse	Planned order type	Required Qty	Planning priority percentages
W001	Purchase	50	70 %
	Purchase	40	50 %
	Purchase	10	30 %
	Purchase	30	10 %
W002	Transfer	15	50 %
	Transfer	45	70 %
W003	Transfer	10	30%
	Transfer	15	50%
	Transfer	45	70 %