Microsoft Dynamics 365 SCM - Master Planning & Vendor Trade Agreements

Hi Folks,

Though the Covid19 is in full swing, however, the show must go on. 

Today, I would like to share one of the business cases which I have faced in 2018 while performing one implementation for Arms manufacturing company. The company is one of the biggest in the Gulf to manufacture weapons and Export them to different countries in Asia, the Middle East, and North Africa. 

Business Case and Challenge

• The sales and commercial team first creates a sales agreement with the customer. They also attached the legal documents and contract with the sales agreement. 
• Based on the sales agreement the sales and commercial department want to create the delivery schedule as advised by the customer. 
• The company is performing the supply and demand forecast in Excel. 
  
• Since it's weapon manufacturing and they are importing the raw material from different countries, the two most crucial factors for the business are lead time and the quality.  
• For a certain group of items, the business needs the flexibility to approve the planned purchase orders based on minimum unit price.  

Proposed Solution

• The sales order will be created from the sales agreement. The system maintains the reference for the sales agreement in the sales order. Also, a business can view the status of sales agreements in the system. 
• Buying head created trade agreements for the items with the different vendors. The effective dates will be defined for the trade agreements for each line.
• The business requirement can't be fulfilled if we just specify one default vendor with the item, in this case, master planning always proposes that vendor while creating the planned purchase order.
• The business user is not willing to modify the planned purchase orders manually. 
   

System Limitation: The business user can only specify one default vendor with the item.

Step By Step Process

Prerequisite Setup - Master Planning Parameter

The first step is to set up the master planning parameter.

Path: Master planning> Setup> Master planning paramters> Planned Orders

In the planned orders tab make sure to enable the "Find trade agreements" and select the search criteria "Minimum lead time". I have selected "minimum lead time" in the maser planning parameter as per the business requirement. 

Create Vendor Trade Agreements 

The buying head will create trade agreements for the vendor. In this vendor trade agreement form we can specify the quantity, amount, warehouse and lead time.

In the below screenshot, I have two vendors in the purchase trade agreement

• Vendor 1001 with purchase price 1000 and lead time 10 days
• Vendor 1002 with purchase price 500 and lead time 5 days

Once defined, make sure to post the purchase price trade agreements. 

Create Sales Order From Sales Agreement

Once the prerequisite setups are configured, the next step is to create sales orders from the sales agreement. I have created two lines in the sales order, one with a delivery date in May and another with the delivery date in June. 

Run Master Plan

The next step is to run the master planning for the item. Select the master plan and if required you can enter your comments in the master planning form. 

Tip: Don't run the master planning for all the items. Especially for demo purpose select the item in the filter before you demonstrate the master planning.  

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Action Center Message

Once the master planning operation completed, the system will pop up with the following two messages in the "action center" form "Operation completed" and "Item coverage updated"

Planned Purchase Order Created by Master Planning

Based on the setup for vendor trade agreements and minimum lead time, system has proposed the Vendor 1002 for a planned purchase order.  The master planning engine suggested the Vendor 1002 as we enabled the selection for "minimum lead time" in the maser planning parameter. The delivery date for the order is 22nd May 2020. 

Master planning maintained the reference of sales order in the pegging fast tab. The sales order "00156" is for the customer "000001".

Firm & Approve Planned Purchase Order

In the below screenshot, the buying head needs first to approve and firm the planned purchase order. 

Before you firm the planned purchase order, make sure to select Group by Vendor so that the system will create one PO. However, there will be two lines for the purchase orders, one for delivery in May and another in June. 

Purchase Order Created

The system has created the purchase order. We can view the open purchase order lines in the below screenshot.

The purchase order number is generated by the system. Since we selected the option "Group by Vendor" the system has created one purchase order "00000853". 

Purchase order lines

In the below screenshot we can check the reference of planned purchase order generated through master planning.

Also, in the reference type field, we can verify the sales order reference with a reference number. 

Net Requirement Form

The net requirement form will demonstrate the item requirement with all the references. Also, the requirement date and quantity column is available to monitor when and how much inventory we need. 

Conclusion & Recommendations 

• If you think one default vendor is not enough to place your purchase orders, use the feature of trade agreements and create trade agreements for multiple vendors with different effective dates and ordered quantity. 
• Master planning will respect the vendor trade agreements and suggest the vendor based on the configuration setup. In this demo, I have selected the minimum lead time, you can explore the feature of the lowest unit price. 
• Run different scenarios with a change in the setup and firm the order only once you get the desired results.
• It's always good practice to extract the planned purchase orders in Excel, and analyze the details. I always suggest and showcased my customer the master planning proposed data in the Pivot table. It will give them a better picture to calculate the net requirements and delivery dates. 
• Business users, usually the buying head can always make the changes in the proposed planned purchase orders.  

Cheers 

Ali Danish

Microsoft Dynamics 365 Solution Architect