Order Policy is based on lead day contribution
The choice of a clear cut order policy based on lead day contribution is essential. To Order items are always planned to be made/purchased to order and are lead day contributors where they are used. Items that you carry stock (Demand Driven) are planned to be available immediately and are therefore not lead day contributors.
Avoid a hybrid order policy
Do not sometimes carry stock for your To Order items. From a planning perspective, To Order items will always be lead day contributors in the schedule regardless of your current stock on hand. Only assign the To Order policy when a component line is always ordered before parent jobs can be started or when a sell item is always made/purchased for each sales order. If you intend to carry extra stock for any reason, the Demand Driven order policy is recommended.
Item order policies directly affect SO required dates
Item order policies directly affect SO line required dates, which are MRP target dates.
Demand Driven Order Policy
When an item has an on hand policy (Demand Driven or Manual Reorder Point), the required date is set to the current date because stock is expected to be available for immediate shipment.
To Order Policy
When an item has a To Order policy, the item is expected to always be made to order, in which case the required date is forward scheduled by the item’s Lead Days and Job Days allocations.
Reducing time to shipment
Time to shipment for make to order items can be significantly reduced by reducing or eliminating the M item’s Lead Days allocation, which is the time allocated for making subassemblies or buying components to order prior to job start. This is achieved by making and buying contributor components demand driven instead of to order within the context of a strategic inventory.
Strategic inventory is your shipping and inventory management plan
“Strategic inventory” is your shipping and inventory management plan. You decide which items are to be made or purchased demand driven in order to reduce times to shipment. Against those items you enter a monthly potential demand value and supply days targets to keep inventory to a minimum. See the previous chapter for details.
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Essential #1 - Plan a Strategic Inventory
Reducing times to shipment gives you a competitive edge
Strategic inventory enables you to dramatically reduce times to shipment, which gives you a competitive edge in the marketplace over slower rivals. Increased customer satisfaction boosts sales and faster payment cycles boost cash flow.
Shipping dates will be reliable and achievable
Whenever you enter a sales order line, the program uses strategic inventory settings to calculate a required date, which is a target shipping date that you can reliably furnish to the customer. If a Job is running behind schedule you can use the Sales > Late Supply screen to update your Expected Ship date and inform your customer if necessary. Instead of guessing when orders can be shipped, you will now operate with consistent and achievable shipping dates that reflect your strategic inventory plan.
