Subcontaracting Scenario

[Former Member]

Dear friends

I would Like to have your views on the senario mentioned, the senario is I have a product which can be manufactured Inhouse as well as subcontarcted Now there are seasons when there is very high demand and low demand, an aggrement have been signed with the these subcontractor that a mininmum quantity have to be suppplied to them even in the lean season( i am working in SNP) even if the capacity are avaiable in house, and If the demand is high then the minimum quantity or the agreed quantity is allocated to the sub-contarctor and rest is Allocated in house.

Regards

Rajan

[Former Member · Accepted solution]

Dear Rajan,

As per your scenario, in all cases(High or Low demand) the demand should propagate to the subcontractor first because of the Minimum Guarantee agreement. Then the remaining demand should propagate to the Inhouse Unit. We have the same scenario, In this case you have to prioritize the subcontractor over Inhouse Production. For this you have to:

1. Assign Low Production cost at Subcontractor as compared to the Inhouse Unit.

2. Assign low transportation cost(per day cost* Transit time) in the TLane connecting Subcontractor as compared to the Inhouse Unit.(Assuming you have connected both the locations to your Godown/customer i.e Direct TLanes are there)

3. Maintain Optimizer profile with a check on Maximum PPM Lot size.

By doing so, first the demand will propagate to the Subcontractor to the extent of Capacity available/Max Lot Size whichever is Min. then the remaining demand will propagate to the Inhouse unit.

Award points if helpful

Regards,

Manjit

[Former Member]

Hi manjit

Thanks for your Reply, Yes You have understood the secnario Correctly and i am using SNP optimizer. Manjit which location type should i use the Sub contractor (1050) or the Vendor(1011) . The system Is giving me results If I use location type 1050 .

The Steps recommended by you i will map my secnario and Let you know

Thanks and Regards

Rajan

[former_member1230066]

Dear Rajan,

If you are running the SNP Optimizer and the users can analyse the period of the year as lean or boom.

What you could probably do is create two optimizer profiles one profile with a tick on "picking up the maximum lot size defined in the PPM/PDS" wherein the fixed quantity can be picked up from the subcontractor and in case of a boom period use the standard optimization profile with PPM/PDS Costs such that the optimizer would ensure going to subcontractor when the inhouse capacity is overload.

Regards,

Prashant Kumar

[Former Member]

Hi Rajan,

Which tool of SNP(Heuristics/Optimizer) are you using.

Regards,

Manjit

[Former Member]

Hi - have you tried using the Quota arrangement and/along with transportation lane priorities. First priority to sub-contractor to ensure min qty is assigned and subsequently look at internal capacity.

[srinivas_krishnamoorthy]

DO you have some procurement scheduling/outline agreement setup in your OLTP system ? In a subcontracting context, there must be some of these agreements that will automatically create deliveries in the system over a horizon that should appear automatically in APO if these agreements come into APO.

If these setups are to be avoided, you can take a backdoor route by creating distribution demand at subcontracting location of the minimum quantity per week that you want.