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APAC Procurement Business Model

Quota Arrangement Procedure Training Document

Local Group Companies

Submit Date, 16-Nov-04 <Confidential>

<Other Clause> Copyright @ 2003 Holcim Services (Asia) Ltd.

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Document Control Document Name Quota Arrangement Procedure Training Document Author Ha Tran File Name & Path Created 16-Nov-04 Last Edited Printed on

Version Revision Date Revision Description Author Sign-off V1.0 16-Nov-04 Ha Tran

Document Approval Role Name Signature Date

Distribution List Role Name Signature Date

Quota Arrangement Procedure Training Document 2/21

This document is for Super Users Training on 17 – 21 January, 04

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Table of Contents FUNCTIONS OF THE QUOTA ARRANGEMENT............................................................................... 4

PREREQUISITES................................................................................................................................. 4

DETERMINE THE SOURCE UNDER A QUOTA ARRANGEMENT................................................... 5 USE.................................................................................................................................................... 5 ACTIVITIES .......................................................................................................................................... 5

Calculating the Quota Rating ........................................................................................................................5 Determining the Quota Base Quantity...........................................................................................................5 Use of the quota based quantity – example: .................................................................................................5 Individual and Collective Calculation of quota base quantity.........................................................................6 Calculation of quota rating – example: ..........................................................................................................6

QUOTA ARRANGEMENT IN MATERIAL REQUIREMENTS PLANNING......................................... 7 EXAMPLE OF REQUIREMENT SPLITTING IN MATERIALS PLANNING:............................................................ 7 EXAMPLE OF REQUIREMENT SPLITTING WITH MINIMUM SPLITTING QUANTITY: ........................................... 8

1. Maximum lot size per quota arrangement item .........................................................................................8 2. Minimum lot size per quota arrangement item ..........................................................................................8

EXAMPLE OF MAXIMUM LOT SIZE WITH 1X INDICATOR: ............................................................................ 8 EXAMPLE OF MAXIMUM QUANTITY: ........................................................................................................ 8

BUSINESS PROCESS PROCEDURE............................................................................................... 10 1. ASSIGNMENT OF QUOTA ARRANGEMENT USAGE KEY TO MATERIAL MASTER (PURCHASING VIEW).... 10 2. CREATE QUOTA ARRANGEMENT.............................................................................................. 16



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Functions of the Quota Arrangement

Like the source list, the quota arrangement which is an instrument used in source administration, facilitates the administration of sources of supply at plant level. If a certain material is procured from a number of different sources, a quota can be assigned to each individual source. The quota specifies which portion of the total requirements should be procured from a given source. To be more specific, the quota arrangement indicates which share of the requirements arising for the material over a certain period is to be procured from which source. If a quota arrangement exists for a material, it is taken into account during source determination. A quota arrangement is specified and valid for a certain period of time. A quota arrangement item is created for each source during that period. Noted the existence of a quota arrangement does not involve the apportioning (among different sources) of an individual material requirement (that is the quantity set out in an individual purchase requisition) ie. if a quota arrangement applies, this does not mean that the quantity of a single manually created purchase requisition is automatically apportioned among different sources. In such case, the entire requested quantity of the requisition is assigned to one source – the source that is next in line to receive the relevant order – in accordance with the quota arrangement. The breakdown of requirements according to the specified quotas can only take place if material requirements planning is used. It can only be carried out with regard to aggregate, not individual, requirements.

Prerequisites

Before creating a quota arrangement, the following information are required: Number of the material or the plant to which the quota arrangement applies. If a quota arrangement is maintained for a material with a manufacturer part number (MPN), define the MPN material. Details are to be defined in a separate document. Procurement Type of the material (that is, whether the material is manufactured in-house or procured externally). Vendor number Quota arrangement validity period Quota to be assigned to each source of supply Special procurement type (defining, for example, whether a consignment arrangement exists with the source of supply) Furthermore, it is mandatory to define the application in which the quota arrangement of the material is used (for example, in Materials Planning or in purchase requisitions). Check the Quota arrangement usage field in the purchasing or materials planning and control data of the material master record. Noted that in connection with the quota arrangement, the splitting quota is only relevant to Material Planning, not to Purchasing. In Materials Planning, requirements can be split up among various vendors. This is not possible in Purchasing.



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Determine the source under a quota arrangement

Use The system calculates which source is next in line from which a specific material requirement is to be procured from among the sources that have been assigned a quota in the current validity period. This calculation is carried out if the source of supply is available for a requested material and by the system during the source determination process.

Activities

Calculating the Quota Rating The system assigns a quota rating to each of the sources of supply which is calculated as follows: Quota rating = (quota-allocated quantity + quota base quantity) / quota where

• Quota-allocated quantity Total quantity of all requirements (from all purchase requisitions, purchase orders, release orders, and scheduling agreement schedules as well as planned orders allocated to a given source of supply) included in the quota-allocated quantity according to the quota arrangement usage indicator in the material master record. The quota-allocated quantity is updated automatically.

• Quota base quantity Quantity used for manual control of the quota arrangement when new sources of supply are included.

• Quota Number that determines how requirements are apportioned among the various sources. On the other hand, this is the number specifying which portion of a total requirement should be obtained from a certain source.

In the automatic source determination process, the source with the lowest quota rating is assigned ie. the source with lowest quota rating represents the valid source, even if it has a quota rating of Zero (that is, the quota-allocated quantity and the quota base quantity have the value of Zero). If more than one source of supply has a quota rating of Zero, the item with the highest quota is the valid source of supply. The formula yields to the following truism: The higher the quota, the lower the quota rating and the greater the probability that the relevant source will be determined as the valid source

Determining the Quota Base Quantity The quota base quantity can be used on the one hand when a new source is included in an already existing quota arrangement and on the other to remedy a disproportion between quota and quota-allocated quantity. To be more specific, it enables the prevention of the new source from being assigned all requirements (in the form of purchase requisitions or purchase orders, for instance) until its quota-allocated quantity exceeds the quota-allocated quantity of one of the existing sources. This is achieved as a result of the fact that the quota base quantity acts as an additional quota-allocated quantity in the calculation of the quota rating.

Use of the quota based quantity – example: Suppose a new vendor is included in an already existing quota arrangement. The existing quota arrangement consists of two vendors, who are each assigned 50% of the material requirements that arise. Each of these vendors has a high quota-allocated quantity because the enterprise has already ordered a lot of material from them during the validity period of the quota arrangement. The new vendor is to be assigned the share of forthcoming total requirements of the material equal to that of the two other vendors in the quota arrangement. However, according to the formula for



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calculating the quota rating, all subsequent requisitions requirements will be allocated to the new vendor until such time as the latter’s quota rating exceeds that of one of the other two vendors. However, if the requisitions are to be assigned evenly (on an equal basis) that is, as though the new vendor had always been a party participated in the quota arrangement, it is compulsory to define manually the quota base quantity for the new vendor appropriately or have it determined automatically by the system.

Individual and Collective Calculation of quota base quantity The system provides two procedures for determining the quota base quantity:

Individual Calculation Calculation of the quota base quantity of the selected quota arrangement items. Select the items whose quota base quantity is to be recalculated and choose Edit Base Quantities Individual Calculation.

Collective Calculation Calculation of the quota base quantity for all quota arrangement items. Use this procedure if the allocation of requirements that arise for a material under a quota arrangement is to be based on the starting situation again, in which all sources have the same quota rating ie if the assignment of individual requirements is to be effected on an equal basis for all sources of supply. Choose Edit Base quantities Collective calculation. As a result of the calculation of the quota basis quantity, the quota rating of a new source exceeds the quota rating of the source representing the valid source (that is, the source to which the next individual requirement is assigned because it has the lowest quota rating).

Calculation of quota rating – example: A purchase requisition is created for a material (100 pcs) for which the source determination process in the requisition is regulated on the basis of a quota arrangement. The following table shows the current situation with regard to the quota arrangement at the time of source determination:

Vendor Quota Quota-allocated quantity

Quota base quantity

A 3 780 0

B 2 380 0

C 1 0 260

The quota base quantity of 260 for vendor C was set with Edit Base quantities Individual calculation According to the specified formula, the quota ratings for vendors A, B, and C are as follows:

Vendor Quota Rating A (780 + 0) / 3 = 260

B (380 + 0) / 2 = 190

C (0 + 260) / 1 = 260

This means that the source representing vendor B will be assigned to the requisition item because this vendor has the lowest quota rating. After the requisition has been saved, the situation regarding the quota arrangement is as follows:


Quota base quantity



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Quota base quantity

A 3 780 0

B 2 480 0

C 1 0 260

Quota Arrangement in Material Requirements Planning

In contrast to source assignment via quota arrangement in the manual creation of a purchase requisition, in the planning run it is possible to split up the requirement as per the specified quotas among the various sources in the quota arrangement. For the quota arrangement to be taken into account during the source determination process in material requirements planning, the quota arrangement usage indicator must have previously been set to the appropriate value in the material master record. Furthermore, each source in the quota arrangement (apart from info records) must have been entered in the source list with the appropriate MRP indicator. Whether or not a requirement is split is determined via the lot-sizing procedure that has been assigned. The indicator for the splitting quota must have been assigned to the lot-sizing procedure with which the material is planned (in Customizing). In the case of the lot size ES (exact lot size calculation with splitting), for example, the Splitting indicator is set.

Example of requirement splitting in materials planning: The starting situation is as follows: There is a requirement for 1000 pc of a certain material in whose master record the lot size ES (exact lot size calculation with splitting) has been set. Each vendor has been assigned the quota shown in the following table:

Vendor Quota Quota-allocated quantity A 4 420

B 3 310

C 2 190

D 1 100

In requirements planning, four purchase requisitions are generated, the requirement of 1000 pc being apportioned among the four sources in the proportion 4:3:2:1. In the case of a quota arrangement with splitting, the quota-allocated quantity and the quota rating are both irrelevant. The following distribution thus applies with respect to the quota arrangement:

Vendor Quota Quota-allocated quantity A 4 820

B 3 610

C 2 390

D 1 200

To prevent the system from splitting up a requirement that is too small in the course of a planning run, a minimum quantity for splitting can be specified. This minimum quantity defines the lowest quantity that a lot must have before it can be split up among several sources during the requirements planning run. If the lot is smaller than or equal to the minimum quantity, the usual quota arrangement logic applies.



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Example of requirement splitting with minimum splitting quantity: During the maintenance of a quota arrangement for a material with the number M-01, a minimum splitting quantity of 1200 is set. Suppose there is a requirement of 1000 pc. In the course of a planning run for material M-01, this requirement will be converted into a single purchase requisition. Since the requirement falls below the minimum quantity for splitting, no splitting takes place and the vendor with the highest quota is determined by the system as the source for the requisition. When maintaining a quota arrangement, it is also possible to specify the minimum or maximum lot size for each item of the arrangement. Yet, the specified lot sizes are only taken into account in the case of requisitions and planned orders that are generated automatically (that is, via the MRP). The lot size specified in the quota arrangement item overrides the settings in the material master record.

1. Maximum lot size per quota arrangement item A maximum lot size is defined as the maximum purchase order quantity that may be assigned per order proposal to a source in the requirements planning run. If the requirement quantity exceeds the maximum lot size, another quota-allocation process takes place for the residual quantity. It may now happen that, due to a low quota rating, the same source is reselected and a second order proposal generated for it. To prevent it, the 1x indicator can be set. If this indicator is set, a source is not taken into account for more than one lot with a quantity equal to the maximum lot size per planning run. The remaining quantity is then allocated to the next sources.

2. Minimum lot size per quota arrangement item The minimum lot size is defined as the minimum purchase order quantity that may be assigned per order proposal to a source in the requirements planning run. If the requirement quantity is less than the minimum lot size, the lot is assigned to the source with a quantity equal to the minimum lot size.

Example of maximum lot size with 1x indicator: There is a requirement for 500 pc of a material. The starting situation is shown in the following table. Vendor Quota Quota-allocated

quantity Max. lot size 1x

A 3 100 250 X

B 1 200

Due to the fact that the 1x indicator has been set, a planning run will result in the generation of one requisition for 250 pc with vendor A as the source and one requisition for 250 pc with vendor B as the source. Without the 1x indicator, the planning run would generate two requisitions for 250 pc with vendor A as the source. In addition to a minimum and/or maximum lot size, it is also possible to specify a maximum quantity in a quota arrangement item. The maximum quantity is taken into account in both the manual creation of purchase requisitions and the automatic generation of requisition within the framework of material requirements planning. The maximum quantity acts as the limit value for the quota-allocated quantity for a source. A quota arrangement item is not suggested as the source if the quota-allocated quantity is – or would become, greater than or equal to the maximum quantity.

Example of maximum quantity: There is a requirement for 800 pc of a certain material. The quota arrangement has been maintained in the system according to the following table.



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Max. quantity

A 1 1500 2000

B 2 3800

With this starting situation, a planning run would result in the generation of one requisition for 800 pc with vendor B as the source. Although vendor A has a lower quota rating than vendor B, due to the already quota-allocated quantity of 1500 pc, the maximum quantity would be exceeded if the former were to be assigned to the requisition as the source.



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Business Process Procedure

1. Assignment of Quota Arrangement Usage Key to Material Master (Purchasing View)

1.1. Access transaction by Via Menu Logistics Materials Management Material Master Material

Change Immediately Via Transaction Code MM02

Key T-Code: MM 02

Fig-01



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1.2. On “Change Material (Initial Screen)” screen, fill in the data as below:

Fig-02

Field Name Description R/O/C/D User Action and Values Material Alphanumeric key uniquely

identifying the material R Select the material number to

which the Quota Arrangement Usage Key is to be assigned

Change number Number used to uniquely identify a change master record

O Enter the change number if you make a change with reference to a change number, or create a object with a change number

Click on icon or press “ENTER”. Then the pop up screen appears as shown.

Legend: R = Required, O = Optional, C = Conditional, D = Display



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1.3. On the pop up screen, maintain information as specified in the table below:

Fig-03

Field Name Description R/O/C/D User Action and Values Select the appropriate logical

screen and click on icon. Then the pop up screen appears as shown.




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1.4. On the pop up screen, fill in the data as below:

Fig-04

Field Name Description R/O/C/D User Action and Values Plant Key uniquely identifying a

plant R Select the plant number

Click on icon Legend: R = Required, O = Optional, C = Conditional, D = Display



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1.5. On “Change Material XXXXXXXXXXXX” screen, fill in the data as below:

Fig-05

Field Name Description R/O/C/D User Action and Values Quota arr. usage Key that specifies which

business functions use a quota arrangement

R Select the appropriate key (which was defined in IMG via Transaction OMEQ)

Click on icon to save this material master update




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1.6. On “Change Material (Initial screen)” screen, maintain information as specified in the table below:

Fig-06

Field Name Description R/O/C/D User Action and Values

Click on icon to return to the main menu of SAP




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2. Create Quota Arrangement

2.1. Access transaction by Via Menu Logistics Materials Management Purchasing Master Data

Quota Arrangement Maintain Via Transaction Code MEQ1

Key T-Code: MEQ1

Fig-07

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2.2. On “Maintain Quota Arrangement: Initial Screen” screen, fill in the data as below:

Fig-08

Field Name Description R/O/C/D User Action and Values Material Alphanumeric key uniquely

identifying the material R Select or Enter the material

number Plant Key uniquely identifying a

plant R Select or Enter the plant number

Press “ENTER” to display the overview screen for the quota arrangement periods


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2.3. On “Maintain Quota Arrangement: Overview of Quota Arr. Periods” screen, fill in the data as below:

Fig-09

Field Name Description R/O/C/D User Action and Values Valid from Date specifying when the

quota arrangement becomes valid

C The start date is calculated by the system and is always the current date or the follow-on date from the end of the previous quota arrangement

Valid to Date until which the quota arrangement is valid

R Enter the date

Press “ENTER”, then select the quota arrangement and click on

icon to display the item overview screen of the quota arrangement


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2.4. On “Maintain Quota Arrangement: Overview of Quota Arr. Items” screen, enter a quota arrangement item for each source of supply that is required to be included in the quota arrangement, as follows:

• Specify the procurement type for each source (in-house production or external procurement).

• A quota arrangement can provide for external procurement or in-house production. Enter f (the indicator for external procurement) in the P column.

• Where appropriate, specify the special procurement type. • Enter k in the S column, for instance, if a consignment arrangement for the material

exists with the vendor. • Enter the vendor number • Enter the number of the vendor from whom external procurement is required, if the

material is procured externally. • Procurement plant (supplying plant) • Enter the key of the procurement plant (supplying plant) in column PPI, if the

procurement type provides for in-house production. • Specify the quota ratios on the basis of which requirements arising over the

period are to be apportioned. • In the Quota column, enter the quota assigned to each item. The quota determines

which portion of a total requirement over a period should be procured from the source in question. For example, suppose a quota arrangement contains two sources of supply and a quota of 1 is entered for both. This means that each source is then allocated 50% of the total requirements for the material over the period in question.

Fig-10

Field Name Description R/O/C/D User Action and Values P (Procurement type)

Indicates the type of procurement (that is, in-house manufacturer or external procurement) for

R Enter “f”

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Field Name Description R/O/C/D User Action and Values the quota arrangement item

S (Special procurement type)

Indicates which special procurement type is to apply in the case of this source

O Enter “k”, for instance, if a consignment arrangement for the material exists with the vendor

Vendor Alphanumeric key uniquely identifying a vendor

O Enter the number of the vendor from whom external procurement is required, if the material is procured externally

PPI. Key for the factory or branch of a company (that is, a company code) from which the material is to be procured

O Enter the key of the procurement plant (supplying plant), if procurement type provides for in-house production

Quota Number specifying which portion of a requirement is to be procured from a given source of supply

R Enter the quota assigned to each item.

Click on icon to save the Quota Arrangement


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2.5. On “Maintain Quota Arrangement: Initial Screen”, maintain information as specified in the table below:

Fig-11

Field Name Description R/O/C/D User Action and Values

Click on icon to return to the main menu of SAP

Legend: R = Required, O = Optional, C = Conditional, D = Display Note: Before maintaining a quota arrangement item with the procurement type external procurement, a source of supply (info record and/or outline agreement) must exist.

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