In ERP systems, the standard source of supply refers to a predefined or preferred source for materials or services that is used by default when generating order proposals.
If there are several suppliers for an item, one of the suppliers is created as the main supplier in ERP systems. The main supplier is typically the one from whom orders are placed most frequently or from whom the largest quantity is purchased.
Ideally, the main supplier in terms of quality, reliability, price, delivery times and delivery capability should be the supplier of the item that offers the best overall conditions and can guarantee a stable long-term relationship.
When creating MRP proposals, the ERP system accesses the MRP master data of the main supplier, such as delivery time, minimum order quantity and lot size increment.
If the main supplier is unable to deliver, you can fall into the trap of a delivery time gap if replacement deliveries require longer delivery times than the main supplier, as in this case the ERP system orders the order proposal based on the main supplier’s delivery time and therefore too late.
Our tip:
The problem of longer delivery times with replacement suppliers can be addressed in various ways.
A pragmatic approach can be to set the opening horizon for creating an order proposal so that the opening horizon + delivery time of the main supplier covers the delivery time of the longest replacement supplier. In this case, the ERP system proposes an order so early that it can be placed on time even if the order is redirected to the replacement supplier.
In this case, you should ensure that your ERP system is based on the material’s requirement date when determining the delivery date. Otherwise, if the material is ordered from the main supplier, it would be delivered too early by the opening horizon. Example: An opening horizon of two weeks with a delivery time of four weeks from the main supplier is sufficient to order on time from a replacement supplier with a delivery time of six weeks. In this case, however, an order must not be placed with the main supplier for four weeks, otherwise the delivery would be two weeks too early. Instead, the delivery date must be based on the requirement date, even if the order were placed today. In this case, the main supplier would implicitly be granted two weeks more delivery time than actually agreed.
An alternative strategy for critical materials with large delivery time differences between the main and replacement suppliers could be to define increased safety stocks. These serve as a buffer if it is necessary to switch to the replacement supplier with a longer delivery time. Compared to the opening horizon mechanism, however, this mechanism leads to higher stocks.
Alternatively, allocating orders between two suppliers can also help. Powerful ERP or scheduling systems can take into account the fact that the suppliers with whom orders are placed alternately have different delivery times.
