In Merchandise Distribution, a distribution center forms the link between a number of recipients and a vendor. The following example describes Merchandise Distribution with two levels.

The procedure for planning merchandise distribution is described in brief below. The pull process is used at both levels, which means that collective purchase orders are generated for the issue documents.

• Planning for Level 2

• Stores 1, 2 and 3 order article R100000 from regional warehouse 1 using issue documents 1, 2 and 3 (warehouse orders).

• Collective purchase order 1 is generated for regional warehouse 1 for issue documents 1, 2 and 3. The collective purchase order is a warehouse order for the central warehouse, and contains one item for article R100000.

• Stores 4, and 5 order article R100000 from regional warehouse 2 using issue documents 4 and 5 (warehouse orders).

• Collective purchase order 2 is generated for regional warehouse 2 for issue documents 4 and 5. The collective purchase order is a warehouse order for the central warehouse, and contains one item for article R100000.

• Planning for Level 1

• Regional warehouses 1 and 2 both order article R100000 from the central warehouse using collective purchase orders 1 and 2. From the point of view of the central warehouse, these collective purchase orders are issue documents.

• Collective purchase order 3 is generated for collective purchase orders 1 and 2. The result is a purchase order to an external vendor containing one item for article R100000.