Planning Demand Fulfillment According to Priority Tiers
If the distributable quantity during deployment is too small to cover the demand of all child locations and the parent location during the replenishment lead time, deployment works with priority tiers. For the parent location a replenishment lead time of zero is taken into account, which means that only overdue quantities are considered. The system splits the demand during the replenishment lead time into prioritized demand. This means that the system covers the demands that you have defined in Customizing as most important demands first, such as for example, backorders or fixed demands, and does not consider less important demand.
With priority tiers, you can freely define the hierarchy of individual demands according to importance.
Deployment can use either two-level tier processing, or multi-level tier processing. You can decide in the service profile which method you want Deployment to use.
If you want to use less system performance for planning demand fulfillment, and have less complex calculation, choose two-level tier processing. It may also be more advantageous to use two-level tier processing if you are working with Inventory Balancing, as the demands at the lower level of the Bill of Distribution (BOD) may be covered by Inventory Balancing faster and the parts sent by Deployment may cause an excess.
If you want Deployment to consider demands on lower levels of the BOD in the appropriate tiers and not in the tier demand over replenishment lead time, use multi-level tier processing. Multi-level tier processing covers high priority demands at lower levels of the BOD before lower priority demands at higher levels, which can lead to an improvement in your service.
Two-Level Tier Processing
Two-level tier processing takes only a sub-BOD into account. This means that it considers only a parent location and its direct child locations. Therefore, Deployment in two–level tier processing does not recognize high priority demands of locations of lower levels below the direct child locations of a parent location. It looks only at the priorities of the demands at the location it is sending from (parent location), and the potential receiving locations (direct child locations). Demands at locations below the direct child locations are all put on the tier demand over replenishment lead time for the corresponding direct child location. As a result, medium priority demands (for example, fixed demands) at direct child locations are covered before high priority demands (for example, backorders) at locations below, if not enough goods are available to cover both.
Example of Two-Level Tier Processing
The BOD in the graphic above consists of an entry location which is the parent location in this deployment decision and has two direct child locations, location one and location two. Location one has a priority demand that is assigned to tier three, and location two has no priority demand. Location two is an intermediate location and has location three as a child location. Location three has a priority demand that is assigned to tier one. In two-level tier processing, Deployment puts the demand of the locations on lower levels (that is, of location three), in the tier demand over replenishment lead time at the corresponding direct child location, which is tier eight of location 2 in this example. This means that Deployment sees a demand assigned to tier three at location one and a demand assigned to tier eight at location two. Consequently, Deployment covers the tier three demand first. Only if there are products left that can be distributed, does it cover the tier eight demand at location two, which is, in fact, a tier one demand at location three.
Multi-Level Tier Processing
In the case of multi-level tier processing however, the priority of demands is rolled up to the second level of the BOD in a recursive algorithm, to provide visibility to the priority of demands on lower levels. In the figure below, Deployment satisfies the priority one demand at location three, because it has been made visible by multi-level tier processing. This means that high priority demands at lower levels of the BOD are covered before medium priority demands at higher levels.
Example of Multi-Level Tier Processing
The BOD in the graphic above consists of an entry location which is the parent location in this deployment decision and has two direct child locations, location one and location two. Location one has a priority demand that is assigned to tier three, and location two has no priority demand. Location two is an intermediate location and has location three as a child location. Location three has a priority demand that is assigned to tier one. In multi-level tier processing, the priority of demands at location three is rolled up to location two. This means that Deployment sees a demand assigned to tier three at location one and a demand assigned to tier one at location two. Consequently, Deployment covers the tier one demand first.