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 Executing Fair Share Distribution

Purpose

Deployment realizes the deployment of goods quantities from a parent location to the child locations using fair-share distribution. If the distributable quantity is greater than the net demands of the child locations, the system immediately performs fair-share distribution. If the net demands of the child locations exceed the distributable quantity, deployment firstly distributes considering priority tiers before giving the remaining quantity using fair-share distribution.

Fair share distribution is a step-by-step process. For each period or priority tier, the system checks whether it can cover the cumulative net demand of all child locations with the quantity that deployment is to distribute. In the period or priority tier in which the system can no longer cover all demands, the system divides the rest of the distributable quantity according to fair-share rules.

The aim of fair share distribution is to distribute the remaining quantity available for a period or a priority tier according to certain rules.

Process

  1. The system calculates the net demand for the periods or priority levels that it can no longer cover.

    Note Note

    If the system can only partially cover the demands of the priority tiers “Open Customer Demand/Backorders” and “Prioritized Fixed Demands”, it does not proceed according to the following steps, but uses special fair-share rules .

    End of the note.

  2. The system calculates the percentage of the demand (for the periods or priority levels that are no longer fully covered) that it can still cover and thereby calculates the coverage level of a location before fair-share distribution.

  3. The system calculates the average possible coverage level of all locations.

  4. The system excludes locations that have a coverage level above the average achievable coverage level of all locations from the fair share distribution.

  5. For all remaining locations, the system begins the process again at step 4 and carries out this process until all remaining locations lie within the average achievable coverage level. These are the locations that the system will consider when distributing the quantity available for fair share distribution.

  6. The system calculates the average achievable coverage level for the remaining locations and divides the distributable quantity between these locations so that each reaches the average achievable coverage level.

  7. The system rounds the quantities calculated in step 6 to shipment quantities.

Example

In the following examples the system can fully cover the cumulative net demand until 28 Sept, 2006, the system cannot cover the demand of the 29 Sept, 2006.

The amount to be distributed is 100 pieces.

Example 1

You have defined the smallest possible packing quantity as 1 piece

Unrounded cumulative net demand on 28 Sept, 2006

Unrounded net demand on the 29 Sept, 2006

Unrounded cumulative net demand on 29 Sept, 2006

Coverage level for demand on 29 Sept, 2006 through stock or rounding

Allocated fair share quantity

Location 1

15,00

20,00

35,00

0 %

19,67

Location 2

- 90,00

130,00

40,00

69,23 %

0

Location 3

73,45

29,45

102,90

1,87 %

80,33

  1. For location 1 the unrounded cumulative net demand on 29 Sept 2006 was 35 pieces. Since the system can completely cover the demand for the 28 Sept, 2006, fair share distribution only considers the demand that is dispatched on the 28 Sept, 2006, that means the demand for the 29 Sept, 2006. This means that the system can cover at least 15 pieces of the 35 piece demand. For fair share distribution the system therefore only takes 20 pieces into account (the demand for 29 Sept 2006).

    On 28 Sept, 2006, location 2 has a demand of -90. This negative demand can arise from current stock or expected receipt of stock. The unrounded cumulative net demand for location 2 on the 29 Sept, 2006 amounts to 40 pieces. This means the net demand for the 29 Sept, 2006 is 40 -(-90) = 130.

    On 28 Sept, 2006, location 3 has an unrounded cumulative net demand of 73.45 and on 29 Sept, 2006 an unrounded cumulative net demand of 102.9. This gives a net demand of 102.9 - 73.45 = 29.45 for the 29 Sept, 2006.

  2. The system calculates the coverage level for each location for the demand of 29 Sept, 2006 before the fair share distribution.

    For location 1 this coverage level is 0%, since on the 28 Sept, 2006 no stock is available at this location that can be used to cover part of the demand for the 29 Sept, 2006.

    For location 2 the coverage level is 90/130 = 69.23%, since on the 28 Sept, 2006 90 pieces are still available, which can be used to cover part of the 130 piece demand.

    For location 3 the coverage level is 1.87%. This value results from rounding. In order to cover the demand of location 3 on the 28 Sept, 2006, the system assigns 74 pieces to this location, the demand of the location is however only 73.45 pieces, Therefore a calculative stock of 0.55 pieces remains at this location. These 0.55 pieces cover 1.87% of the 29.45 piece demand on the 29 Sept, 2006. Therefore the coverage level of this location is 0.55/29.45 = 1.87%.

  3. The system calculates the average possible coverage level of all locations as follows:

    • It calculates what quantity is available for fair share distribution. This quantity results from the stock, the stock left from rounding and the remaining quantity that is to be distributed after the 28 Sept, 2006.

      In this case the stock is 90, the stock left from rounding is 0.55 and the remaining quantity to be delivered is 100 - 15 - 74 = 11 after the 28 Sept, 2006.

      Therefore a quantity of 90 + 0.55 + 11 = 101.55 is available for fair share distribution.

    • The system adds the net demand of the 29 Sept 2006 of all locations: 20 + 130 + 29.45 = 179.45.

    • The system divides the quantity that is available for fair share distribution by the net demand of the locations and in this way calculates the average possible coverage level of all locations: 101.55/179.45 = 56.59%.

  4. The system excludes location 2 from the fair share distribution, because its coverage level (69.23%) already lies above the average possible coverage level (56.59%).

  5. The system calculates the average possible coverage level of locations 1 and 3.

    The quantity to be distributed is in this case 11 + 0.55 = 11.55; the system no longer considers the stock (90 pieces) of the excluded location 2. The net demand of locations 1 and 3 amounts to 20 + 29.45 = 49.45, which gives an average possible coverage level of 11.55/49.45 = 23.36%.

  6. Since the coverage levels of both location 1 and location 3 lie under this average possible coverage level, fair share distribution considers both locations.

    For each of locations 1 and 3, the system assigns 23.36% of their demand for the 29 Sept, 2006 as well as their unrounded cumulative demand for 28 Sept, 2006.

    This means that location 1 is entitled to 4.67 + 15 = 19.67 pieces, and location 3 is entitled to 6.88 + 73.45 = 80.33 pieces.

    The sum of these fair share quantities equals the quantity to be distributed (19.67 + 80.33 = 100).

Example 2

You have defined the smallest possible packing quantity as 10 pieces.

Unrounded cumulative net demand on 28 Sept, 2006

Unrounded net demand on the 29 Sept, 2006

Unrounded cumulative net demand on 29 Sept, 2006

Coverage level for demand on 29 Sept, 2006 through stock or rounding

Allocated fair share quantity

Location 1

15,00

20,00

35,00

25 %

20

Location 2

- 90,00

130,00

40,00

69,23 %

0

Location 3

73,45

29,45

102,90

22,24 %

80

  1. For Location 1 the system assigns 20 pieces for Fair Share Distribution.

    For Location 2 the system assigns 130 pieces for Fair Share Distribution.

    For Location 3 the system assigns 29.45 pieces for Fair Share Distribution.

  2. The system calculates the coverage level for each location before the fair share distribution.

    For location 1 the coverage level is 25 %. This value results from rounding. In order to cover the demand of location 1 on 28 Sept, 2006, the system assigns 20 pieces to this location, since the smallest possible packing quantity is 10. The demand of the location, however, is only 15 pieces. Therefore a calculative stock of 5 pieces remains at this location. These 5 pieces cover 25 % of the demand on the 29 Sept, 2006. Therefore the coverage level of this location is 5/20 = 25%.

    For location 2 the coverage level is 90/130 = 69.23 % (see example 1).

    For location 3 the coverage level is 22.24 %. This value results from rounding. In order to cover the demand of location 3 on the 28 Sept, 2006, the system assigns 74 pieces to this location, the demand of the location is however only 80 pieces, Therefore a calculative stock of 6.55 pieces remains at this location. These 6.55 pieces cover 22.24 % of the 29.45 piece demand on the 29 Sept, 2006. Therefore the coverage level of this location is 6.55/29.45 = 22.24 %.

  3. The system calculates the average possible coverage level of all locations as being 56.59% (see example 1).

  4. The system excludes location 2 from the fair share distribution, because its coverage level (69.23%) already lies above the average possible coverage level (56.59%).

  5. The system calculates the average possible coverage level of locations 1 and 3 as being 23.36%.

    The system excludes location 1 from the fair share distribution, because its coverage level (25 %) lies above the average possible coverage level (23.36 %).

  6. The system calculates the average possible coverage level of location 3 as being 22.24 %.

    There for location 3 receives 22.24% of it demand from 29 Sept, 2006 through Fair Share Distribution, plus its unrounded cumulative demand from 28 Sept, 2006. This amounts to 6.55 + 73.45 = 80.

    Location 1 and 2 only receive the rounded demand from 28 Sept, 2006. This means location 1 receives 20 pieces and location 2 receives nothing, because on 28 Sept, 2006 it had a negative demand (meaning it had stock).

    The sum of these fair share quantities equals the quantity to be distributed (20 + 80 = 100).