It was the best of processes, it was the worst of processes. We at Cetec ERP have to live in two realities - the ideal ‘best practice’ vs. the practical reality. We admittedly have a bit of an idealist ethos (which maybe is necessary to write business software).

Too often these ideals do not align in contract manufacturing (or really any type of manufacturing), so we adapt the software to meet the needs of our customers. Pragmatic idealists.

Inventory planning for contract manufacturing is one of those topics. In an ideal world, you let the software tell you what you need for what job and what customer, and you can buy (and organize your warehouse) in a completely streamlined cash-flow optimal way. The reality is much more complex…every customer contract is unique with different terms, stipulations, etc. Often these dictate segmentation of inventory - be it for consignment, customer liabilities, managing guerilla customers, or just ease for the warehouse…

So - the preallocation feature was created to allow users to preallocate PO line and bin qty to a specific bin or job. This, for the last few years, has been a one-to-one relationship. But now there is a one-to-many relationship, allowing users to preallocate a PO line to multiple orders, and thus consolidate purchasing (we’ve almost come full circle!).

Why Consolidated Purchasing Makes Sense

The ideal purchasing relationship would be one demand, one PO line, one receipt, one job. Very clean. It also doesn’t fit many, many process needs.

Five jobs may need the same connector. The supplier has a minimum order quantity. There may be a meaningful price break at 1,000 pieces. Or the buyer may simply not want to send the same vendor five purchase orders for the same part and dock date.

So, purchasing consolidates the demand. That is the commercially sensible decision.

The system still has to remember why the material was purchased.

The Problem with One-to-One Allocation

Under the previous structure, a PO line, purchase quote line, or inventory bin could only be preallocated to one customer or order line.

That works well when supply and demand line up perfectly. When they do not, users have to make the data fit the software. They split the purchase into duplicate PO lines, maintain the allocation in a spreadsheet, receive everything into general inventory and protect it through warehouse knowledge, or manually move allocations around later.

All of those can work. None of them are especially durable.

The connection between supply and demand gets weaker. Purchasing thinks demand is covered. MRP may disagree. The warehouse sees available inventory without knowing who it was meant for. Production discovers the problem when someone else has already used the material.

What We Still Need to Preserve

Consolidating the purchase cannot mean throwing all of the material into one anonymous bucket.

The PO still needs to show the total quantity being purchased. Each order needs to retain its share of that quantity. MRP needs to know which demand is covered. Receiving and the warehouse need to know what is already committed.

Timing also matters. One PO may cover three jobs, but the first job cannot wait behind a delivery date that only works for the third. Allocation should preserve the demand and the dates that led to the purchase in the first place.

A Simple Example

Assume three work orders need the same component:

• Work Order A needs 200 pieces.
• Work Order B needs 300 pieces.
• Work Order C needs 400 pieces.

The known demand is 900. The supplier sells the component in packs of 1,000, so purchasing creates one PO line for 1,000 pieces.

The allocation can now reserve 200 for Work Order A, 300 for Work Order B, and 400 for Work Order C. The remaining 100 can stay unallocated for stock or future demand.

One purchase. Three jobs. The buyer gets the quantity and pricing that make sense, without losing the reason 900 of those pieces were ordered.

One-to-Many Preallocation in Cetec ERP

Cetec ERP 4.24 allows a single purchase quote line, purchase order line, or inventory bin to be preallocated across multiple customers or order lines at the same time.

The feature is supported by the rebuilt allocation engine behind MRP. As supply and demand change, Cetec ERP can retain the relationship between the combined purchase and the individual jobs it supports.

This affects more than purchasing. Planning can see whether the job is covered. Warehouse staff can see that the inventory is committed. Production is less likely to find out too late that material intended for one customer was used for another.

Almost Full Circle

The goal is still the same ideal we started with: let the system tell you what to buy, connect the supply to the demand, and give the warehouse a clear record of where the material belongs.

One-to-many preallocation just acknowledges that manufacturers often need to buy several demands together. The purchasing decision can be practical without losing the structure needed by MRP, inventory, and production.