NetSuite Supply Allocation Guide

Supply Allocation matches inventory supply sources to demand sources. This feature enables you to meet demand requirements with the right product, amount, and location by the required date. The Supply Allocation feature can expand inventory commitment calculations to consider future inventory on supply orders in addition to current, on-hand inventory. 

It is useful to wholesale distributors or manufacturers with specialized in-demand products with long supply lead times. It provides invaluable supply chain visibility and product reservation capabilities to all relevant parties. 

When you enter demand orders (sales orders or transfer orders), the allocation process considers planned inventory orders and your order through the supply required by date field. When Supply Allocation matches demand orders that have future ship dates, to supply orders with future receipt dates, on-hand inventory remains available to fill immediate demand orders. 

The following are the key concepts that this guide will address. 

Supply Required by Date 

To efficiently match supply with demand, you must know the required shipping date for the product. For the system to perform these calculations accurately, you will identify a Supply Required By Date on-demand order (Sales Order / Transfer Order) line. Then, NetSuite will calculate allocation to determine which supply sources should be used to meet the demand on specific orders by the required date. This applies to the demand created from customer orders, and demand from transfer orders and work orders. 

Allocation Strategies 

The planner will leverage allocation strategy records to define rules for allocating inventory. When you allocate inventory for particular types of orders, NetSuite assigns allocation strategies to order lines. 

For example, you can create an allocation strategy to allocate the total ordered quantity as soon as it becomes available. You can also create a strategy to allocate any portion of the full ordered quantity as close to the Supply Required By Date as possible. 

Allocation Calculation 

Supply Allocation calculations assess current and future inventory supply and determine the best ways to allocate supply to the demand on orders. NetSuite bases these calculations on the allocation strategies defined on order lines. The system can perform calculations automatically based on preference settings or predetermined schedules. 

Allocation Exceptions 

Supply Allocation matches supply with demand based on allocation strategies. It identifies orders that will not have a supply source to meet the demand by their Supply Required By Date. When this occurs, NetSuite generates a Supply Allocation Exception to warn you that the demand may not be met in time. 

Main Setup 

Enabled Features

  • Setup > Company > Enabled Features > Items & Inventory | Check ‘Supply Allocation’ 

supply allocation

  • Special ‘data check’ will be initiated; click [Submit] to start the processNext, NetSuite will inform you whether the check was successful or not. 
  • If the check was unsuccessful, NetSuite will ask you to contact NetSuite Support. Feel free to contact us, and we will be more than glad to assist you. 
  • If the check was successful, you should go to: Setup > Company > Setup Tasks > Enable Features and check the Supply Allocation box on the Items & Inventory subtab again, and click [Save]. 

Determine the Allocation Strategy 

In the context of supply allocations, the allocation strategy helps you define various sales order types and prioritize  allocating your inventory to them and shipping them to your end-customers. For example, you may wish to allocate inventory to your e-commerce orders as soon as possible but align the allocation for your B2B orders with the ‘Supply Required By Date’ field on your transaction lines.  

This is the section on which you should spend most of your time. Test the creation of various supply and demand transactions and observe how the automatic allocation is affected by the defined strategy. 

  • Out-of-the-box, two predefined strategies are provisioned immediately in the system. 

predefined strategies

  • They can be found here: Setup > Order Management > Setup Tasks > Order Allocation Strategies. 

           - Predefined Available Allocation Strategythis strategy uses available inventory quantities in the system to allocate them to the ordersThe allocation may be partial. 

           - Predefined Complete Allocation Strategythis strategy will only allocate the inventory quantities to the order lines if they can be completely fulfilled with the inventory that is available. 

  • Click on [New Strategy] to define your personalized allocation strategy. 
  • On the next page, populate the sections explained below, as required. 

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  • When ready, [Save] the page, and you have completed your first allocation strategy. Our advice is to start simple and create one maximum of two strategies to get comfortable with this functionality. 
  • Also, make sure you open every strategy that you won’t use and inactivate it before re-saving the record. 

order allocation strategy

Supply Allocation Preferences 

Once you have determined the strategy, it is time to adjust your Supply Allocation Preferences. To do this, you will have to go here: 

  • Setup > Order Management > Supply Allocation 
  • On the ‘Demand Preferences,’ adjust the sorting options and check the ‘Perform Supply Allocation After Transaction Entry, Update or Delete if you want the allocation to run every time you make transactional adjustments. Note, when you clear this box, you will be reallocating inventory through a manual process (still click-of-a-button). 

Supply Allocation Preferences 

In the ‘Supply Preferences’ tab, you will select the default strategies you created in the previous stepNote, the strategies affect only the transaction types defined below. 

‘Supply Preferences’ tab

Create Allocation Schedule 

We are almost done with the setup. The last step will be to complete the scheduling of the allocation so that NetSuite can perform the allocation adjustments for us automatically. Note, the preferences and the strategies defined above will define the allocation logic. In contrast, the schedule will help us define which transactions in the system will be affected by the inventory allocation and reallocation logic 

If you checked the ‘Perform Supply Allocation After Transaction Entry, Update or Delete’ (see above), the schedule will affect the allocation of all transactions that were not physically updated by the user but pull inventory from specified locations. 

Create Allocation Schedule 

To create an Allocation Schedule, please follow the steps below: 

  • Go to: Transactions > Inventory > Allocate Orders > Schedule. 
  • Click on [New Order Allocation Schedule]. On the next screen, populate the criteria as required and [Save] the page. 

order allocation schedule

  • The schedules will run as per the frequency you defined above. 

schedules

  • You can review the results of each run here:  

Transactions > Inventory > Allocate Orders > Status 

  • Once you click on the ‘complete’ link, you will see the allocation run's transaction effected. 

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Allocation for Demand 

It is simple to select the allocation strategy on your Demand transactions (Sales Orders and Transfer Order). As you are entering your Sales Orders, pay attention to the following line/column fields. 

Allocation for Demand 

  • Please make sure that the Supply Required by Date is up to date. This field defines the date by which the products must be allocated for delivery to the client. 

Now, let us assume (see the screenshot below) that our ‘supply required by date’ is earlier than the ‘expected ship date. If the system cannot automatically allocate inventory from the existing stock and if we can’t fulfill the order-line on timeNetSuite will give us the opportunity to reallocate inventory on the spot from other sales orders  in the system. 

be allocated for delivery

When you click on the ‘Reallocate’ link, the pop-up will list the orders associated with your SKU, which could be used for reallocation. Notice below; the orders are sorted based on the criteria I defined in the Allocation Preferences. 

Allocation Preferences

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  • The top of the page will show the required quantity (300). 
  • Notice the affected (Demand) Orders that the system will allow you to source (allocate) from. Their commitment is NOT confirmed (‘Commitment Confirmed’ field = ‘F’)The system will auto-check them for you. 
  • By clicking on the [Generate Recommendation], you will let the system propose the orders that it thinks are optimal for the reallocation based on your allocation strategy. 

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  • There are three tabs on this screen: 

1. Select Orders for Reallocation 

- Sales Orders that have allocated inventory which you can transfer/reallocate to your order (as mentioned above). 

2. Affected Orders 

- When you click on the [Generate Recommendation] button in this tab, the system will display the orders and item quantities that it recommends you reallocate from.

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         3. Allocated Supply 

             This tab will show the allocated supply or work orders and purchase orders that have been allocated but are available for reallocations. 

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  • In the last step, the user will accept the system’s recommendations. 

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           - At this time, one unit that was not allocated to order #SO3004177 was transferred from order #SO3004179 

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          - This now shows on our original transaction (see image above) 

          - By clicking on the 'Allocated Supply' link, the pop-up will show the allocation's supply side. 

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Allocation Calculations for Supply 

After the demand transactions are entered, the Supply Allocation engine uses them to calculate the inventory demand of the items listed on your ordersThe demand is matched against the current and future sources of supplyThe following sources of this supply are used for these calculations: 

  • Purchase Orders 
  • Work Orders 
  • Transfer Orders (Distribution Centers) 

Based on the demand on the Sales Order line (which was added earlier) we can see that given the allocation strategy and the supply transactions that are in the system (in this case Work Orders as this is an assembly item) our product delivery to the Customer will be late by 149 days. 

Allocation Calculations

If we review the supply chain snapshot on the item record, we can see the demand and supply for the specified horizon. 

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  • We can see that we have a substantial back-order for this assembly item right after we process our original order (#SO3004177). 
  • Once the Supply Transaction (Work Order) is entered, we have several ways of how we can allocate that inventory to the open demand (Sales Orders that are awaiting fulfillment): 
  1. Allocation Schedules (defined above) 
  2. On-Demand 

          You can do this on the Allocate Orders page: Transactions > Inventory > Allocate Orders 

Allocate Orders 

  • For example, this page allows you to select two orders and transfer allocations to orders with no or limited allocations. 

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  • In the above image, we are transferring 194 units from #SO3004180 to #SO3004179When you submit this page, the allocation is completed. 

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  • Note, this page cannot control commitments. 

3. Manually 

Calculate reallocation for demand orders using the Reallocate Items page. This is a standard page that many of you are potentially very familiar with. It allows you reallocated available inventory and not the supply. This page can be found here: 

Transactions > Inventory > Reallocate Items 

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Supply Allocation Exceptions Management 

The supply allocation engine will sometimes determine that the inventory may not meet the demand by the specified ‘Indicated Supply Required by Date. In these situations, the system will generate a Supply Allocation Exception, which warns you that the order cannot be fulfilled on time. 

You can find these exception alerts here: 

Go to Transactions > Inventory > Allocate Orders > Order Allocation Alerts 

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With the help of this alert, which can be exposed to the planner’s dashboard, the planner will have ample time to react to supply and demand changes. 

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  • The default alert view can be customized and flagged to be used as a reminder. 

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  • Lastly, the alert can be added to the reminders portlet. 

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Conclusion 

In conclusion, this feature exposes allocations that were in the past managed in the back-end and to which users had no or little visibility. With new allocation strategies, exception tracking, and more intuitive reallocation screens, NetSuite system owners will have greater visibility of their supply chain and how their products are committed and delivered to their customers. 

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