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Supply Chain and Distribution Requirement Planning
Clusters are used to specify groupings of entities so that relationships between entities can be defined. Entities belonging to a cluster do not have to belong to the same financial and / or logistic company of an organization. The notion of a clustered item is comparable to that of an item/warehouse combination under inventory module. The major difference is that a cluster can be an aggregate several warehouses. The concept of cluster is best illustrated by the following Example. Suppose distribution centers of a large retail organization are grouped into i) north, ii) south iii) east and iv) west clusters. All of them, in addition to getting some local supplies, are largely supplied by distribution orders from a central warehouse. The distribution requirement planning for north cluster, where supply chain comprises of one regional depot and three divisional depots, are shown in the following diagram: Cluster and Warehouse Hierarchy 
It may be noted that the flow of demand is upward and the flow of goods can be in any direction. Supply Planning - Supply planning is the next important element of distribution requirement planning, which comprises of following: Supply Sources Material requirements can be covered with three types of orders:
Distribution orders move the goods between clusters. Distribution orders are especially suitable for the situation where depots/ sales channels of an organization are spread throughout a large area. Goods Flow Strategies Sources of supply are optimized with:
The sourcing strategy determines whether a requirement is covered by production orders, distribution orders, or purchase orders. A combination of these sources is also possible. If the source is distribution, the system selects the suppliers (depots) on the basis of
If the source is purchase, system selects the suppliers on the basis of supply strategy for external suppliers. Supply Strategy: refers to the method by which the supply of plan items is divided over multiple suppliers. The supply strategy defines the priority rules and allocation rules that direct the planning engines in the choice of suppliers. There are separate supply strategies for external suppliers (planned purchase orders) and for internal suppliers (planned distribution orders) Supply Chain Strategy: The sourcing strategies and supply strategies are grouped in supply chain strategies. Supply chain strategies can be linked to scenarios and remains valid during a certain time period within that scenario. This functionality enables to flexibly change business strategy over time such as percentage of items to make, buy or distribute. The following figure shows how the concepts are related. 
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