As the name suggests, Scheduling Agreements are created to ensure our suppliers deliver our requested products JUST-IN-TIME. Imagine our production schedule goes on the floor on Monday 10 am, so we expect the deliveries on or after Friday 6 PM. We have to factor the GR processing time in our premises while timing the vendor delivery, do not make fancy moves and keep no breathing space between the vendor delivery and the production scheduling.
Prima Facie, Scheduling agreements were conceptually incorporated to deal with JIT scenarios. We do not want to pile up on unwanted inventory before our production schedule and also engage cash into the inventory. Classic Example is to imagine a Japanese plant being disrupted by a earthquake and we have already accepted early deliveries from our supplier, this could be a disaster since we have already invested in the inventory.
Scheduling Agreements ( SA) were incepted in automotive companies. Automotive companies had a production visibility of the next six months approximately so they wanted the suppliers to send the raw materials to align with the production schedule. SAs were created by the procurement department which acted as definite purchase orders. The schedule for the deliveries was maintained by the production department instead of the procurement team, this made absolute sense since the production guys had a full uninterrupted view of the production schedule. The suppliers were mandated to deliver the products on the requested date, deliveries prior to the delivery date were not accepted by the system. Deliveries after the requested delivery date were accepted but they invited a Late Delivery ( LiquidatedDamages) clause which was incorporated in the SA terms & conditions.
Delivery schedules were continually ( not continuously )sent by the production team to the suppliers (please see there is gross difference between continual and continuous ). This made life easier for everyone and also saved costs for the enterprises since there is only one header document SA.
The Goods Receipt is done against the SA number and not against the SA line ( which does not have a character of its own and instead depends upon the SA number for its identification ).
The Invoice can be posted against a Challan number for a specific goods receipt or all the deliveries can be clubbed for payment, it totally depends on how the vendor invoices your company.
SAs are a potent weapon playing a central role in your strategic sourcing endeavour. SAs can be integrated seamlessly with Classic MRP & MRP Live. MRP programs can create automatic delivery schedules / SA lines which are then relayed to the supplier instantly or by a deferred method.
The SA Lines are not restricted through a approval process so a clear path has to be defined for the forward communication with the supplier. If integrated with MRP, SAs can streamlined for procurement and deployment of general items which are bought regularly.
To sum it up, if used with a clear understanding, SAs can be completely cut the fab and make the company fit and lean in their procurement endeavours.
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