Describing Scheduling Agreement Collaboration


After completing this lesson, you will be able to:

  • Define Scheduling Agreement Collaboration
  • Explain the business case for Scheduling Agreement Collaboration
  • Define a typical process flow for Scheduling Agreement Collaboration (including commitment zones)
  • Compare Scheduling Agreements with releases and without releases

Scheduling Agreement Overview

What is a Scheduling Agreement?

For an overview of Scheduling Agreement, watch this video.

Types of Scheduling Agreements

There are two types of scheduling agreements:

  • With releases - LPA

    Each release is delivered to the Supplier according to the delivery schedule.

  • Without releases - LP

    The entire agreement is delivered to the Supplier when the agreement is created.

Scheduling Agreement Business Case

  • Scheduling Agreements assist Suppliers with planning
  • Pricing and terms agreed for the time period (horizon)
  • Quantity covers the needs for the horizon:
    • Short-term or immediate needs are ordered on an ASAP basis in the firm zone
    • Mid- to long-term needs are ordered in the trade-off or forecast zone

Scheduling Agreement Benefits for Customers

The customers can benefit in a number of ways:

  • One delivery schedule can replace many discrete Purchase Orders or contract release orders. This removes the need to approve each Purchase Order.
  • Inventories can be reduced to a minimum. This allows companies to carry out manufacturing operations based on the Just-in-Time (JIT) principle.
  • Reduced lead times facilitate smaller deliveries. This also allows the Supplier to plan and allocate resources and plan material purchases.

Scheduling Agreement Time Periods

For an overview of Scheduling Agreement time periods, watch this video.

Scheduling Agreement Commitment Zones

There are three commitment zones for the Scheduling Agreement:

Firm Zone

Signal to Start Production
  • Suppliers submit Order Confirmations and Advance Ship Notices for quantities in this zone (regardless of Scheduling Agreement type).
  • Cancellation ramifications:

    Depending on the Scheduling Agreement Structure, the supplier is entitled to reimbursement for both material and production costs.

Trade-off Zone

Signal to Buy Components
  • Cancellation ramifications:

    Depending on the Scheduling Agreement Structure, the supplier is entitled to reimbursement for material costs only.

Forecast/Planning Zone

Strictly for Planning
  • Suppliers may aggregate demand from all Buyers and plan future purchases..
  • Cancellation ramifications:


Additional Information about the Commitment Zones

  • Scheduling Agreements do not have to include all three commitment zones.
  • It is standard practice to send Scheduling Agreements on a weekly basis to revise the quantities in each commitment zone.
  • As time passes, the quantities automatically move from one zone to the next, from the Forecast/Planning zone to the Trade-off Zone, and from the Trade-off Zone to the Firm Zone.

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