Quota Arrangements means a material can be obtained from various sources of supply, each individual source of supply can be allocated a quota arrangement. 

The quota arrangement is valid for a certain period of time and specifies exactly how the receipts are to be distributed amongst each source of supply. 

You can set the quota arrangement for in-house production as well as for external procurement. Sources of supply can be:

- an individual vendor or outline agreement 
- another plant, from which material should be procured 
- a production version

To used quota maintenance, you have to maintained the quota arrangement usage for the respective material in the material master (MRP 2 view). 

The quota arrangement usage determines whether a material is included in a quota arrangement and which operations lead to a quota arrangement. You can define, for example, that only purchase orders are included in quota arrangements or that procurement proposals created by the system in the planning run are also included.

- You define the quota arrangement usage in Customizing for Purchasing in the IMG activity - Define quota arrangement usage.
- You have maintained the quota file for the material.
- You define the sequence of the sources of supply, the quotas per source of supply and numerous other parameters in the quota file.

During the planning run, the system determines the sources of supply according to the quota file and assigns the procurement proposals to the sources of supply. 

In external procurement, the procurement proposal is allocated to the appropriate vendor. This vendor is copied to the purchase requisition.

For every procurement proposal with a quota arrangement, the system updates the quota file, so that the quota arrangement is always based on the current situation.

Two procedures are available:

- Allocation quota arrangement: every lot is assigned to a source of supply 
- Splitting quota arrangement: a lot is split among various sources of supply
- Further functions are also available for controlling quota arrangements. For example, you can set a maximum release order quantity that defines the maximum delivery capacity of one particular vendor.

In Summary:

The quota arrangement is an instrument used in sourcing administration i.e it basically divides the total requirement of a material over a period among certain sources of supply by assigning a quota to each source. The quota specifies which portion of the total requirement should be procured from a given source. 

If a quota arrangement exists for a material, it is taken into account in the source determination process.

It is specified for a certain period. The existence of a quota arrangement does not involve the apportioning (among different sources) of an individual material requirement (that is the quantity set out in an individual purchase requisition). The entire requested quantity in a requisition is assigned to one source under the quota arrangement. 

If you have maintained a quota of 60:40 say between two vendors then the system will first assign the requirement to the source with quota score of 60 fully, then, once this supply quantity is fullfilled it will move over to the other source having quota of 40.

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