@Edie Below is the detailed explanation from the documentation:

Define Automatic Reservation

Explanation

This activity is used to define the rules for the automatic reservation functionality. In this page it is possible decide if automatic reservation should be pure FIFO, handling unit optimized or perhaps consider putaway zone ranking. It is also possible to define if receipt dates for FIFO consideration should consider date and time or only date. Furthermore you can decide if created transport tasks with destination move to inventory, should be considered as available to reserve from.

Automatic Reservation Priorities – presets
The application includes five flexible prioritization possibilities in the automatic reservation process. It will be used to sort out in which order to search for and find available items to reserve. These five settings could be combined or leaved out but at least one prioritization value is needed to be set. Below a list of example presets which can be used to understand the impact of the setup possibilities:

Default when creating site:
Priority 1: Highest Putaway Zone Ranking
Priority 2: Earliest Expiration Date
Priority 3: Earliest Receipt Date
Priority 4: Largest Quantity on Handling Unit
Priority 5: Outermost Handling Unit
Handling Unit Optimization: Enabled
Receipt Date with Timestamp: Disabled
Reserve from Transport Task: Disabled

Prioritization is using zone ranking, expiration date and receipt date and HU optimization, i.e. trying to pick the most suitable HU found. If expiration date is null on part records, it will be handled as unlimited expiration date. Handling Unit Optimization checked means that the reservation looks at the available stock from a HU perspective meanwhile having it unchecked means the stock is looked at on a part level, even if the part belongs to a HU

Note that using handling unit optimized set with this combination means that the automatic reservation will always prefer to reserve complete handling units regardless of other setting in priority. So if highest putaway zone ranking is set as highest priority there could still be reservations made from outside the zone if a complete handling unit is found there but not in the highest ranked zone.

Pure FIFO
Priority 1: Earliest Receipt Date
Priority 2:
Priority 3 :
Priority 4:
Priority 5:
Handling Unit Optimization: Disabled
Receipt Date with Timestamp: Enabled
Reserve from Transport Task: N/A

This will prioritize items in order of the actual receipt to inventory, i.e. reserve the earliest received item first, using the timestamp of the receipt. This known as the FIFO principal and by combined it with timestamp parameter set to true means that it will be reserved in the order it was received on the level of seconds. The HU perspective is not taken in consideration meaning that stock is seen as parts only. Note that Handling Unit Optimization must be unchecked to get pure FIFO. If you reserve from created transport task this material will be evaluated from a FIFO perspective otherwise not.

Handling Unit Optimized
Priority 1 : Largest Quantity on Handling Unit
Priority 2 : Outermost Handling Unit
Priority 3:
Priority 4:
Priority 5:
Handling Unit Optimization: Enabled
Receipt Date with Timestamp: Disabled
Reserve from Transport Task: N/A

This definition indicates the most optimized setup for usage of HU. It will trying to pick the HU with the largest quantity, i.e. trying to reserve less HUs as possible (example: if the demand is 20 pcs, a HU including 20 pcs will be reserved in front of two HUs including 10 pcs each). It will also try to pick outermost HU in front of HU being a part of a structure (example: if the reserve demand is 10 pcs and there exists an HU with this quantity, this will be reserved in front of the same type of HU which currently is put on a pallet, i.e. the pallet is in this case the outermost HU). If you reserve from created transport task this material will be evaluated from a handling unit perspective otherwise not.

Note that using handling unit optimized means that the automatic reservation will always prefer to reserve complete handling units regardless of other setting in priority. So if highest putaway zone ranking is set as highest priority there could still be reservations made from outside the zone if a complete handling unit is found there but not in the highest ranked zone.

Expired first
Priority 1 : Earliest Expiration Date
Priority 2:
Priority 3:
Priority 4:
Priority 5:
Handling Unit Optimization: Disabled
Receipt Date with Timestamp: Disabled
Reserve from Transport Task: N/A

The setup should guarantee that items with the earliest expiration date will be reserved, no matters if it stored as pcs or part of HUs. If expiration date is null on part records, it will be handled as unlimited expiration date. The HU perspective is not taken in consideration meaning that stock is seen as parts only. If you reserve from created transport task this material will be evaluated from a expiration perspective otherwise not.

Note 1: When having Handling Unit Optimization unchecked, the prioritization values “Large Quantity on Handling Unit” and “Outermost Handling Unit” is not applicable.
Note 2: The Receipt Date with Timestamp is only applicable if prioritization value “Earliest Receipt Date” is used.

Furthermore, if you use putaway zone ranking and handling unit optimization you have the option to configure an alternative putaway zone ranking to be used at reservation of complete handling units by one demand line. For instance this implies that you can prioritize to reserve complete handling units in bulk zones prior to reserving complete handling units in the picking zone. This is enabled for certain handling unit types and the alternative ranking is entered in the putaway zone ranking.

Upon these prioritizations, there is a base sorting which is the fallback when all flexible prioritizations rules turn out to be equal in the specific case. These are a bit different depending if running with or without Handling Unit Optimization:

Handling Unit Optimized enabled:
1) Total Available Quantity of the requested part in Handling Unit
2) Least of Total Qty Required and Total Quantity available to reserve on the Location
3) Warehouse Route Order
4) Bay Route Order
5) Row Route Order
6) Tier Route Order
7) Bin Route Order
8) The handling Unit ID of the HU from we will do a partial reservation
9) The Lot/Batch No of the stock records
10) The Serial No of the stock records

Handling Unit Optimized disabled:
1) The Lot/Batch No of the stock records
2) The Serial No of the stock records
3) Least of Total Qty Required and Total Quantity Available to reserve on the Location.
4) Warehouse Route Order
5) Bay Route Order
6) Row Route Order
7) Tier Route Order
8) Bin Route Order

Prerequisites

The inventory parts and locations must meet the following prerequisites:

• The inventory location must be a picking location. The inventory location cannot be a floor stock, a manufacturing cell, an inspection location, a shipment inventory.
• The part must not be expired, i.e., the part must be current.
• The inventory part might be connected to a part availability control ID (in the Inventory Part In Stock page). If so, the availability control shall allow reservations.
• The inventory balance of the part at the inventory location must be higher than zero (0) after accounting for all current reservations. Note that created transport tasks can be considered as available to reserve depending on configuration on the site.