What Is Project Pegging?
Also known as: LN pegging, project peg, pegged inventory
Definition
Project pegging in Infor LN links demand, supply, inventory and cost to a specific project, element or activity. Pegged material is reserved for that project only and its costs flow to the project budget, which is how contract-driven manufacturers segregate program inventory.
Project Pegging Explained
In standard manufacturing logic, inventory is anonymous: a part in a warehouse can satisfy any demand for that part. That model breaks down in contract-driven work. Material bought against a government program, funded by that contract and subject to its accounting rules, cannot simply be consumed by a commercial order because the planning engine found it convenient. Project pegging exists to make the ERP enforce that separation rather than relying on procedural discipline.
The peg is a reference to a project and, at finer granularity, to a project element or activity within it. It is carried on demand, on the supply created to meet that demand, on the inventory when it is received, and on the cost when it is consumed. Planning respects the peg: pegged supply is netted only against demand carrying the same peg, so a shortage on one program does not get quietly covered by another program's material.
Cost flow is the other half. Because the peg travels with the transaction, purchase, production and issue costs land against the project budget structure rather than into a general inventory pool, which is what makes program cost reporting possible without a parallel spreadsheet. Distribution rules handle the cases where one supply order legitimately covers several pegs, and transfers between pegs exist for the situations where material genuinely must be reallocated with a documented trail.
For aerospace and defense manufacturers this functionality is frequently the reason LN is selected in the first place. Contract accounting, government property segregation and program-level traceability are difficult to bolt on to an ERP that assumes anonymous inventory. The cost is complexity: pegged environments require planners, buyers and warehouse staff to understand that identical parts in the same building are not interchangeable.
Why It Matters
- Government and defense contracts frequently require material segregation that anonymous inventory models cannot demonstrate.
- Program cost visibility comes directly from the transaction flow rather than from reconciled spreadsheets.
- Pegging prevents one program's shortage from being covered silently by another program's funded material.
- The complexity is real, so training and process design must match the functionality or users will work around it.
In Practice
The most common operational friction is a shortage on one peg while identical parts sit pegged to another project. Users will ask to just take the part. Define an approved peg transfer process with authorization and a documented reason code before go-live, because if you do not, the workaround will be an unrecorded physical move that destroys both traceability and cost accuracy.
Frequently Asked Questions
What is the difference between pegged and anonymous inventory?
Anonymous inventory can satisfy any demand for that item. Pegged inventory carries a reference to a specific project, element or activity, and planning will only net it against demand carrying the same peg. Physically the parts may sit in the same warehouse; logically and financially they are separate, which is what contract and government property requirements generally demand.
Does project pegging slow down planning?
It increases planning complexity because netting happens within each peg rather than across all inventory for an item, which produces more planned orders and less natural pooling of supply. The operational effect is more purchase and production orders for smaller quantities. That is usually an accepted cost in contract manufacturing, where segregation is a requirement rather than an optimization choice.
Related Terms
Cost Component
A cost component in Infor LN is a bucket that classifies part of an item's cost - material, operation, subcontracting, surcharge or general cost - so standard and actual cost prices can be broken down, rolled up through the bill of material and compared.
Enterprise Planning
Enterprise Planning is Infor LN's supply planning engine. It runs master planning and order planning across plan items, sites and companies, generating planned orders and reschedule signals from demand, inventory, lead times and the supply strategies defined per plan item.
LN Item Code
An LN item code is the unique key identifying a part, product, service or cost item in Infor LN. It is carried on every order line, bill of material and inventory record, and its length and segmentation are fixed in the data dictionary before go-live.
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