What conditions are “planned orders” created and converted?

Did you know the answer of the following questions frequently asked by the SAP interviewers to fresh SAP training completed consultants. 

• Under what conditions are “planned orders” created? 
• What may planned orders be converted to and how is that conversion accomplished?

Planned orders are always created when the system creates an internal procurement proposal. In the case of vendor procurement, the MRP Controller may create a planned order or directly create a PR. The next step for a planned order is to be converted to a PR so it goes to purchasing and is to eventually become a PO. A planned order can be converted to a PR using transaction code MD14.