Item rebuild and MRP

Hello All,

I have a case study connected with Item rebuild and MRP.

There are two locations - WAREHOUSE & PRODUCTION.
Sales Orders use WAREHOUSE location.
Production Orders use PRODUCTION location.

There is an Item A. It is being produced. We have two SKUs connected with Item A:
WAREHOUSE location: Replenishment System = Transfer Order from PRODUCTION location, Reordering Policy = Order.
PRODUCTION location: Replenishment System = Prod. Order, Reordering Policy = Order.

There is an Item B. It is being produced.
We have two SKUs connected with Item B:
WAREHOUSE location: Replenishment System = Transfer Order from PRODUCTION location, Reordering Policy = Order.
PRODUCTION location: Replenishment System = Prod. Order, Reordering Policy = Order.

Item A is one of the components in BOM of Item B.

We want to produce Item B using Item A. Item A is already in WAREHOUSE location (available, not reserved against anything).

As the Reordering Policy is Order, system will suggest new supply. In that case - to produce needed component - produce Item A. But we do not want to produce it - we have in on stock, in WAREHOUSES location so we want to use it.

Scenarios which have been considered so far:

Adding new location on which rebuilds will be done:
Pros: MRP to be used with new SKUs
Cons: Adding and handling virtual location

Skip planning via MRP - create Production Order for Item B manualy and create customization which will create automatically new Transfer Order and create reservations.
Pros: No need of extra location
Cons: Manual work with creating Production Order, Cannot steer the process as it is possible with SKUs

Such a rebuild is not a standard process (if would be - Item A will remain in PRODUCTION location) but still, we would like to stay with planning it via MRP.

We would like to stay with Order Reorering Policy too..

Did anyone have similar scenario to handle? Do you have any ideas how to rearange the setup?
Any suggestions and thoughts will be much appreciated.

Thank you,
Katarzyna Rola