So, I can answer my own question. After seeing this occurring randomly I knew it wasn't a setting issue. Turns out was training.
Went back to order entry folks who sent me screenshots of their process. At line entry, an MRP screen comes up to advise if inventory is not available for order. Some folks decided to hit F16 (procure) to get by it. That option will create a PO tied to the customer order. All our items are MFG, so MRP failed to create PO, and defaulted to creating production order proposal. All production was then locked to ship only against that sales order.
Problem solved and since I'm a consultant, $$