Available to Promise
The question often posed in different ways by individuals and commercial customers about their upcoming order is “how much and when can I get it”? The responsibility for answering the ‘when’ question lies with Customer Service, from calculations by Operations Planning, working with Procurement and Logistics – the Supply Chains group.
An accurate delivery promise is dependent on the planning process and the criteria used for order promising. Within the One Plan process, output from Sales & Operations Execution (S&OE) is the avenue to provide Customer Service with information concerning ‘when’. The action is called Available to Promise (ATP), which contains four levels:
Available in Stock (AIS)
- the item is available (and transport available) for delivery within a defined geographic area and lead time and for a defined period
Available to Promise (ATP)
- the item is scheduled within the current production or import planning period
Capable to Promise (CTP)
- items can be made available within a defined lead time based on:
- the next available capacity slot at the Constraint resource. This is for MTO and ATO type products
- the product can be planned if there is sufficient demand – for MTS type products
- the next available production run for the product group or SKU and/or storage capacity and resources availability
- intermediate components and materials are available within a defined lead time
Capable to Deliver (CTD) but dependent on the following:
- transport mode availability, capacity and schedules
- transport link capacity and schedules
- transport lead time and likely variability in the LT
- capacity at Nodes in the supply chain to accommodate the transport mode e.g. seasonal demands
The ability to provide ATP is an important element that sets an expectation of delivery for customers. To measure Order Reliability, compare the first ATP provided on an order to the actual delivery performance and chart the deviations by reason codes. To assist the ATP process and Reliability measures requires five dates associated with the order:
- the order request date,
- the order commit date,
- the current schedule date,
- the actual despatch date
- the actual received date
But can your ERP system support the dates needed to answer questions from customers and Operations Planning?
Is the ATP available and updated?
This is unlikely to be available in your organisation’s ERP system. The essence of Operations Planning for supply chains, designed in the 1980s, has remained much the same. Planning based on the segmentation of customers, suppliers and SKUs, operational capabilities and constraints is therefore usually not available. And the links between planning horizons at each planning level are difficult to use or non-existent.
The majority of companies do not have a Sales & Operations Planning (S&OP) process (they may have a monthly budget meeting, which is not the same). Data is therefore held within organisation silos and interoperability between applications is rare.
So, data about markets, advertising and new product introduction stays within Marketing and demand shaping activities concerning price and other trade promotions stays within Sales. Forecasts enter the ERP system at the Operational (S&OE) level and remain an operational issue. This results in increased Variability and reduced Reliability through the supply chains and a lack of forward planning decisions about the design of supply chains.
A solution – simplify
For too many companies, especially in the FMCG/CPG sector, the mantra is to be ‘Marketing driven’. New products and product line extensions, pricing, advertising and promotions with packaging modifications. All of which adds complexity to the business (and particularly the supply chains) but without analysis of whether the activities provide additional value for the customer/consumer. To assist with managing the added complexity, technology companies provide ‘solutions’ that also add to the complexity and rarely add value for the business.
However, this scenario is unlikely to change in the foreseeable future. So, to improve the assurance that the ATP is a valid measure for customers, the process under control of the Supply Chains group must be simplified. To achieve this commences with an analysis of customers.
Cost to Serve: an analysis to identify the costs to serve customers that enables a program to reduce the costs for identified customers.
Customer Segmentation: While the price of an item and the total value of financial transactions in a year are valid measures of importance, non-financial factors measures can also influence the business relationship. Examples are the type and importance of the products and/or services to the seller and the strategic importance to the buyer’s business of the customer. Strategic customers will have preference in Inventory Allocation and Available to Promise (ATP) policies.
One Plan unified data model must be promoted by Operations Planning. Work with application suppliers and internal IT to improve interoperability in applications, to accept and use data from other applications. Manage the allocation of finite capacity by pulling forward replenishment and orders to load factories
SKU forecast range identified by Probability, not a fixed number, to assist the buffer plans for finished goods inventory and inbound materials.
Modelling of scenarios, simulations and ‘what-if’ analysis to identify the probability of planning outcomes.
Work with Engineering to ensure that productive capacity is available through a preventative maintenance and ‘overall equipment efficiency’ (OEE) program.
Work with Production to enable shorter production cycles. Reduce the changeover time of equipment through a program of ‘single minute exchange of dies’ (SMED) and reduced capacity of holding tanks for liquids. Work with Production to be ‘effective’ (achieving the plan), rather than each work area being ‘efficient’. Actions taken to be effective can include:
- eliminate waste (ask the question: if not for what, can this be eliminated); simplify and combine,
- rationalise the number of SKUs, especially those that form the ‘long tail’
- reduce part numbers (are multiple types of a part needed e.g. screws),
- introduce a ‘postponement’ capability, to enable an Assemble to Order (ATO) finishing and packing process
- a program to train multi-skilled employees for higher Variability
The range of activities to simplify planning does not require more applications. However, for ATP to be effective requires support for a message or file based link to the ERP (or order management) system and for updates from planning in near or real-time.