Available to Promise Inventory Calculations OFI Your Partner for Supply Chain Education & Consulting

Implementing ATP processes effectively for your business can mean the difference between sustained growth and a stock that runs out of customers’ favorite products. Many inventory tracking systems can easily integrate with a warehouse management system (WMS), so you can track warehouse activity and inventory levels all in one place. This is useful if a business allocates inventory across channels or fulfillment centers.

Available-to-promise inventory tips

The available-to-promise model in action allows companies to stock enough products to maintain normal business operations, without having too much of one item at any given time. We have a scenario where we have committed to fulfilling multiple sales orders based on the quantities and inbound delivery dates outlined in a purchase order. However, the vendor has now informed you of a production delay, and only a partial delivery will be possible. Businesses never want to miss out on a sale or cast a skeptical eye on rosy forecasts, but overestimating demand can backfire terribly. It can lead to write-offs, flawed products, and angry investors that come as a consequence of overcommitting that is far worse for a business than higher stockout rates or lower service levels.

Cumulative ATP with a Look Ahead

Along with processes and monitoring KPIs, implementing an inventory management system or an ERP inventory system can help eliminate human error, save time, and track inventory in real time. While ATP is a demand forecasting term, “capable-to-promise (CTP)” is a more complex inventory metric that considers multiple parts of the ecommerce supply chain, including production and resource capacity. As a result, you need to update the confirmed delivery dates and quantities for both your sales and inventory orders to reflect these changes. With ATP forecasting, your supply chain can be one step ahead of the curve, anticipating your sales staff’s needs, creating a level of buy-in and trust that wasn’t possible before. An ATP supply chain offers the opportunity to stay in the available to promise atp sweet spot between in-stock and backordered, with items always available just in time for customers. As its name implies, available to promise refers to the available quantity of inventory a business can commit to selling in the near future.

How to calculate Available-to-Promise

Tracking your Available-to-Promise inventory can give your business granular insights into your supply chain and production schedule so that you’ll be able to match inventory levels to customer demand. You can make informed decisions about when to reorder products and how much to keep in stock. This optimizes your working capital and reduces the costs of holding excess inventory. ATP supply chains give businesses a competitive edge over slower, less advanced inventory management systems. This advantage is hard to create otherwise, giving customers flexible delivery options in a narrow time window and a high rate of customer satisfaction. Of course, inventory management software that uses ATP is much more complex than this, but the same principles apply.

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This means that the sales orders can only be confirmed if the sum of the receipts exceeds the sum of the confirmed quantities. If the material availability date calculated by backward scheduling is in the past or if the material is not available on the material availability date, the requested delivery date cannot be confirmed. SAP S/4HANA then tries to determine the next possible delivery date(s) using forward scheduling. The earliest point in time at which the material is available, is the or is a material availability date. This is the starting point for forward scheduling to propose the or a possible delivery date. Outbound delivery items usually have a storage location in addition to the plant.

For externally procured materials, a purchase requisition is created and the purchasing department is asked to order. If the material is produced in-house, or if both procurement types are possible, the MRP run generates a planned order that is then converted into a production order or into a purchase requisition. Otherwise, the customer requirement could be confirmed at the latest after the goods receipt of these receipts into unrestricted-use stock. However, backorder processing is necessary for this, as requirements (for example, sales orders) do not repeat the availability check. Understanding and using ATP is essential for modern business and supply chain management because it enables businesses to balance inventory levels with demand, minimizing overstocking and understocking. This leads to cost savings, better customer service, and improved operational efficiency.

Advanced information technologies and expanded logistics infrastructure are reshaping the global business environment. Buyers and sellers can now share information and exchange decisions in real time while products can be moved from place to place globally within days. In order to gain competitive advantage in the new business landscape, firms are redefining their business models not only to enhance back-end logistics efficiency but also to improve front-end customer satisfaction. While the basic principles of Available-to-Promise inventory management are essential for most ecommerce businesses, several advanced strategies can take your ATP processes to the next level. Reliable stock information provided by ATP minimizes the risk of incorrect shipments or product substitutions.

• Most companies fear losing customers if they fail to have an item in stock.
• Another common method for inventory analysis, capable-to-promise (CTP) refers to a system that forecasts customer demand to determine production levels.
• Depending on the characteristics of the requirement (plant, plant/storage location), the availability check is carried out at different levels.
• ATP contributes to improving customer satisfaction and profitability by ensuring the right amount of inventory is available to meet customer demand without overstocking.
• ATP is important for muscle contraction, nerve impulses, and chemical reactions in the body.

Looking for a better fulfillment solution?

• There are so many different ways to track inventory efficiently, but it’s highly encouraged to adopt a system to track ATP inventory.
• It’s important to note that available-to-promise inventory is different than “available to sell” inventory, which is another common inventory term.
• This article breaks down exactly what ATP is, how it works, and how you can put it into practice in your own business.
• In this article, we will discuss what Available To Promise (ATP) is and how it works.
• The cumulative without look-ahead procedure equals the ATP in the previous period plus the MPS, minus the backlog in the period being considered.
• ATP is a key molecule in the body that provides energy for many different cellular processes.
• Powerful software enables you to collect and use customer data that informs inventory processes.

These are going to be materials that do not expire and/or have a long market lifetime. The other assumption is that we only consider orders in periods where there is production. This may be valid in environments where there is a significant amount of changes to orders or when cancellations are common.

Using Available-to-Promise for omnichannel fulfillment

Sales orders 27 and 28 now have fully confirmed quantities, with a delivery priority of 2 (Medium). I created two sales orders, 27 and 28, with quantities of 100 and 50, respectively. When you assign several BOP segments to a single strategy, they will run in the order you set them up. In this part, you will take those BOP segments you set up earlier (in Step 1, where you configured them) and connect them to any of the available strategies, like Win, Gain, Improve, Redistribute, Fill, or even Lose. If a material is planned using Material Requirements Planning, requirements control the procurement of the material. The Check Material Coverage app also cannot be used for statements about the availability of a material, as it also does not show the cumulative ATP quantity.

Push-based ATP is based on forecasts regarding future demand – based on anticipation of demand, ATP quantities and availability dates are computed. A prominent example is the traditional determination of ATP based on the Master Production Schedule. The push-based approach is fundamentally limited by dependence on forecasts, which may prove inaccurate.