How S/4HANA Can Help You Make Supply Chain Promises You Can Keep
Not too long ago, buying a bulky item that did not fit into the trunk of your car was anything but convenient. You had to walk into a store, pay for the item, and then call customer support to arrange a delivery window for your new purchase – which, unfortunately, took anywhere between a few days and a couple of weeks. On the promised day of the delivery, your item was more likely not to arrive as promised due to a delivery conflict. Already irritated about the situation, you call customer support again and schedule a new delivery time. Sounds familiar?
Luckily, these days are quickly becoming a thing of the past. Customers are no longer willing to buy a product without knowing the exact hour it will be delivered. If next-day or in some cases even same-day delivery is not possible, there are other competitors just a click away for the customer to consider.
Assigning a delivery time to a customer’s purchases is called order promising or available to promise (ATP). Typically, this is a service that the supply chain function offers the sales organization. The underlying principle of this process is to verify if the materials and resources required to deliver on a customer’s request are sufficient.
The concept of ATP may sound simple, but the process can become complicated very quickly. Some businesses must assess multiple plants located in different geographical regions that can service an order. Others need to determine whether an out-of-stock product or material can be replaced with an alternative. And a few may want to give more-strategic customers higher priority in the order-promising hierarchy. All these factors and many more have to be taken into account when committing order to customers – otherwise, you run the risk of breaking that delivery promise.
Available to promise and classical ERP
For years, enterprise resource planning (ERP) systems handled ATP capabilities. Although the approach was easy to use and implement, it did not offer the breadth of functionality most businesses needed to keep with an increasingly digitally empowered customer base. For example, availability checks could only be done for a combination of an individual product and plant. Cross-plant checks and product substitutions had to be done manually. Optimally, this capability needed to be automated or modeled into the ERP system.
Companies, which required this advanced order promising functionality, relied on secondary solutions – such as the SAP Advanced Planning and Optimization (SAP APO) component or other third-party solutions. Needless to say, this strategy introduced a high degree of complexity to the IT infrastructure and the business users. Having two systems to maintain – instead of just one – creates a whole new set of problems for data quality and latency.
Such technology limitations, rooted in the underlying classical database of ERP, forced most companies to compromise on the service their customers wanted for the service that was available. They could either deal with the narrow capabilities of ATP in an ERP system or put up with the added complexity of a standalone advanced ATP solution. It’s a perfect example of being stuck between a rock and a hard place.
No more compromises
With SAP S/4HANA, companies no longer need to make these concessions. In fact, they can benefit from the best of two worlds: an advanced ATP solution and a simplified IT architecture.
The 1610 release of SAP S/4HANA introduced advanced ATP functionality directly into the digital core without the need to deploy additional solutions. This direction significantly simplifies the IT team’s job because it is no longer responsible for maintaining separate back-end systems. Plus, business users do not need to jump from screen to screen to complete an availability check. More important, supply chain accuracy and performance are tremendously enhanced.
Next-generation backorder confirmation strategies
In addition to consolidating advanced ATP functionality with SAP S/4HANA, companies can optimize backorder processing (BOP) confirmation strategies. As explained in this 2 min video, BOP is a critical process within ATP scenarios because it aligns the order-promising process with business rules to determine which orders should be shipped first.
As more companies move their commerce transactions online and the expectations of new millennial shoppers are shaped by services that resemble Amazon Prime, enterprises have no choice but to reexamine their order-promising capabilities.
Does your business rely on basic ATP capabilities because you didn’t want to deploy another enterprise solution like GATP in SAP APO? Or are you using an advanced ATP secondary solution and handling all the complexity that comes with it? Either way, now is the time to reconsider your order-promising strategy.
A picture is worth a thousand words
Check out this infographic to compare ATP checks in the classical ERP model and advanced ATP checks in SAP S/4HANA.