By David Sweetman, Senior Marketing Director – SAP S4/HANA Digital Supply Chain
Ever increasing customer expectations balanced against cost pressures requires companies to be more strategic about how they fulfill demand and meet their promised dates commitments. Technology now enables the delivery dates promised from vendors like Amazon to be reliable. Manufacturers are more assured that components are being delivered on time with high certainly. But alas, this is not always the case, and it is not by luck whether you will receive your product on time, it will depend on many factors like how strategic you are as a customer versus others if product is short in supply and back orders need to be processed.
Managing accurate promise dates and decisions about which customers and orders should be prioritized to receive product cannot be left to broad rules like “first come first served”, it requires a more insightful approach coupled with accurate real time information to decide who will get available inventory when processing back orders. There can be a heavy cost associated with missing delivery on contracts that guarantee fulfillment. Conversely, selling surplus product opportunistically can be very beneficial. The secret is to follow a decision framework that considers factors carefully and consistently to maximize the benefit. It requires more than a simple review of available and inbound inventories and the production plan.
When products were more standard managing allocations was easier, but now the process is more complex as products are more individualized to a customer, have more varied production, more variable demand and multiple stock localizations. Poor decisions can have a ripple effect and require more consideration of the supply chain and customer importance.
SAP S/4HANA uses the speed and accuracy resulting from having of a single transaction and analytical database in memory to simplify the allocation decisions, the management of available and inbound inventories and the production plan. The advanced available to promise (aATP) optimizes business opportunities and increase business success.
The product allocation process in SAP S/4HANA deploys a very simple to understand “Winner –Gainer – Loser” concept. The terms are funny, but really highlight the concept of managing allocations and providing accurate promise dates well.
For example, you can set a “winner” priority against any customer or order that we consider strategic, where the cost of missing shipment could be high in current and future business. We may consider a “Loser” priority where we are selling surplus inventory at lower margin more opportunistically to a customer with less than perfect credit history or one willing to accept the benefits of a lower price in return for lower service levels.
Responding appropriately to rush orders with accurate available to promise response is imperative, as doing so without thought could put strain on customer relationship and services. Conversely, a well-considered response could help the company build and retain its market share in today’s highly competitive markets. The prioritized fulfillment sequence of rush customer demands can be reached with the aATP based on the fulfillment ability and the prioritization confirmation concepts.
The Advanced Available to promise functionality is yet another part of the depth of the S/4HANA Digital Supply chain
I would encourage you to learn more with the following information
Video of Advanced Available to Promise in 2 minutes https://www.youtube.com/watch?v=voXufPrfHw0
Advanced Available to Promise Technical review