Supply protection: reserve stock for specific customers and markets
Available-To-Promise is one of the most critical business functions in a supply chain. The calculation of the ATP quantity is executed in objects like sales orders, stock transport orders etc. It enables you to match supply and demand, make feasible delivery promises and improve customer satisfaction and service levels.
Sometimes criteria other than sales order sequence determine which orders you deliver first. Perhaps, you just want to reserve quantities and ensure supply to specific customers or markets.
Until recently, this was difficult in Available-To-Promise. As of the releases SAP S/4HANA 2020 On-Premise and Cloud 2011, Supply Protection (SUP) is available as additional functionality in SAP’s advanced Available-To-Promise (aATP). This new functionality allows you to protect quantities and prioritize the demand. SUP supports sales orders, stock transport orders and contracts, and is fully integrated with other aATP functionalities like Product Allocation (PAC), Product Availability Check (PAL), Backorder Processing (BOP) and Alternative-Based Confirmation (ABC). In this article, I summarize what you need to know about SUP.
Benefits of supply protection
By making sure that the stock is protected, you can improve commitments to customers. Supply protection ensures supply to your most important markets, customers and distribution channels. By prioritising important segments, profitability may increase as well.
Supply protection variants: core versus prioritized
There are two ways to protect stock quantities:
- with core or horizontal supply protection, you protect complete groups against each other.
- with prioritized or vertical supply protection, demands from a lower priority group must respect protected quantities of higher or equal priority groups. Demands from a higher priority group do not need to consider protected quantities of lower priority groups.
Core supply protection
The goal of core or horizontal supply protection is to protect complete groups against each other. Basically, with this methodology, you make sure that each group keeps its protected quantity.
Imagine that France (FR), China (CN) and Australia (AU) are important export markets for your company. Horizontal supply protection between FR, CN and AU will guarantee a minimum stock quantity for each of these markets. It cannot be offered to other markets.
In the example below, you have 7,000 pieces in stock. 6,000 pieces are protected, as FR, CN and AU markets enjoy horizontal supply protection. 1,000 pieces can be used for other markets.
Plant 2510 – Distribution Center TVC – Material Porthos12
Protection also means restriction. Protecting quantities implies that groups must respect quantities allocated to other groups.
Prioritized supply protection
With prioritised or vertical supply protection, you can define subgroups with different priorities. As a lower priority subgroup, you must take into account the quantities reserved for subgroups with a higher priority. In case of supply shortages, a subgroup can order more than its protected quantity, even if that is at the expense of the protected quantity subgroups with a lower priority.
Plant 2510 – Distribution Center TVC – Material Porthos12
In the example, Internet sales has a higher priority than retail sales. Internet sales has a protected quantity of 1,400 pieces for France. Of 7,000 pieces available, Internet sales in France may consume up to 3,000 pieces: 1,400 protected for Internet sales + 600 protected for retail sales (provided that Internet sales has a higher priority than retail sales) + 1,000 pieces in ‘free’ stock. In this case, stock for retail sales is not protected against requirements from Internet sales. Internet sales can lead to insufficient stock availability for retail sales.
Supply protection objects and groups
You can define supply protection for objects and groups.
- An object is a specific material/plant combination with a planning horizon. In the example above, there are 3 supply protection objects:
- Plant 2510 (Distribution Center TVC) – Material Porthos12 and Destination country FR
- Plant 2510 (Distribution Center TVC) – Material Porthos12 and Destination country CN
- Plant 2510 (Distribution Center TVC) – Material Porthos12 and Destination country AU
- A supply protection object consists of one or multiple supply protection groups. Supply protection object ‘Plant 2510 (Distribution Center TVC) – Material Porthos12 and Destination country FR’, for example, has 2 supply protection groups: Internet sales and retail sales.
- If there is only one protection group, then there is only core protection. With multiple supply protection groups in the supply protection object, vertical protection is active.
The general aim of supply protection is to protect quantities for a certain time. It could well be that quantities need protection only in certain periods or seasons. You can define time buckets corresponding to the requested delivery date in the order. If the quantity is not fully consumed at the end of a time bucket, it will expire.
Calculation and consumption
As you can see in the examples, the calculation takes into account the protected quantities of other supply protection objects, the restrictions within vertical supply protection objects, and the time buckets. Each consumption of a protected quantity will reduce the restriction.
Even if the protected quantity is fully consumed by a certain market, ATP commitment is still possible as long as you have freely available, not protected stock. With supply protection, you assign a minimum quantity, unlike with production allocation, where a maximum quantity is assigned.
For the calculation of the restriction, only the reduced protected quantity is considered. A confirmed sales order will reduce the remaining stock and the remaining supply protection. If sales order items are cancelled, the consumption will be deleted. The remaining protection quantity will be adapted.
Now let’s look at the screens and show you how this works in real life. These are the quantities and priorities that we want to apply:
First, we dive a bit deeper into the supply protection objects. On the screen below, you see detailed information about the protection objects and the totals of protected and consumed quantities.
If you go to the details for supply protection object Australia (AU), for example, you can see the prioritization of the distribution channels.
If you click on the Supply Protection Group line, you can find the details and the time buckets.
Big order from France!
Now let’s simulate an order for a French customer. He orders 5,000 pieces through distribution channel 10 ‘Retail sales’.
Even though you have 7,000 pieces in stock, only 1,600 can be confirmed: 600 pieces protected for retail sales in France + 1,000 pieces in free stock. The rest is protected for the other supply protection groups.
For Internet sales to a French customer, 3,000 pieces would be available: 1,000 free stock items + 600 pieces protected for retail sales (lower level priority group) + 1,400 pieces for Internet sales to a French customer.
After saving the Internet sales order, you can check the consumed protection quantity and analyse the impact.
3,000 pieces have been consumed even if only 2,000 pieces were protected. If you click on the protection group, you get more details for follow-up, such as information about the time buckets, and the list of sales orders that consumed the quantities.
Are you getting started with SUP? Then I have a few more tips and tricks for you!
- Make sure you activate supply protection in the scope of the availability check for the relevant checking rules.
- Keep it simple. The more logic, the more impact on transparency. Avoid overprotection!
- Mass Data – Use the API (API_SUPAVAILYPROTPLAN_G4BA) to import data.
- Try to protect only minimum quantities and not the complete forecast quantities.
- Protect minimum quantities and focus on the protection of important groups. A protection level that is too high can lead to overprotection.
The functionality is powerful and easy to use. This could be very useful for companies that occasionally have shortages and need to reserve goods for certain customers or markets.
SAP Help – Supply Protection