Available-to-promise (ATP)

Available-to-promise (ATP) is a business function that provides a response to customer order enquiries, based on resource availability. It generates available quantities of the requested product, and delivery due dates. Therefore, ATP supports order promising and fulfillment, aiming to manage demand and match it to production plans. Available-to-promise functions are IT-enabled and usually integrated in enterprise management software packages.

 However, ATP execution may need to be adjusted for the way a certain company operates. A fundamental distinction between ATP functions is based on the push-pull strategy. 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. Gross ATP represents the total available supply, Net ATP represents the supply remaining to support new demands, after existing demands have been accounted for.

 Pull-based models, on the other hand, dynamically allocate resources in response to actual customer orders. This means that pull-based ATP is able to balance forecast-driven resource replenishment with order-triggered resource utilization, but because resources are allocated with each coming order, the process will yield myopic results.

 ATP functions can be executed in real time, driven by each individual order, or in batch mode – meaning that at a certain time interval, the system checks availability for orders piled up in that period of time. The process is triggered by the need to check resource availability before making a commitment to deliver an order. For example, ATP calculation using ERP software depends on the level of “stock, planned receipts (production orders, purchase orders, planned orders and so on), and planned requirements (sales orders, deliveries, reservations, etc.)

SCM and ATP

Available-to-promise (ATP) is an important concept in supply chain management, meaning to quote an available quantity and a delivery date for an order from a customer. There are various methods and levels of determining the quantity and delivery date depending on circumstances.

‘ATP (Available to Promise)’ may literally mean “delivery commitment limit” but probably the closest word used in the Japanese manufacturing industry is “delivery quotations”. In other words, ATP information contains quantities and due dates for which delivery can be committed. If you can determine how you allocate (schedule) materials and resources such as machines and workers to actual demand and forecast demand, you can quote delivery dates based on that information.

 “Real-time ATP” means to create a production schedule in real time even for one order (speculative demand or an inquiry) using SCM software and according to the operation capacity and material inventory constraints of the supply chain.

 “Delivery quotations” is an important concept in Supply Chain Management (SCM). For ATP in cases of Make to Stock (MTS) where finished goods inventory exists, you need to allocate the inventory for an order and calculate the delivery lead time. In cases of Make To Order (MTO), you need to determine the production lead time based on a schedule within the range of usable parts, materials and resources, and determine ATP.

 When a sushi chef receives an order for delivery of sushi, he instantly determines (processes information) whether the ingredients (materials) are available, which worker (resource capacity) is available, and which vehicle, bicycle or motorbike, should be used for delivery, and determines firm ATP about a due time and quantity such as “an hour and a half later at 7:30” for “5 sets of special sushi course”.

 Depending on production patterns from Make to Stock (MTS), Assemble To Order (ATO), and to Make To Order (MTO), there are various levels for calculating ATP. For example, calculating Available-to-promise (ATP) for sushi orders theoretically includes the lead time of purchasing ingredients and catching the fish. Therefore, the lead time needs to be calculated considering the wait time and setup time that can be a factor of inventory under constraints of operation capacity and materials, which are the target for supply chain management.