One Key Practice to Help Build Trust with Your Customers

If we assume that the ability to deliver the perfect profitable order is the primary goal of any supply chain, then the ability to accurately predict when a customer order will be available is clearly an important capability. For make to stock (MTS) environments, this functionality is called Available to Promise (ATP), and Capable to Promise (CTP) in a make to order (MTO) environment. Here is how they work:

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Available to Promise (ATP)

When a customer places an order, they would like to know when they can expect to receive it. That shouldn’t be too much to ask for, should it? I can tell you that most of my clients start between 40 and 60 percent on time performance against that commit date. Even airlines might be disappointed with that performance level.

Available-to-promise (ATP) is one practice that can improve that performance quickly. It calculates the availability of the item when the customer requests it.

?As you can see from the diagram above, customer orders gradually consume inventory on hand and then the future production plan. If there is insufficient ATP, then the supplier will need policies in place to know what to do next. Sometimes the supplier defines a standard lead time per item, which they can use to calculate when to promise the order.

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As with all software functionality, ATP requires accurate data to provide an accurate commitment to the customer. In this case, it requires on-hand inventory, open sales order, and incoming delivery dates to be accurate.

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What I described above assumes that you have an MTS inventory strategy. In other words, the plan is to always keep inventory on the shelf, waiting for customers to place their orders. But what if you have an MTO strategy? In other words, you wait for your customers to order first before you commit to producing more inventory. Obviously, ATP is useless in this environment, as there will never be available inventory to promise. Not to worry, I have one last trick up my sleeve that can address this issue. It is capable-to-promise (CTP).

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Capable-to-Promise (CTP)

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With CTP, we are promising against available resources, not available finished goods. In an MTO environment, it is resources, not finished goods inventory, that we promise against, and new customer orders consume the resources required to build a product.

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Now, this CTP functionality is not for rookies. It requires much more data to calculate availability than ATP. For example, it requires that available capacity be known, which in turn requires accurate item routings, work center data, etc. There is more required, but you get my point. As they say, “Don’t try this at home” unless your organization is committed to managing this data consistently.

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It is possible to pull this off manually, but, unless you order volume is light, I would advocate seeking this functionality in your enterprise system.