ATP produce strategies in supply chains that help to manage the stability of the supply chain functions. When a new order is received, CTP will provide a realistic date to fulfill that order. This helps the company meet its current commitments while avoiding changing production orders. Companies that use the available-to-promise model effectively can see increased profitability and strong growth.

• The increased number of variables that CTP introduces into business operations may benefit some businesses, and prove distracting for others.
• Alongside these benefits, available to promise inventory tracking is also crucial for several supply chain strategies such as just-in-time delivery, omnichannel fulfilment, continuous flow, and so on.
• This is particularly useful if you expect to see a major uptick in sales (say, around the festive season) or a massive drop (seasonal or otherwise).

Available-to-Promise vs. Safety stock

It’s a key concept in supply chain management that can help your business reduce production and holding costs, while still meeting forecasted demand. Logiwa’s WMS can generate ATP reports, helping businesses maintain lean inventory while enhancing customer experience. By providing accurate, real-time information on available inventory, Logiwa can facilitate efficient order fulfillment and inventory management. As we explore the concept of “Available to Promise” (ATP) in this article, you’ll learn how this game-changing strategy in supply chain management can optimize your inventory and maximize profit.

However, if the requirement refers to a storage location, the system must also check for the storage location. Therefore, this is more favored than the pull strategy since pre-planning and preparing for unexpected production requirements. Here, quantity on hand means the number of readily available products.Total supply means the number of products produced.Total demand means the number available to promise atp of products that customers are ready to purchase. ATP can increase accuracy in inventory prediction and control by providing a real-time, data-driven estimate of available inventory for sale. This can help prevent overstocking and understocking, leading to improved inventory management.

One of the main differences between safety stock and an ATP approach to inventory management is the fact that ATP numbers can change, while safety stock figures typically remain the same. A company’s safety stock is often a set amount of extra inventory, while its ATP represents a number of products that can vary as its formula’s variables change. Companies without significant labor costs or several possible manufacturers can minimize supply chain hassles when using ATP processes.

How Does a Warehouse Management Software Calculate Available to Promise?

• ATP is essentially an inventory of what a company can able to offer customers in terms of products or services.
• For example, Toyota has utilized ATP techniques to enhance their just-in-time production process, reducing inventory costs and increasing efficiency.
• The formula for the pull strategy is the same as the push strategy, with a slight difference.
• ATP focuses on existing stock availability, while CTP assesses the feasibility of fulfilling orders through production or procurement.
• Requirements always reduce the ATP quantity of the stock or receipts that are the closest to them when looking into the past.

As the case may be, unconfirmed requirements are also taken into account when calculating the cumulative ATP quantity. This means that not only confirmed requirements, but also unconfirmed requirements reduce the cumulative ATP quantity. A new sales orders can then only be confirmed if the sum of the receipts exceeds the sum of the requirements quantities. If scheduling is activated, the material availability date is first determined through backward scheduling, starting from the requested delivery date. The material had to be available on the material availability date, because only then can the shipping process start.

Average Order Value: 5 Tips to Increase it + AOV Formula

By analyzing historical ATP data and considering factors like seasonality, promotions, and market trends, you can make more accurate predictions about future demand. From there, you can fine-tune your production and procurement strategies, to maintain lean inventory and stay one step ahead of the game. This shortage can result in problems such as delivery creation being blocked. When this process is automated with efficient ERP systems, it helps to analyze the customer demands and adjust the required production schedules accordingly. One of the primary hurdles is ensuring data accuracy, as inaccurate inventory counts can lead to flawed decision-making, resulting in stockouts or overstocking.

The better everyone understands the system, the fewer obstacles you’ll experience down the road. By having leaner inventory management operations, businesses can reduce their markdowns and increase stock turnover rate, which improves not only overall revenue but also gross margins. As its name implies, available to promise refers to the available quantity of inventory a business can commit to selling in the near future. For example, ecommerce retailers use the ATP calculation to determine your delivery due date.

Software integrationChoose an ATP software solution that seamlessly integrates with your existing systems, such as your ERP, WMS, and e-commerce platforms, to provide a holistic view of your inventory. Calculate ATP by adding on-hand inventory to expected supply, then subtracting allocated stock and backorders. Statements about the availability situation of a material can only be made based on the cumulative ATP quantity. Available-to-promise refers to extra retained inventory necessary for delays, but it can also mean an amount below safety stocks, depending on how much you have. ATP thinks about material availability, but capable to promise (CTP) is about fulfilling what you’ve already committed.

It is the sum of ATP in the previous period and the MPS minus the considered backlog. As a warehouse operator or 3PL provider, selecting the right warehouse management system (WMS) is one of the most critical decisions for growth. The right WMS platform keeps orders flowing, optimizes labor, and helps you scale without adding unnecessary overhead. It indicates the amount of inventory available for sale, not including allocated inventory. Work in process inventory means inventory that is partially completed or in a stage of production. Learn your work in process formula and how to manage it by reading this blog.

Available to Promise (ATP) Definition, Formula and Example

ATP (Available to Promise) inventory refers to stock that’s immediately available for customer orders, while non-ATP inventory encompasses items reserved for other purposes or not yet ready for sale. For example, during the back-to-school season, items like lunchboxes, notebooks and backpacks sell quickly in stores and online, requiring raid planning and replenishment across channels. Here is where the “available to promise” or the ATP inventory comes into play. This type of inventory is the kind that has the projected amount of inventory a business needs to have in stock. The amount is regarding the number of orders they have had and are ready to sell.

If the material availability date calculated by backward scheduling is in the past or if the material is not available on the material availability date, the requested delivery date cannot be confirmed. SAP S/4HANA then tries to determine the next possible delivery date(s) using forward scheduling. The earliest point in time at which the material is available, is the or is a material availability date. This is the starting point for forward scheduling to propose the or a possible delivery date. This results in an empty inventory on January 3rd with 150 products to be added to the available to promise supply chain. This means that orders for 30 products will get delayed until the next supply cycle.

If the material is not available in the original plant, the plant in the order item can be replaced manually by another plant, if Advanced Available-to-Promise (aATP) is deactivated. If Advanced Available-to-Promise (aATP) is activated, the plant of the order item can be replaced automatically as part of Alternative-Based Confirmation (ABC) by one or more plants. However, the plant of the order item can also be specified manually during processing. While it is not a silver bullet for solving all supply chain problems, it can be a valuable tool in your arsenal. A positive value means more items are needed, while a negative indicates less than desired amounts, which would cause shortages if not dealt with immediately.

ATP Inventory Management and Analysis

Tracking your Available-to-Promise inventory can give your business granular insights into your supply chain and production schedule so that you’ll be able to match inventory levels to customer demand. You can make informed decisions about when to reorder products and how much to keep in stock. This optimizes your working capital and reduces the costs of holding excess inventory. Ultimately, ATP empowers businesses to meet customer demands promptly, improve operational efficiency, and maintain a competitive edge in the market. Knowing the advantages of ATP inventory, let’s see some of the common and popular practices that every supply chain needs to streamline its operations.

To stay ahead in the competitive market, directors should understand that ATP is not just about maintaining balance but also about agility in operations. Accurate ATP figures arm sales teams with reliable information so they can commit to customer orders with confidence, thus improving order fulfilment rates and enhancing customer satisfaction. The calculation considers various factors such as current on-hand inventory, scheduled receipts from suppliers, customer backorders, and forecasted demand. Available to Promise (ATP) inventory defines the uncommitted portion of a company’s inventory and planned production, which is available for customers to order. It’s a dynamic figure that changes with incoming orders and completed production.

This collaborative approach can lead to stronger supplier relationships and a more resilient supply chain. Additionally, ATP inventory management enables businesses to optimize their production schedules and supply chain processes. With a real-time view of inventory and demand, companies can adjust their operations to minimize costs and maximize efficiency, ensuring a responsive and agile supply chain. One of the key advantages of ATP inventory management is its ability to prevent stockouts and overstocking. According to a report by Supply Chain Digital, stockouts can lead to a 4.7% loss in sales revenue, while overstocking ties up capital and increases the risk of inventory obsolescence. By maintaining precise control over inventory levels, ATP helps businesses balance supply and demand, enhancing both profitability and customer satisfaction.

Harness the power of cutting-edge inventory management systems to elevate your business’s ATP capabilities. By implementing tools like Microsoft Dynamics 365, companies gain the edge in generating precise ATP reports that streamline lean inventory and optimise production schedules. This involves training individuals who can adeptly navigate your ERP systems and warehouse management software to keep pace with real-time inventory demands. The collective know-how of these personnel fortifies your supply chain, equipping you for both routine operations and unexpected challenges.

By leveraging real-time data and demand forecasting, these companies have been able to maintain optimal inventory levels and enhance their overall supply chain performance. Positive Available to Promise (ATP) supply chains operate with efficient inventory management, ensuring goods are consistently available to fulfil customer orders. They maintain optimal stock levels, minimising stockouts and delays, enhancing customer satisfaction, and fostering trust. This system facilitates accurate order promising, meeting delivery commitments reliably and potentially gaining a competitive edge. ATP inventory management fosters better collaboration between businesses and their suppliers. By sharing real-time inventory data, companies and their partners can work together to optimize supply chain operations, reduce lead times, and ensure timely delivery of products.

To meet customer expectations and to prevent stockouts and backorders, the retailer must regularly and accurately estimate how much stock it will have on hand in a given period of time. Reduced shipping errorsReliable stock information provided by ATP minimizes the risk of incorrect shipments or product substitutions. Communicate its importance with all the team members and let them know how it influences them. Give a chance to inventory planners, customer service team members, supply chain leaders, and warehouse managers to suggest input during the ATP enlisting process. Here, the quantities and delivery due dates are derived based on the demand that has been forecasted. Then, the inventory and operation capacities are deduced based on regular production trends.