Available to Promise (ATP) is a concept used in logistics and supply chain management to determine the quantity of a product that is currently available in inventory and can be promised to customers for delivery within a specific time frame.
ATP is an important metric for businesses to track because it allows them to accurately set customer expectations and avoid overselling inventory. It is also used to plan production and transportation schedules.
What are the methods to implement ATP in logistics?
There are two methods an organization can choose to implement ATP:
Pull-based ATP is a method of calculating ATP that is based on actual customer orders. When a customer places an order, the business checks to see if they have enough inventory available to fulfil the order. If they do, the order is accepted and the inventory is allocated to the order. If they do not have enough inventory available, the order is rejected or backordered.
Push-based ATP is a method of calculating ATP that is based on forecasts of future demand. The business uses a forecast to predict how much demand there will be for each product over a given period of time. This forecast is then used to calculate ATP by determining how much inventory needs to be on hand to meet that demand.
Here:
- Stock = Available inventory of the item
- Orders = Sales orders
- Demand = Forecasted demand
- Supply = Monthly supply of the item
Summary of the key differences between pull-based and push-based ATP:
| Characteristic | Pull | Push |
|---|---|---|
| Basis of calculation | Actual customer orders | Forecasts of future demand |
| Inventory allocation | Inventory is allocated to customer orders when they are placed | Inventory is allocated to products based on forecasted demand |
| Advantages | More accurate reflection of available inventory | Less susceptible to forecast errors |
| Disadvantages | Can lead to backorders if demand exceeds supply | Can lead to overstocking if demand falls short of forecasts |
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