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Available to Promise

- Extract from "Business Excellence" by Phil Robinson

From chapter 3 - Master Production Scheduling

3.4) Available to Promise (ATP)Click to purchase Business Excellence

The available to promise calculation is a key component of the master scheduling process. It is the means by which we are able to give reliable delivery promises to customers. The calculation looks at each time period from one point of supply, an MPS (Master Production Schedule) receipt, up to the period before the next point of supply. In each of these time periods (or "windows") the total MPS quantity available is subtracted from any actual demand. If the actual demand (orders) exceeds supply in any window, the negative quantity is subtracted from the previous available to promise. On hand quantities are added to or taken as a point of supply in the first period. There is one available to promise figure for each supply, on-hand stock or MPS receipt. The calculation rules are as follows:

  1. Do not include any forecast demand.
  2. Work from the future in to the present.
  3. Consider each "window" from one point of supply up to the next point of supply separately.
  4. In each window ATP = MPS - (the sum of the actual orders)
  5. In the first period only, add the on hand quantity to the MPS
  6. If the result of the above calculation is negative, the available to promise is zero and the negative quantity is passed back to the previous supply window

The only place it is mathematically possible to have a negative available to promise is in the first period as this quantity cannot be passed back. A negative available to promise means that more production has been committed to customer orders than is available. It is important that such a situation is corrected as early as possible either by re-scheduling a customer order or, preferably, by increasing the supply of that item.

It is the total family quantity that is authorised by the sales and operations plan so that a negative available to promise on one item can often be corrected by moving production from another member of the family. The earlier that such a change is made the easier the change will be. The skill of the master scheduler is to juggle the master schedule quantities on the family members to satisfy demand but keep the total family production to the approved sales and operations planning quantities. The juggling of product from one member of the family to another will maintain the stability of the manufacturing unit but can cause disruption in the material planning of the unique components for the changed members of the family so this juggling should carried out with this in mind.

mpshorizontalThe available to promise calculation is illustrated in the plan for part number 123 shown. Working as we said from out to in, in day 8 there is a supply quantity of 20 (MPS) and there are no orders this far out so all 20 are still available to promise. In day 4 there is actual demand of 8 and an MPS supply of 20 so there are 12 available to promise. Between day 1 and day 3 there is actual demand for 5 which has to be covered by the on hand balance of 15 so there are 10 available to promise in day 1.

The beauty of the available to promise calculation is that it effectively reserves product for a customer's order from the nearest point of supply. This leaves any unallocated earlier supplies available for customer's orders that arrive later but are wanted earlier. Traditional allocation systems tend to allocate supply on a first come first served basis which does not always make best use of supplies. It is not, of course, necessary to ship the production that has been reserved, shipments are still made from the oldest stock to maintain stock rotation.

In this illustration, orders (actual demand) have been received for 13 units. The on hand balance is 15 but there are still 10 available to promise in day 1 as the order for 8 will be satisfied from the supply in day 4. The available to promise approach can therefore improve customer service without additional stock.

mpsverticalAs the orders are received, they have consumed the earliest available forecasts in these examples. This is the normal method of forecast consumption. The way the forecast is consumed is vitally important so is discussed in more detail in the section under the heading "Managing Customer Demand" below.

Each ERP systems has its own way to display the MPS report. Many systems these days show the dates in a column rather than a row as the first illustrations. The MPS line may be called scheduled quantity or receipts, the available stock balance can be called available or stock but although the format may differ the basic principles remain the same.

Some planning systems have the option to show the available to promise figure cumulatively i.e. the available to promise in any day is the total available up to that day. An accumulated available to promise is not recommended for 2 main reasons:

  • In the above example it is easy to see that the order for 8 in day 4 is supplied by the MPS quantity of 20 in day 4 and the order for 5 in day 2 is supplied from the on-hand quantity. With an accumulated available to promise it is harder to see this relationship.
  • An accumulated available to promise does not show as clearly where there is available capacity. This is important if the demand for another member of the same family exceeds supply so production can be transferred to where it is needed.