When you first hear about Available to Promise, or ATP, you might think of something pretty complicated. It’s actually much more simple than you might think.
Available to Promise is an essential piece to managing your supply chain. ATP is the projected amount of inventory you have left available to sell, not including allocated inventory. Unlike safety stock, which is used to buffer a retailer should a flux in demand or delays occur, ATP is what you have available in the near future. Think of ATP as a numerical commitment to your selling channel or customer that a specific amount of inventory is available to sell.
Available to Promise is yet another calculation that depends on a number of factors such as the amount of inventory you currently have, the amount of sales orders you have per day, and whether a purchase order is coming in or not. The rules for calculating available to promise are pretty simple:
Unlike safety stock, which may stay at a stable allocated number, your ATP can change pretty easily as a result of fluctuations. It can even be negative! While a positive value indicates you have inventory available to sell, a negative value indicates that your inventory is below your safety stock quantity.
As you can see in the graphs above, an ATP’s value is generally determined by a variety of factors. These factors could be anything from the current inventory level to the sales orders to when a purchase order arrives. Safety stock is included to demonstrate how your ATP can hit negative levels despite allocating safety stock.
Why is it valuable to use a WMS for Available To Promise?
ATP is an essential tool to have in your toolbox when managing your inventory. You can prevent missing a sales opportunity by knowing whether your ATP is negative or positive. This helps you know whether you should create a purchase order or sell inventory to free up money for other products, such as sales. A warehouse management system (WMS) uses this value to create a well-constructed report like the one below. These reports are the key that will help you determine how to proceed. WMS’s can create new purchase orders if the amount is negative to help you avoid overselling. In fact, they can also notify you if your ATP is positive to help your sales increase. This in turn increases customer satisfaction. It’s a win-win!
Written by Cagdas Yildiz
Cagdas Yildiz is the Chief Customer Success Officer and Co-Founder of Logiwa.