Last updated: January 14, 2019
SAP ATP (available to promise) in eCommerce
Definition: What is SAP ATP?
SAP ATP (Available to promise) is a critical calculation used in supply chain management, manufacturing, and fulfillment. It’s also highly relevant for SAP e-commerce. In a nutshell, ATP calculations allow you to control the proportional distribution of your products among your customers.
For example, say a manufacturer has 50 units in stock, but only 10 may be available to promise for the next step in the manufacturing process or for sale to a customer. 10 are available today, but the customer will have to wait to claim all 50 at some point in the future. That future date is determined by lead times, which SAP calculates by taking many factors into consideration.
In this article, we’ll talk about some of those factors and how they influence decisions regarding SAP ATP (available to promise) policy.
SAP ATP is a powerful calculation, and its exact form will be unique to your ERP system.
SAP ATP requires you to model your entire supply chain and manufacturing process. You have to re-run the calculations of that model every time you get an order, in the context of all the orders that you have. It’s phenomenal to think about how SAP ATP calculation works.
The B2B industry is already struggling with the tradeoffs associated with “never say no.” That commitment means you have to have inventory, which costs money—and potentially, inventory can go obsolete.
SAP ATP allows a manufacturer to stay as lean as possible. It also forces the manufacturer to rethink any factors that aren’t supporting lean and just-in-time manufacturing.
How does SAP calculate available to promise?
Your ERP system uses a highly complex formula to calculate SAP ATP. This formula takes many factors into account, including:
- All the purchase orders that are outstanding to suppliers for parts and/or ingredients of the finished product.
- The manufacturing cycle time, how long it takes to convert inbound supplies to a product that’s available to promise to a customer.
- How you allocate product to competing customers.
Should all customers see the same SAP ATP calculation for a product?
This is a great question, and there’s no right answer. Every company (and every customer of that company) is different. This can become an issue in e-commerce if your SAP ATP calculation isn’t built to model smart management practices.
For example, it might seem like a good idea to show the same available-to-promise figure to every customer. But what if you sell out of the product before your biggest customer can put their quarterly order in? Yikes.
Luckily, there are strategies and technology available for manufacturers who need to hold back when there’s limited inventory. The key is to understand your customer landscape and use the tools at your disposal to allocate product to the highest-value customers first.
How do different companies handle SAP ATP calculations?
Every company has different needs when it comes to SAP ATP. For example, in the B2C sector, Amazon has developed an interesting workaround for the available-to-promise problem. They show the inventory for all their products as, “Usually ships in X days.” That could be 1 day, 3-5 days, or something similar. “Usually” is the key word here. It has all kinds of contingency baked into it. The whole phrase, “usually ships in X days,” is a euphemism for, “the product is in inventory (or we can get it quickly), we are going to promise it to you, but we reserve the right to send you a followup email saying that we couldn’t get it to you on time and it will be delayed.”
In the B2B sector, one of our clients takes a different approach. Their B2B e-commerce website says, “Order by 5 today, and you’ll get it tomorrow.” The company carries everything in inventory. Of course, this model comes with its own challenges. The company can only fulfill their delivery promise about 85% of the time. But they’ve committed to this model for larger reasons that make sense in their industry, and they’re always trying to get that number to 90, 92, 93%.
In other words, they’re using available to promise to drive their customer service excellence.
What SAP ATP configuration is right for my company?
As you can tell by now, available to promise configuration is totally dependent on your industry, your company, your products, and your customers. It’s helpful to think of SAP ATP configurations as falling on a spectrum.
For instance, brick-and-mortar retail provides us with one extreme on the spectrum. If you’re shopping for a pair of jeans in your size and the retailer don’t have that size in stock, you don’t buy them that day, and the store doesn’t get the sale. That’s lost revenue. You’re not going to sit at the register and say, those are the pants that I want. When they come in, call me and I’ll buy them. Available to promise is useless to you because you want your jeans now!
There is one exception to this rule in B2C—the product that is very unique. The further away the product is from a commodity, the more the consumer is willing to endure what is ultimately the far end of this spectrum: the dreaded black hole of “backordered.”
Somewhere between the two extremes, between “in inventory” and “backordered,” you have available to promise. SAP ATP helps you strike that balance between fulfilling customer expectations and working with the reality of your supply chain.
How does SAP ATP affect eCommerce sales?
The better the manufacturer’s SAP ATP calculation is, the greater chance the company has to sell product through a distribution channel like e-commerce. That’s why it’s important to provide an accurate available to promise calculation on the e-commerce store. In the Corevist app, we provide functionality that checks the availability and price of a product without ordering it.
In some industries, this SAP ATP calculation is critical to closing the sale. If the customer doesn’t get a good answer, he or she will go somewhere else to buy it—especially if the product is highly commoditized.
Whenever we implement a new e-commerce website, we have many discussions with our client. We ask a thorough set of questions to help our client think through their SAP ATP policy as it relates to e-commerce. The questions include:
- What are you going to do about inventory? Show it? Hide it? Give actual quantities that are in inventory? Give visual signals like green/yellow/red to give qualitative information about inventory?
- Can you run SAP ATP calculations in SAP, and if so, do you want to display that in e-commerce? And if you want to display it, do you want to break up a line item into the various SAP ATP quantities and dates?
- If SAP can’t come up with a calculation for ATP and the product goes on backlog, do you want to take that order or not? And what message do you want to give your customer?
What if I can’t provide an ATP date from SAP?
Different industries will handle the lack of an SAP ATP date in different ways. For example, one of our clients sells soda ash to farmers as a supplement for cows. If a factory goes down for a week, due to an explosion, it doesn’t produce any inventory. What happens if a farmer logs in to the website, in desperate need of soda ash, and sees no inventory available to promise? It’s a frustrating and stressful moment for the farmer. He needs a truckload this week. The product is backlogged, and the manufacturer doesn’t know when it will be available? What’s the farmer supposed to do?
If you can’t provide an available to promise date, the key is to communicate the situation with a friendly message. When your SAP-integrated ecommerce website senses that an ATP isn’t available in SAP, you can display a message that says, “Please call your Customer Service Representative for details about this product.”
Here’s another example of why SAP ATP matters in ecommerce. Some of our clients have multiple warehouses. They anticipate that at times, the customer’s “facing plant” may not have the required inventory. In that case, we serially check multiple plants and provide the customer with choices as to what he would like to do. This is a complex topic unto itself, and we covered it in this post–Multiple Line Items from Multiple Warehouses.
The factory explosion is a true story. In this case, our client chose to ship from another factory at their own expense. This helped our client maintain important customer relationships. The client showed dedication to the customer, showing that they understood the urgency of the need.
Moving forward: FREE Case study
For a greater understanding of how best to handle SAP ATP in your business, download this case study. You’ll learn how one manufacturer took a journey from RDD (requested delivery date) to EDD (estimated delivery date) and back again in their e-commerce configuration. Their story illustrates the complexity of SAP ATP in e-commerce, but also how the simplest path is often the best for your business.