Order promising enables us to determine what date we can get saleable stock to the customer. At the point the Sales Order comes in, we may have the necessary stock, or perhaps we need to purchase or manufacture the item! Where the stock is readily available, the number of dates we have to factor in is far less! Order promising is split into two parts: Available to Promise and Capable to Promise.
Today we are going to look at how we can go from an incoming sales order right up to the point of sale, in a situation where we don’t have stock available and aren’t sure when the earliest we can obtain it is! Based on data in Business Central, we can determine when we can obtain the stock, to either produce or simply resell to the customer and when we can expect it to reach the customer.
This topic will be broken down into two parts as it’s quite long! We previously wrote a blog on order promising; however, this was more introductory. To give that a read before diving into this one, click here.
What is Available to Promise?
Available to Promise (ATP) calculates the earliest date an item can reach the customer with respect to available inventory. This ‘available’ inventory is not necessarily physical stock at your warehouse. It could also be stock that’s on incoming purchase orders – stock that hasn’t even arrived yet! To explain, imagine a scenario where we sell mobile phones. A customer sends us a Purchase Order for 10 of these. We currently don’t have any in stock, but we have 100 coming on an incoming order. As we know how long it will take for the stock to reach us, how long it will take to prepare the item upon arrival in the warehouse and then how long it will take to ship to the customer, we can factor that into our response to the customer and say when we can fulfil the order by.
What is Capable to Promise?
Capable to Promise is similar. The difference is, as well as factoring in stock we have available to us, CTP also factors in items that aren’t in stock and that haven’t been placed on an order. For example, in a situation where stock is only made-to-order, until the point that sales order is received, stock to fulfil it won’t be available. So using CTP, we can factor in the creation of the purchase order and all associated time of that into our calculation of when the stock can reach the customer.
Why use Available to Promise over Capable to Promise?
Where the stock is in the warehouse, the Capable to Promise and Available to Promise date should be the same. This is because they are both looking at the quickest way of getting the stock to the customer. Obviously in a situation like that, it’s less likely you’d use order promising. Where there’s incoming stock but Capable to Promise acknowledges there’s a faster method of getting stock, it will suggest that faster method. This is a key difference. It may be that we don’t want to plan additional orders for stock that will arrive shortly, especially if the differences in time between ATP and CTP calculations are minimal.
Incoming orders which we can plan for
Below is a list of stock increasing orders that can be factored into Available and Capable to Promise:
- Purchase Order
- Production Order
- Assembly Order
- Transfer Order
What calculations are involved?
The dates you will factor in will depend on how you are acquiring the stock. But this doesn’t have to be limited to one type. So what do I mean? Well, if you are producing an item, it might be that various components have to be bought or made prior to making the item itself. For example, imagine we receive a sales order for a go-kart. Let’s say a go-kart is made up of an engine, four wheels, a steering wheel and a body kit frame. The wheels, steering wheel and body kit frame are all obtained using purchase orders. However, the engine is created using a production order. Let’s say the engine is made from a piston, gasket, spark plug and a fly wheel. We will need to factor in obtaining the components for the engine, which itself is only a component of a complete go-kart.
You can begin to think about how deep this can go. If you use multi-level BOMs, the date calculations can become very complex. A sub-level BOM which makes up a component of the overall item is called a phantom.
Order promising Setup in Business Central
Let’s turn our attention to Business Central now and look at what needs setting up to run Available and Capable to Promise in Business Central. Firstly, go to the Order Promising Setup page. There are four fields we need to fill in.
The Offset Time in Business Central pushes out the date which the Purchase, Production or Transfer Order is made. This allows people in charge of purchasing or manufacturing to review the Planning Worksheets. This adds days in between the time you create the Sales Order (for order promising) and the time the initial Purchase Order is made. If there is no Offset Time set (either the field is left blank or 0D), then the Purchase Order will be made to the Vendor as soon as the Sale Order is made. This is exclusive to order promising, for all normal purchase orders it’s assumed the Purchase Order request will be sent the same day.
Order Promising No.s
This is a number series. Whilst you can create one for this, I’m unaware of where this would be used. To create a number series, go to the Number Series page and manually enter the details. Afterwards, link that series with this field by entering in the code.
Order Promising Template
This field lets you choose between the ‘Planning’ and ‘Requisition’ worksheets. Both are concerned with increasing stock levels in different ways. If you click on an empty company, there are no no options to click in this field. To resolve this, use the search bar and navigate to the Planning Worksheet or Requisition Worksheet page. We had an issue before where the options wouldn’t appear until we had initially visited the pages.
Order Promising Worksheet
This field let’s you specify which individual Worksheet you will use when it comes to order promising calculations.
Company Information setup
Next go to the Company Information page. In the Shipping tab, there are some key fields.
Check-Avail Period Calc.
This field determines how far in the future you want the system to look when planning. For example, if you have a purchase order for the relevant item arriving in three months, do you want that to be factored into the calculation for your Sales Order? Do you want the system to wait for 3 months before say, ordering a separate one that will arrive in two weeks? Chances are you would prefer a separate order to be made sooner. If the Check-Avail Period Calc. was set to 3M, ATP would use this stock arriving in 3 months as it only looks at incoming orders or available stock. CTP will see that there’s a faster method of getting stock in and will create another purchase order.
Why would you want a longer ‘Check-Avail Period Calc.’?
When it comes to manufacturing it’s likely that you would want a longer date inputted for this field. This is because you must account for the time taken for potentially multiple levels of BOMs and any item lead times for components. This can take over a month and so it’s not abnormal to have this set to 3M, especially for companies who are manufacturing goods. For those who solely buy and sell, 1M might be more practical.
This field determines how frequently you would like the system to check whether supply-demand events occur to discover if item on the demand line is available on its shipment date. We typically advise this to be as frequent as possible, so generally 1D.
Now, let’s determine the handling times for the relevant location(s) we are shipping in and out from. The below fields are found within the Warehouse tab on a Location Card.
Inbound Whse. Handling Time
The Inbound Whse. Handling Time field gives a measure of the time taken to unpack the inbound stock and move it to bins or relevant storage areas. This is assuming that some Advanced Warehousing functionality like Warehouse Receipts are not turned on. This is a topic we will cover in the future! The Inbound Whse. Handling Time field is only relevant for items coming into the location. This may be returns, transfers or purchases. Where you are manufacturing items and the components are not having to be shipped in, this field will not be relevant. If you are manufacturing a BOM but the components are being shipped in, then this will apply for the incoming components.
Outbound Whse. Handling Time
This field specifies the time taken to pack goods and moved to the shipping zone. It’s not unusual for this field to include some leeway for contingency time. These fields are optional and the amount of time you enter depends entirely on the types of items you are dealing with. The time allocated here would typically be 1-2D, if anything.
Thanks for reading. Expect part two to be available next Friday! In that post we will demonstrate ATP and CTP in action and different scenarios in which order promising can be used. If you have any comments or questions, drop us a message here.