Have you noticed that the expected delivery time vary for the same product in e-commerce sites when you check later? A work desk might have displayed ’10 days for delivery’ last month but now could show upto 15 days to deliver.
The changing delivery time depends on the numbers of units available with the retailer for customer orders. It is technically termed as ‘Available to Promise’ (ATP)
ATP is the portion of the company’s inventory or production that is not committed and therefore available for customer order processing. It helps to optimise the minimum quantity of each item that needs to be ‘available’ while maximising the warehouse space and minimising the chances of the customer seeing ‘Not available’ in the portal.
Available to Promise = Inventory on Hand + Supply – Demand
Inventory Management has become a complex process as we source orders from multiple channels. We still look at the safety stock by keeping a certain amount of additional inventory above the necessary stock as a buffer – but it is a fixed quantity. But ATP considers the customer demand and indicates how much inventory we can sell at any given time. It is a continuous process, so we need to have the right technology behind to provide the numbers at real time.
If we follow a push strategy where we manufacture to stock/forecast, then the demand in the above formula includes the demand forecast and the sales orders. But in a pull strategy where we manufacture to order, the demand only considers the sales order.
With increased competition, it is highly important for us to keep our customers satisfied. They expect the products to be delivered as quickly as possible and also want to know the delivery time when they order. Narrow delivery time windows definitely acts as a determinant to choose a particular e-commerce site over the competitors. So we need to know how much is available to promise!
