11 Material Management Class Note # 2 MPS Practices – Available-to-Promise ( ATP ) Prof. Yuan-Shyi Peter Chiu Feb. 2011

22 ~ MPS Practices ~ Order Promising : The process of making order delivery commitments  The delivery date is negotiated  Whether we can promise delivery on certain date or not ?! Extended MPS Record  Forecast  Customer orders (actual received)  Projected Available  Available–To–Promise (ATP)  MPS (scheduled shipments)

33 Projected Available = (Beginning inventory) + (MPS shipment) — max. [ (the period’s forecast),(actual customer orders) ] Period Forecast Customer orders Projected available Available – to – promise MPS (shipments Received) ＊ the beginning inventory is 110 Then using formula, we obtain projected available as shown in red eg.

44 eg. (with projected available) Period Forecast Customer orders Projected available ATP MPS (shipments) Projected Available

55 ATP (Available–To–Promise) ： The uncommitted portion of a company’s inventory and planned production, maintained in the MPS to support order promising  ATP action bucket : for current period  ATP future : for future replenishment periods

66  ATP action bucket = (beginning inventory ) + (MPS shipment) — (Customer orders before next replenishment)  ATP future = (MPS shipment) — (Customer orders between current MPS shipment and next scheduled replenishment) Period Forecast Customer orders Projected available ATP MPS (shipments) ＊ ATP action bucket = – ( ) = 50 ＊ ATP 3 = 125 – ( ) = 80

77 ＊ ATP 5 = 125 – (15) = 110 ＊ ATP 7 = 125 – 0 = 125 ＊ ATP 8 = 125 – (10) = 115 ＊ ATP 11 = 125 – (10) = 115  The ATP records show how much inventory is available to satisfy customer demand, to support order promising

88 ＊ update customer order in period 5 to 200, below ： Period Forecast Customer orders Projected available ATP MPS (shipments) ＊ update projected available & ATP PA 5 = ( ) – max {75, 200 } = – 40 ATP 5 = 125 – ( ) = – 90 & PA 6 = (– 40) – max {75,15} = – 115 & so on. Using ATP practices Can you promise a customer’s purchase  Example ＃ 1 ： Can you promise a customer’s purchase of 200 units delivery set in period 5 ？ of 200 units delivery set in period 5 ？

99  TWO rules to remember here ◇ rule #1 : A negative number in the projected available row is sometimes a problem ◇ rule #2 : A negative number in the ATP row is always a problem

10 Period Forecast Customer orders Projected available ATP MPS (shipments) ＊ Use uncommitted units in period 3, ATP 3 = 80 – 80 = 0 and in period 1, ATP 1 = 50 – 10 = 40 i.e. mark 10 boxes in period 1 & 80 boxes in period 3 & 110 boxes in period 5 with the same client’s name  Example ＃ 1Can you promise a customer’s purchase  Example ＃ 1 ： Can you promise a customer’s purchase of 200 units delivery set in period 5 ？ of 200 units delivery set in period 5 ？ ∴ we can promise a customer’s purchase of 200 units, delivering in period 5 delivering in period 5

11 Using ATP practices  Example ＃ 2 ： Can you promise next order for 50 units for period 4 delivery ? for period 4 delivery ? Period Forecast Customer orders Projected available ATP MPS (shipments)

12  Example ＃ 2 ： Can you promise next order for 50 units for period 4 delivery ? Period Forecast Customer orders Projected available ATP MPS (shipments) ＊ Entering 70 in period 4 instead of 20; ∴ ATP 3 = 125 – ( ) = -50 & PA 4 = 30 – max { 50,70} = -40 & so no for PA 5 ……PA 12 By rule #2 : A negative number on ATP is always a problem ! But No prior available–to-promise units can satisfy this 50 units. (although APT 1 =40) Means, everything else has been promised. ∴ We can not accept this purchase order for period 4 ∴ We can not accept this purchase order for period 4 the earliest is in period 7 (why?) the earliest is in period 7 (why?)

13 Using ATP practices  Example ＃ 3 ： Can you promise an additional order for 50 units to be delivered in period 8 ?  Example ＃ 4 ： An additional 30 units for period 12 ? Period Forecast Customer orders Projected available ATP MPS (shipments)

14  Example ＃ 3 ： Can you promise an additional order for 50 units to be delivered in period 8 ?  Example ＃ 4 ： An additional 30 units for period 12 ? Period Forecast Customer orders Projected available ATP MPS (shipments) Yes, we can accept these orders ! Yes, we can accept these orders ! (see above)

15 §. Class Problems & Discussion Period Forecast Customer orders Projected available ATP MPS (shipments)  Problem #1 : Can you accept an order of 80 units for period 7 ?  Problem #2 : Continues on problem #1 ( using the result from #1 ) Can an additional order for 90 units, to be delivered at period 10, be accepted ?  Problem #3 : Continues on problem #2 ( using the result from #2 ) Can you accept an additional purchase order of 75 units for period 9 delivery ?

16 Period Forecast Customer orders Projected available ATP MPS (shipments) Accept the order {i.e. 80 units for period 7 }  Problem #1 : Can you accept an order of 80 units for period 7 ?

17 Period Forecast Customer orders Projected available ATP MPS (shipments)  Problem #2 : Continues on problem #1 (using the result from #1) Can an additional order for 90 units, to be delivered at period 10, be accepted ? Accept the order {i.e. 90 units for period 10 }

18 Period Forecast Customer orders Projected available ATP MPS (shipments) ＊ Violates rule #2 ATP 8 = – 50, need to be solved ＊ using 45 units from ATP 7, ∴ ATP 7 = 45 – 45 = 0 5 units from ATP 1, ∴ ATP 1 = 40 – 5 = 35 ＊ Marking : 5 units at period 1 & 45 units at period 7 & 25 units at period 9 for this client’s name.  Problem #3 : Continues on problem #2 (using the result from #2) Can you accept an additional purchase order of 75 units for period 9 delivery ? 0 35

19 Period Forecast Customer orders Projected available ATP MPS (shipments) Accept the order {i.e. 75 units for period 9 }  Problem #3 : Can you accept an additional purchase order of 75 units for period 9 delivery ?

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21 Period Forecast Customer orders Projected available Available – to – promise MPS Class Note# 2 Class Note # 2 ATP - Problem #5 J.C. Sweaters has authorized the following MPS for her Exclusive line of cashmere sweaters. She wants to use the MPS record for promising future orders. Current order promises are included. The MPS order quantity is 60 units. Beginning inventory is 0. Complete the Following Projected available & ATP records.

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23 Period Forecast Customer orders Projected available Available – to – promise MPS Projected available is calculated as Projected available = Beginning inventory + MPS shipment – the greater of the period’s forecast or the customer orders promised for delivery. Therefore, the projected available at the end of period 1 is 45 units (the beginning inventory of 0 plus the MPS shipment of 60, less the forecast of 15). The correct projected available quantities are shown here.

24 The ATP quantity in the action bucket is 25 units: a beginning inventory of 0 plus an MPS shipment of 60 units, less the customer order of 35 units before the next replenishment (12 in Period 1, 10 in Period 2, 8 in Period 3, and 5 in Period 4). Use the formula for ATP at MPS replenishments to calculate the order ATP quantities. ATP = MPS shipment – customer orders between current MPS shipment and next scheduled replenishment. Compare your answers with those shown on the previous page.

25 Class Note# 2 Class Note # 2 ATP - Problem #6 Jeannette, the owner of J.C. Sweaters has received several additional orders to consider. Using the ATP record calculated in Solved Problem #5, calculate which of the new order Jeannette should accept. The new orders are: (1) 20 units for delivery in period 4, (2) 50 units for delivery in Period 8, (3) 40 units for delivery in Period 12.

26 Period Forecast Customer orders Projected available Available – to – promise MPS /3 Projected available is calculated as Projected available = Beginning inventory + MPS shipment – the greater of the period’s forecast or the customer orders promised for delivery. Therefore, the projected available at the end of period 1 is 45 units (the beginning inventory of 0 plus the MPS shipment of 60, less the forecast of 15). The correct projected available quantities are shown here. Accept the order {i.e. 20 units for period 4 }

27 Period Forecast Customer orders Projected available Available – to – promise MPS /3 Projected available is calculated as Projected available = Beginning inventory + MPS shipment – the greater of the period’s forecast or the customer orders promised for delivery. Therefore, the projected available at the end of period 1 is 45 units (the beginning inventory of 0 plus the MPS shipment of 60, less the forecast of 15). The correct projected available quantities are shown here. Accept the order {i.e. 50 units for period 8 }

28 Period Forecast Customer orders Projected available Available – to – promise MPS /3 Projected available is calculated as Projected available = Beginning inventory + MPS shipment – the greater of the period’s forecast or the customer orders promised for delivery. Therefore, the projected available at the end of period 1 is 45 units (the beginning inventory of 0 plus the MPS shipment of 60, less the forecast of 15). The correct projected available quantities are shown here. Accept the order {i.e. 40 units for period 12 }

29 Period Forecast Customer orders Projected available Available – to – promise MPS The first step is to put the new orders into the MPS record and consider the implications. The updated MPS record is shown here. Note : Jeannette can accept order 1 for delivery of 20 additional sweaters in Period 4. She can also accept order 3 for 40 units delivered in Period 12. However, Jeannette has a problem accepting order 2. The ATP quantity in Period 8 is – 20, which means Jeannette must ensure that enough sweaters are available to satisfy that order.

30 Period Forecast Customer orders Projected available Available – to – promise MPS Projected available is calculated as Projected available = Beginning inventory + MPS shipment – the greater of the period’s forecast or the customer orders promised for delivery. Therefore, the projected available at the end of period 1 is 45 units (the beginning inventory of 0 plus the MPS shipment of 60, less the forecast of 15). The correct projected available quantities are shown here.

31 Period Forecast Customer orders Projected available Available – to – promise MPS Since the ATP quantity in Period 5 is 45 sweaters, Jeannette can set aside 20 of these sweaters so that she has enough to satisfy order 2. Therefore, she can accept all three orders. On the revised MPS record, we see that the customer order in Period 8 is reduced 20 units to 30 units, which are transferred to Period 5, and make customer orders to 40 units in period 5. The 20 units transferred to Period 5 are the 20 units that were not available in Period 8. Look at the changes in the updates MPS record.

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