Advanced Available-to-Promise

1. Advanced Available-to-Promise 2005.03.05 MAI Lab Oh Myongran

2. Paper • Advanced available-to-promise: Classification, selected methods and requirements for operations and inventory management - Richard Pibernik (2004)

3. Advanced available-to-promise: Classification, selected methods and requirements for operations and inventory management International journal of production economics (2004) Richard Pibernik School of Business and Economics, Goethe-University, Germany

4. Content • Conventional ATP vs. Advanced ATP • Classification • A model for batch AATP based on finished goods inventory • A planning mechanism for real time AATP based on finished goods inventory • AATP’s requirement for operations and inventory management

5. Conventional ATP vs. Advanced ATP • Reallocation of company resource • Conventional ATP : only consider uncommitted portion of finished goods inventory. • Advanced ATP : reallocate all resource against all customer order including committed quantity and reflecting order priority • Strategy • - Conventional ATP : only monitor the status of finished goods inventory. • - Advanced ATP : multi-location, partial delivery, substitute product …

6. Classification • Criteria for classification of AATP • 1) Availability level : Finished goods or Supply chain resource • 2) Operating mode : Real time or Batch • 3) Interaction in manufacturing resource planning : Passive or Active

7. Model for AATP based on B/FG • Assumption - Finished goods inventory - Batch mode • Objective: Maximize overall profit and minimize several related costs. • Constraints: - the quantity of first partial delivery - customer demand as compared with accepted order quantity - balance of finished goods inventory - the quantity of second partial delivery - the uncommitted quantity of finished goods

8. Model for AATP based on B/FG • i: every potential customer order and characterized with quadruple set • (du, do, zu, zo) • bt: the inventory on hand • rt: committed quantity of finished goods at point of time t. • lk: holding cost for finished products per unit and time period based on • quantity bt. • dbi: profit for every potential order i. • fki: penalty associated with the denial of a potential customer order. • atpi: uncommitted quantity of finished goods at time t. • tk: additional handling and shipping costs associated with the second • delivery. it's considered in a case of x2(t)>0. • x1(t): quantity of the first (partial) delivery at time t. • x2(t): quantity of the second partial delivery at time t. • u1(t): 1 if first partial delivery due date is at time t, otherwise 0. • u2(t): 1 if second partial delivery due date is at time t, otherwise 0. • vi: 1 if order i was satisfied, otherwise 0.

9. max P = Profit – Inventory holding cost – charge for partial delivery – penalty for denied order Model for AATP based on B/FG • Objective Function (P: Overall Profit)

10. Model for AATP based on B/FG • Constraint ……….the quantity of first partial delivery ………. customer demand as compared with accepted order quantity ………. balance of finished goods inventory ………. the quantity of second partial delivery ………. the uncommitted quantity of finished goods

11. Planning mechanism based on RT/FG Start : Uncommitted Portion of FG inventory Strategy : Multi-location • Assumption - finished goods inventory - real time mode - single order - multi location - substitute product • Trade-off for RT vs. Batch - customer response time - the quality of performance as order priority or profit Alternative Strategy : Substitute products Partial delivery

12. Requirement for operations and inv. management • AATP performance depends significantly on the quality of the provided information. • AATP performance also depends on the capability of operation and inventory management to actually fulfill the orders, against AATP calculations.