Digitisation is tearing down the perceived walls of the supply chain's compartmentalised steps through marketing, product development, manufacturing, distribution, and finally into the hands of the customer. The supply chain is becoming a completely integrated ecosystem to all the stakeholders involved - from the suppliers of raw materials, components, and parts, to the transporters of those supplies and finished goods, and finally to the customers demanding fulfilment.
S/4HANA enables the fruition of this ecosystem by incorporating the following key innovations: advanced availability to promise, integrated quality management, embedded extended warehouse management, efficient procurement, etc.
The result will enable companies to react to disruptions in the supply chain, and even anticipate them by fully modelling the network, creating “what-if” scenarios, and adjusting the supply chain in real time as conditions change.
Available-to-Promise to advanced Available-to-Promise
In the traditional SAP ECC system, conventional Available-to-Promise (ATP) is the order fulfilment process that is designed to provide a commitment to customer-requested order quantities and dates based on availability of products. The availability check ensures that there are enough components available for planned or production orders in production planning and production control. It is an important function in the supply chain and is easy to use and implement, although it does not always offer customers the depth of functionality they were looking for. Further functionality is obtained by implementing SAP Advanced Planning and Optimisation (APO), but entails much more complexity in use and implementation.
The increased complexity of models in today’s digital world, where more complex mechanisms are necessary for varied production, variable demand and multiple stock localisations, led to the fact that SAP conventional ATP has become insufficient. To cope with all these changes and to adhere to the new S/4HANA value levers (agility, efficiency and effectiveness) SAP has developed aATP (advanced Available-to-Promise) which addresses the challenge of working in a dynamic and moving environment allowing organisations to thrive (instead of getting caught like a deer in headlights) as a result of this new dynamic and moving business environment.
How it affects backorder processing
One functionality that was revamped with S/4HANA regarding aATP was backorder processing. This functionality is used to check material availability when the demand or supply situation in your sales order fulfilment process has changed and you want to check if previously calculated confirmations for sales orders are still realistic. For example:
You receive an order from a very strategic customer, "Customer A" for material "Z" but the entire quantity of "Z" is committed to another customer, "Customer B" via an earlier sales order. Customer B is usually late with payments. Through back order processing the commitments could be changed and stock due shifted from customer "B" to "A".
Enterprises today have a wide portfolio of customers that range from the most strategic and valuable to the least profitable and flaky. When demand exceeds supply, in seasonal products or a very successful product launch, for example, enterprises must prioritise their sales orders to ensure that strategic customers always get served. Using conventional ATP in SAP ECC, enterprises needed to execute ATP multiple times and sometimes rely on secondary systems.
S/4HANA 1610 introduces a new backorder processing confirmation strategy that classifies customers in five categories:
- Confirm as requested
- Shall be fully confirmed in time (the most important customer orders)
- Improve if possible
- Shall keep the confirmations and should gain if possible (orders that cannot lose the earlier confirmations)
- Redistribute and Reconfirm
- Might gain, might lose (orders that can lose confirmations)
- Delete confirmation, if required
- Shall not gain anything, should keep confirmation, but may also lose (non-priority customer orders)
- Delete confirmation
- Shall lose all confirmations (orders under credit block)
A rush order is the last-minute customer order after the production plan of a company has been concluded. For these rush orders, appropriate and reasonable response is imperative, as it could put strain on customer relationship and services. A good and positive response could help the company to build and retain its market share in today’s highly competitive markets. The prioritised fulfilment sequence of rush customer demands can be reached with the new aATP based on the fulfilment ability and the prioritised new confirmation concept.
The example below illustrates a rush order that was created for a very strategic customer where the stock of the material orders has already been committed to sales orders of other customers of a lower confirmation strategy hierarchy, leaving no stock available for the rush order. After executing the backorder processing run, stock previously committed to sales orders with customers classified as REDISTRIBUTE, FILL and LOSE has shifted to the rush order containing a customer classified as WIN.