Tag: APS System

  • ATP vs. CTP: What’s the Difference and Why Does it Matter?

    ATP vs. CTP: What’s the Difference and Why Does it Matter?

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    With global competition intensifying, the number of manufacturers competing for your customers’ business is growing. So how does one create a sustainable advantage in a rapidly shifting competitive landscape? The answer lies in going back to one basic that was as true when the first manufacturer made the first widget as it is today: Deliver on your promises. 

    In this post, I’ll drill down into the one promise that still causes headaches for many manufacturers – on-time deliveries – and how the problem may not lie in your people or processes, but in the systems you use. In fact, one single feature can make a huge difference – whether you’re using ATP or CTP when making delivery commitments. 

    The Difference Between ATP and CTP

    Most manufacturers have heard of the terms available to promise (ATP) and capable to promise (CTP). ERP solution vendors use them all the time. While they are sometimes used interchangeably, the difference between them is significant. To lay the groundwork, let’s start with some definitions. According to the Association for Supply Chain Management (ASCM): 

    • ATP is the uncommitted portion of a company’s inventory and planned production, maintained in the master schedule to support customer order promising. 
    • CTP is the process of determining if the required components and resources (e.g., materials, labor, machine capacity) are available to support a specific order or production request. 

    For me, the key difference stands out immediately. ATP refers to a thing (inventory), whereas CTP is a process. Put another way, ATP is exclusively inventory focused. It looks at what is currently available, either in inventory or in production, but not committed to another order. The difference is “available” for new orders. The available date for production or for orders in excess of inventory plus production is based on static lead times.  It doesn’t matter if the plant has capacity or not, the answer is the same for ATP.  

    On the other hand, CTP looks at what could be, i.e., what could be promised to the customer based on the materials and resource capacity available. Instead of just promising whatever the customer asks for, CTP allows sales to provide a realistic availability based not just on inventory but also on factory capacity. 

    That’s a big difference! 

    Why ATP Falls Short of CTP

    Leveraging CTP can help almost every manufacturer meet their customer commitments, but it’s particularly critical for complex manufacturers. Consider these shortfalls of ATP: 

    Static data – Because ATP looks only at inventory and static lead times, it doesn’t account for changes in demand, production delays, capacity changes, or resource constraints. The more overloaded and volatile the manufacturing environment, the less accurate the ATP answer will be. Static lead times are blind to capacity overloads and the actual volatility of the manufacturing environment. 

    No constraints management – ATP completely ignores production constraints. As much as we’d all like to believe constraints aren’t an issue, they are often the main issue in complex manufacturing environments.

    Lack of real-time scheduling – As should be apparent, ATP is not tied to scheduling the way CTP is. As production schedules change, CTP information is automatically updated while ATP allows sales to continue to promise based on inventory alone. Often in ATP environments, customers aren’t notified an order is going to be late until the shipment has already been missed.

    Overpromising – The bottom line is that trying to get by with ATP in a complex manufacturing environment can lead to missed customer commitments and poor customer service.   

    CTP Gives Manufacturers an Order Reservation System

    In a CTP environment, every new order gets a capable date that is fully vetted for both capacity and material availability to ensure the quoted date is in perfect alignment with the manufacturer’s capabilities.  Every time a new order is entered, it reserves its spot in the schedule and the materials it requires.  This ensures that capacity is not oversold.  It ensures that the manufacturer can provide a reliable delivery date with confidence to their customer. 

    Since this is an automated process, environments with CTP drastically reduce the churn between sales and production.  Sales isn’t constantly contacting production to know what can be delivered and production isn’t constantly going through manual calculations to try and determine what can be delivered.  The only time production needs to get involved is when a customer’s request date cannot be made. 

    Provided the CTP system communicated the capacity and material constraints for the order, production knows the dials that must be turned to improve the date.  Can they run overtime, can they expedite a purchased part, can they slide another order to make room, etc.  CTP allows the manufacturer to be proactive.  CTP provides all the necessary information up-front to make the best decisions for the manufacturer and their customers.

    CTP Continually Monitors the Order Throughout Its Lifecycle

    Unlike ATP, CTP accounts for the real-time conditions of the production environment. By continuously establishing a schedule based on the current state of the manufacturing plant along with capacity and materials availability, the CTP is always reflecting the projected delivery date of every order in the system.  CTP keeps the manufacturer in proactive mode, eliminating the guesswork and the manual intervention.

    In cases where a drastic event like a multi-day machine breakdown, a material showing up from the supplier week(s) late, or major components of the build needing to be scrapped, CTP allows the manufacturer to proactively communicate with their customer.  The manufacturer can let their customer know as soon as they know that an order is at risk and will be armed with a new CTP date to provide the customer again fully vetted against the state of manufacturing along with its capacity and material availability.

    Support Best Practices

    CTP even aligns to lean manufacturing and waste reduction initiatives by allowing manufacturers to align production to actual demand, reducing overproduction, scrap, excess inventory, and operational waste.

    Is Guesswork Good Enough for Your Manufacturing Operation?

    Probably not. Unfortunately, many commercial ERP software applications only offer ATP functionality, requiring sales and production managers to make their “best guess” at what can be delivered by when. These systems simply aren’t designed for complex manufacturing environments where capacity constraints are the limiting factor, production priorities can change at a moment’s notice, and meeting customer commitments is critical to long-term business success. 

    That’s why SyncManufacturing from Synchrono provides CTP functionality that can be used with your existing ERP system to help you: 

    • Commit to orders with confidence
    • Adjust to supply chain disruptions
    • Reprioritize production easily and as needed
    • Manage constraints to increase throughput
    • Improve on-time deliveries
    • Control the chaos

    If guesswork isn’t good enough for you, reach out to learn more or schedule a demo and see SyncManufacturing in action.

    Request a demo
  • Finite Capacity Planning: The Key to Meeting Customer Expectations 

    Finite Capacity Planning: The Key to Meeting Customer Expectations 

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    In competitive markets, meeting customer commitments is critical. If resources like inventory, people, and equipment were always readily available, consistently delivering on time wouldn’t be such a challenge. The difficulty is that nearly all manufacturing operations have constraints. In this post, I will drill down into finite capacity planning, how it helps manufacturers live up to their promises, and how to get started. 

    What Are Resource Constraints? 

    As the name suggests, finite capacity planning considers resource constraints when scheduling production to meet customer demand. Work centers, machines, and labor can all be defined as the “resources” necessary to perform a manufacturing operation on an item’s routing. Because these operations take time and the number of resources is not unlimited, each resource has a finite capacity (ability to do work) that constrains its throughput.  

    However, for a given mix of demand, there is always one resource that limits the throughput of the entire factory. This is referred to as the constraint. When the capacity of the constraint resource exceeds the demand, we say the constraint is the market (or the sales team). As positive as that sounds, idle resources do not make for profitable operations. On the other hand, if demand exceeds capacity, the business is vulnerable to supply chain variability and other unforeseen events.  

    Ideally, demand and capacity would be relatively equal, but since we don’t live in an ideal world, planners need visibility into constraints so they can optimize plant performance. They also need to be able to share this information easily with those who interface with customers so they can avoid overpromising and underdelivering. It’s stressful enough when demand exceeds capacity. Promising unrealistic delivery dates to customers makes it so much worse! 

    Are You Using Finite Capacity Planning? 

    It’s not a question of whether you’re using finite capacity planning – it’s a question of at what levels you’re making capacity-planning decisions. Operations know if a schedule is achievable and will make adjustments if it is not realistic.  

    However, if finite capacity planning is only happening at the operational level, you’re bound to disappoint either your customers or your executives (or both). In manual systems with low visibility, floor personnel often make decisions about what to work on based on what seems important to them, because they don’t have visibility into what is most important to the business. Furthermore, their decisions can alter resource capacity. When that information does not automatically flow through the organization, planners and customer-facing teams are often left in the dark about changes to timelines and available resource capacity.  

    Here’s the bottom line for operational finite capacity planning: When demand is greater than your capacity, on-time delivery performance will be at risk. When capacity is greater than demand, you’re leaving profit on the table. In that sense, the goal of finite capacity planning is to maximize profit by balancing demand with capacity. 

    finite capacity planning goal

    MRP Does Not Use Finite Capacity Planning 

    Plenty of salespeople talk about MRP as though it is a finite capacity planning tool, so this needs to be said: MRP does not use finite capacity planning. MRP calculations provide start dates for manufacturing orders, assuming they will be completed according to each item’s lead time. However, Little’s Law (throughput = WIP / lead time) says that for a fixed capacity (throughput), lead time changes depending on the WIP level, and MRP does nothing to keep WIP stable. When lead time is assumed to be constant regardless of the WIP level, that is infinite capacity planning. 

    Finite Capacity Planning Is Not Pull Production 

    This is another common misconception. While finite capacity planning provides dynamic start and completion dates for manufacturing operations based on resource capacity, it is not the same as pull production! Pull production is a technique for releasing manufacturing orders to the shop floor that aims to stabilize WIP, achieve maximum throughput, and increase lead time confidence. Common pull production methods include kanban, CONWIP, and Synchrono’s patented CONLOAD™. Although they are distinct, combining finite capacity planning and pull production results in a more stable schedule than using either method alone. 

    What’s the Fastest Way to Implement Finite Capacity Planning? 

    At its simplest, finite capacity planning means setting start and end times that do not overlap for each manufacturing operation at a resource. The different strategies of finite capacity planning all set the sequence of work differently. Some options include ordering by due date, prioritizing by shortest processing time, or by whichever customer or salesperson is most vocal on a given day. (Unfortunately, the last method is the most common in our experience!) 

    One way to quickly implement finite capacity planning is choosing a software that supports finite capacity planning strategies. SyncManufacturing enriches these strategies by integrating with your ERP system and having finite capacity planning capabilities such as Detailed Sequencing. Detailed Sequencing creates finite schedules for factory resources and calculates a “cycle consumption percentage” for each operation, indicating how past-due or ahead of schedule it is. For example, if Item A has a lead time of two weeks and Item B has a lead time of four weeks, but both items start work at the same resource, the first operation at Item B will have a higher cycle consumption percentage than Item A and will be prioritized first. SyncManufacturing combines this with the operation’s expected availability date to generate the finite schedule, which can be manually adjusted if desired. 

    Advanced planning and scheduling (APS) systems, such as SyncManufacturing, include and expand on finite capacity scheduling by including an order release algorithm to implement pull production and modules to manage material constraints and shortages. Through dashboards and alerts, other areas of the business have visibility into the schedule, e.g., sales can immediately give realistic delivery dates to their customers. To learn more about the impact of Advanced Planning and Scheduling software (APS) on the rest of the organization, read: The Ripple Effect of Implementing APS. 

    If this sounds like something that would help streamline your operations and increase profitability, you’re in good company! Contact us and request a demo to learn more about how SyncManufacturing can assist you with finite capacity planning and much more. 

    Request a demo

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