Guest Blog: Making Customer Delivery Promises You Can Keep: Mastering OTD, ATP and OTFP

By Frank Borovsky, Principal, B2Beyond and former Salesforce senior executive

Product availability and On Time Delivery (OTD) are among the most important determinants of customer satisfaction for most manufacturing companies, impacting their brand and the overall customer experience. In fact, a 2022 McKinsey & Company study confirms that 74% of B2B companies will actively look for another supplier if accurate product availability is not provided online. Yet most manufacturers struggle with these key CSAT metrics.

At the crux of the problem is the logic used to determine whether inventory is currently Available to Promise (ATP), and if it isn’t, accurately expressing when it will be. Ensuring the accuracy of the ATP logic, and that your internal processes support it, will decide whether your company’s On Time to First Promise (OTFP) is truth or fiction. While always difficult, correctly creating ATP logic was especially stressful under the supply chain tumult just a couple of years ago and is equally hard now with today’s demand volatility.

ATP, OTD vs OTFP: Are You Keeping Promises?

ATP is a term used in supply chain management and inventory control to describe the quantity (usually in units) of a product that a company can promise to deliver on a specific date or within a certain time frame. From a customer point of view, a product/part/SKU should be available whenever they want it.

On-Time Delivery (OTD) measures the percentage of orders or deliveries that are completed within the promised or agreed-upon delivery date. It indicates the company’s ability to meet its delivery commitments to customers. On-Time to First Promise (OTFP) is a variation of the OTD metric that focuses specifically on the first promised delivery date given to a customer. It measures the percentage of orders or deliveries that are completed by the initial date promised by the manufacturer themselves. Since the manufacturer determines the promise date, it would stand to reason that they would meet it 100% of the time. Yet many companies fail to meet their own due dates again and again, requiring the same part to be repromised to the same customer again and again. This erodes confidence in the organization and can be a source of frustration not only for the customer, but to sales and service personnel who must deal with the subsequent complaints.

Both OTD and OTFP metrics rely upon ATP logic. ATP takes into account factors such as existing order backlog, inventory levels, production capacity, and both supplier and internal production lead times to determine the feasibility of delivery promises.

The Importance of Real-Time ATP Logic: A Matter of Trust

Real-time ATP gives all members of the value chain up-to-date information on inventory availability at any given moment, allowing them to correctly address changes to orders, shipments, and production schedules. Essentially it allows you to keep your promises to your customers.

The importance of real-time ATP lies in its ability to support effective decision-making and customer service. By having real-time visibility into available inventory, companies increase the accuracy of the promises to customers regarding delivery dates and quantities. This helps manage customer expectations, preventing over-promising and under-delivering. As such, OTFP is often one of the highest contributors to satisfaction metrics such as NPS (Net Promoter Score), used by Sales and CX leaders to measure organizational effectiveness. This trusted human experience is critical to success.

Real-time ATP also enables companies to optimize their production and distribution processes. It allows them to quickly identify inventory shortages or excesses and take appropriate actions, such as adjusting production schedules, reallocating inventory across locations, or expediting shipments. This agility helps minimize stockouts, reduce carrying costs, and improve overall operational efficiency, and most importantly, profit margins.

While this agility was not quite as important when interest rates were low, inventories are now receiving renewed scrutiny under inflationary times. Working capital costs can skyrocket, negatively affecting cash flows.

Furthermore, real-time ATP supports collaborative planning and coordination with suppliers and channel partners, and ultimately, to end customers.

Your Best Customers Deserve the Best Availability

Not all customers are created equal, especially in the B2B world. For most of my career, I have advocated that Sales and CX leaders differentiate the customer experience based upon LCV (Lifetime Customer Value). Essentially, this means rewarding those customers who provide the greatest value (usually measured in Net Profit over a period of time). These rewards are typically outlined in Master Customer Agreements in the form of tiered pricing or discounts based upon agreed sales volumes. However, they can also include non-price incentives, such as white glove service, marketing co-op funds, or other premiums, such as preferred availability. In other words, if you have only one widget to offer, then you should sell it to your best customer first. If you agree with the concept of preferential treatment based upon LCV, then your ATP logic needs to be changed to give them first-in-line service.

Many B2B companies offer versions of the metallic (Platinum, Gold, Silver, Bronze) loyalty programs, similar to airlines. Yet they fail to provide their best customers with the best availability because they can’t provide real-time visibility. This allows less valuable customers to jump ahead of the queue and steal inventory from your best customers, who have earned your business. This is not in their best interest or yours.

Key Takeaways: 8 Essentials to Achieve Real-Time ATP

Of course, real-time ATP is not without its challenges. If it were easy, then everyone would be doing it. Among the considerations for implementation are the following:

1. Data accuracy and integrity: Ensuring that the data and logic within the ERP system is accurate and reliable is crucial for achieving OTD. Inaccurate or incomplete data regarding orders, inventory levels, production schedules, or delivery timelines can lead to incorrect delivery promises and impact OTD performance. Master data management is key to creating Trusted Data. Without that foundation, nothing else matters.
2. Timely data updates and synchronization: To maintain accurate OTD calculations, it is essential to have timely updates and synchronization of data across various modules and systems within the ERP. Delayed or inconsistent data updates can result in outdated information and affect the ability to make reliable delivery commitments. Nightly batch updates simply won’t do in a world of 24/7 commerce.
3. System Integration: ERPs often need to communicate with internal systems such as Customer Relationship Management (CRM) and eCommerce platforms while remaining the single source of truth. Ensuring seamless integration and touchless data exchange among these systems can be a challenge, since most were not designed with best of breed integration in mind, and may use different data formats, protocols, or have incompatible interfaces. This is the #1 issue that I have heard from manufacturers over the past few years. Customer demand resides in the company’s Sales systems (often Salesforce), while the MRP, including ATP logic, resides in their ERP (often SAP). When the two can’t talk to one another in real-time, all of the other pieces fall apart, and you lose customer trust.
4. Visibility across the value: Achieving OTD requires visibility into the entire value chain including suppliers, production facilities, warehouses, channel partners, and transportation networks, and even end customers themselves. Lack of real-time visibility and collaboration among stakeholders can lead to delays, miscommunications, and difficulties in meeting delivery deadlines. All of this costs time and money, negatively impacting margins and cash flow.
5. Lead time calculations: Accurately estimating lead times for order processing, production, and transportation is critical for OTD calculations. However, lead times can be complex to calculate due to labor/production variability and unforeseen delays in transportation/logistics due to weather. Yet most delivery misses are due to more fundamental process flaws in the system.

   Supplier lead time calculations (again resident in your company’s MRP) are often based upon promises that were made when the original agreement with the Procurement Department was signed. Sometimes these lead times are based upon false premises or expectations (and were only likely to occur in the best of circumstances. Often adherence to these lead times is not properly measured or monitored. Still more often, they are not updated with the proper frequency to address changes in supply or demand over time. Unless your suppliers have earned the right to JIT (Just In Time) inventory by meeting their deadlines 100% of the time, then their lead times should be reviewed and updated at least monthly. Failure to do so could result in inventory overages, higher expedite costs or customer attrition.

6. Production planning and resource allocation: Effective production planning is essential for meeting delivery deadlines. Challenges may arise in aligning production schedules with demand forecasts, optimizing resource allocation, managing production bottlenecks, and ensuring smooth coordination between different departments or production sites. (We can talk about S&OP another time.)
7. Order prioritization and rescheduling: While over manipulation should be avoided, ERP systems must handle dynamic situations where order priorities change or unexpected disruptions occur. Proper order prioritization and rescheduling capabilities are necessary to manage capacity constraints and minimize delivery delays.
8. Performance monitoring and reporting: Tracking and measuring OTD performance is crucial for identifying areas of improvement. The ERP system should provide robust reporting and analytics features to monitor OTD metrics, identify bottlenecks, and facilitate data-driven decision-making.

The Future Outlook for Real-Time ATP

Everyone is getting on the generative AI bandwagon, and I am no exception. There are ample benefits of using generative AI to assist in real-time decision-making across the value chain. There is no question that it will be able to suggest ATP solutions on the fly. But for AI to work properly, all of the considerations outlined above must still be addressed: TrustedData, real-time integrations between your sales and operating systems, proper prioritization, attending to the needs of your best customer first, adherence to the processes, etc. AI will help manufacturers act more swiftly and allow you to enhance your ATP algorithms, giving you the confidence to let the system run as intended. Sales, CX and Digital Ops executives, working with their Supply Chain partners, should embrace the new technologies by preparing for them now. Your customers and your brand depend upon it.

Real-Time Data is Critical

As you look to address OTFP, if SAP ERP is your single source of truth for data integrity and business rules/logic/processes, look to a trusted partner like enosix for integration. enosix is the only solution architected to bring real-time data from inside SAP into trusted front-end systems like Salesforce (and more). Purpose-built, configurable SAP integrations mean critical OTFP data points can be virtualized directly inside any Salesforce cloud or iPaaS solution. This means smarter eCommerce solutions that work 24/7 and let customers self-serve and answer the ever-present question “Where is my widget?” It also arms Customer Service teams with all the data they need, directly inside Salesforce. From placing orders on behalf of customers that are 100% acceptable-to-SAP rules, to handling complex variable configurations, to applying customer-specific discounts to up-to-the-second ATP, you can’t afford to run your business on anything less than TrustedData. How else will you keep your promises to your most valuable resources, your customers?