Guest Author: Ken Mullen, Vice President of Supply Chain Solutions

Managing Available-to-Promise (ATP) Demand Plans

Order routing and orchestration functionality is not “one size fits all” when it comes to supporting B2B customer sales order processing. Unlike traditional direct-to-consumer (DTC) transactions that are commonly initiated through a website or e-commerce platform, B2B orders characteristically include:

• Order line counts greater than five, with an average of 18 and can exceed 100 ordered items
• Future delivery dates with over 30 days lead time on average
• Transmission to the distributor by the customer via electronic data interchange (EDI), thus limiting the ability to provide a near real-time response and interaction that most consumers have come to expect when ordering online
• Alignment to a previously modeled forecast specific to a timeframe window (e.g., a calendar week) inclusive of the customer’s requested delivery date

Critical Requirements for B2B Order Management

The last B2B order characteristic is arguably the most important requirement for B2B organizations when evaluating order management software vendors. It is also a critical requirement that separates true B2B order management vendors from those software providers that claim they can manage B2B customer orders when historically they have only supported DTC fulfillment. The main reason is that most order management vendors are architected to verify a customer order against the current available-to-promise inventory snapshot across all viable fulfillment locations, as most traditional customers want their orders fulfilled ASAP, like a typical DTC customer order.

Aligning Orders with Forecasts

As outlined above, a B2B order typically includes a future delivery date requested by the customer that can average 30 days of lead time ahead of actual delivery fulfillment. Additionally, a B2B order needs to align to a previously modeled forecast for each requested item within the same future delivery date window. B2B organizations must honor a modeled forecast item quantity for each customer segmentation, also known as a sales channel, or risk not having available inventory to satisfy their customer’s order. The result could be an order cancellation and the associated lost sales revenue, or the loss of the customer altogether due to habitual customer dissatisfaction.

Inventory Management and Commitments

The reality is that unless a B2B fulfillment organization is warehousing enough inventory days on hand (DOH) equal to the customer’s requested amount on the customer’s requested future delivery date, the B2B fulfillment organization cannot provide a trusted commitment to fulfill the order at the time the customer order is received. These organizations must initiate either purchase orders (POs) to outside vendors or manufacturing orders (MOs) internally to support manufacturing requirements planning (MRP) of resources and raw materials to ensure the forecasted customer quantity per item is available by the requested delivery date.

Flaws in Traditional ERP Applications

Traditional ERP applications (e.g., SAP, Oracle, NetSuite, Microsoft Dynamics) allocate requested future date item quantity in the aggregate, but only against current on-hand inventory, confirmed POs and committed MOs; this is known as perpetual soft allocation. Unfortunately, this is a flawed customer order commitment process as it fails to understand a specific timeframe in which the customer has provided forecast guidance for the order to be fulfilled, as well as a hard commitment date for the actual order.

B2B-Focused Order Management Applications

Mitigating Flaws with Specialized OMS

Enter a B2B-focused order management application to mitigate this flaw as supported by the following best-in-class functionality:

• Capture ATP forecasting inputs across multiple planning date ranges, including customer demand plans, inventory availability, future inventory availability already requested and supplier/manufacturer capacity to fulfill by exception.
• Allocate requested customer quantity for an item against the customer’s forecast and requested delivery date. This will allow the B2B distribution organization to measure historical customer forecast accuracy by item or item category and use this as a weighted variable when responding to future customer ATP requests.
• Dynamically allocate inventory that can “steal” unallocated inventory within a forecasted timeframe to honor an unforecasted customer request for an item on a specific delivery date. Dynamic inventory allocation functionality is typically configurable and rules-based to allow the B2B distributor to tailor this advanced order sourcing logic to unique scenarios such as high-margin items and highly valued customers.

Optimizing Fulfillment Locations

Additionally, a B2B-focused order management application should offer flexibility when optimizing the actual fulfillment location(s) to fulfill the customer order, including warehouses, 3PL distribution facilities, vendors or in-house manufacturing locations; best-in-class optimized order fulfillment supports selecting a configurable number of fulfillment locations, also known as order splitting. Additionally, best-in-class order routing and orchestration include allocating ATP inventory for a customer order against an issued PO for a specific item as well as available manufacturing capacity for an item that has been scheduled within a specific plant production plan.

Routing for Non-Inventory Items

Finally, this approach to order routing and orchestration can also apply to non-inventory items, including outbound trailer delivery capacity for those B2B distributors that want to support “light” transportation planning based upon delivery “units” as opposed to weight or stackable cube. This additional metric helps ensure an available-to-promise commitment is optimized for both inventory availability as well as the distributor’s preferred method of delivery.

Value Drivers for Integrating a B2B-Focused OMS

The value drivers for a B2B organization to integrate a B2B focused order management application within its customer order experience includes conservatively:

• Increase on-time and in-full order fulfillment rates by 3% of current customer sales revenue.
• Reduce transportation costs by 5% in outbound freight costs through fulfilling accurately against available freight capacity, as well as from the most optional fulfillment location, factoring in configurable business rules.

Interested to learn more about whether an order management solution is right for your B2B fulfillment organization? Let’s have a conversation!^®