In a perfect world, your company would continually have enough inventory on hand to fill all of your customer orders and ship them on time. Unfortunately, this isn’t always the case in the real world.
It could be that one of your suppliers of raw materials is having problems shipping you what you need. Maybe a machine on your shop floor is down for repairs affecting your capacity to produce. Or, maybe your ERP software doesn’t give you the ability to properly forecast what you need to keep in stock, both saleable items and the components needed to produce those items.
There are several reasons an item may get backordered. Regardless, it’s important to know the answer to the unavoidable customer question – “When can you ship my order?”
An ERP Solution
Any good ERP solution for Manufacturers should include the real time calculation of an Available-to-Promise (ATP) date for any items not in stock as the sales order is entered. This is the date the product will be available based upon the following constraints: Available stock and commitments to that stock, production capacities, components on hand, and vendor lead times.
INFINITE production scheduling, meaning there are no capacity restrictions, the time required to produce the item should be calculated using the produced item’s fixed and variable lead times combined with lead times needed to stock any short components. The available date is then the order placed date, plus the component lead time and production lead time.
FINITE production scheduling, meaning you’re prevented from scheduling more work than you have the capacity to produce, the sale order entry program should first look at open work orders and their due dates and quantities and subtract from that any other customer backorders that may exist. If the existing work orders don’t cover the shortage it should next look a planned work orders and their due dates and quantities
If this still doesn’t cover the shortage the program should lastly look at the purchase lead time for any short components, the hours needed to produce the item based on its routing steps and the available hours at the work center on your shop floor that produces the item.
Empowering your employees by giving them the ability to provide customers with accurate information regarding their order ship date. Having ERP software that has the ability to provide this information real time. That’s what we call good customer service!