Manufacturers Seek Capacity Clarity in Order to Keep Their Promises
Much of our world relies on the timeliness, effectiveness, quality, and reliability of manufacturers. And while a degree of wiggle room may have been afforded to producers in years gone by when it comes to ultimate delivery of items, a broken delivery promise in the digital era is likely to be met with far less forgiveness, and far more severe ramifications to both reputation and future business. In this regard, the sector that keeps our societies, infrastructure, businesses, and consumption ticking along is in search of capacity clarity in order to keep their promises.
The notion of available to promise (ATP) offers a subtle yet significant upgrade to the traditional target of available to sell (ATS). While the latter reflected a hypothetical availability of products based on norms, capacities or existent stock, ATP addresses the complete end-to-end ability to execute the delivery of an item.
Are production facilities running at peak capacity? Are there current gaps in the labor force? Is the downstream supply chain also operating at full tilt? These questions and many more need to be considered to commit to delivery dates with complete confidence.
The upgrade from ATS and ATP has had to be made across numerous spheres that have increasingly relied on supply chain optimization in recent years. However, it is proving to be a more complex proposition for manufacturers who are typically more nascent in their digitalization efforts, and in bringing improved connectivity and visibility to their supply chains.
This largely derives from organizations’ allocation to customers being quite consistent and rigid, traditionally. They’ll typically allocate a certain number of production items to each customer as part of their contract, and they remain hard and fast… easy to predict… easy to plan for. However, this ringfence approach doesn’t allow for the level of agility that’s required now, the peaks and troughs that occur, or the unforeseen events that change the status quo.
At times of increased customer variability, volume fluctuations, spontaneous orders, and capacity strains, it is vital that manufacturers now adapt and go beyond simply knowing what is available within their ecosystem (ATS). They must instead strive for true ATP.
What Contributes to Capacity?
To put it simply, ATP is the sum of production time plus delivery time, weighed up alongside capable-to-promise (CTP) metrics in the form of production capacity in order to yield an ultimate delivery promise to the customer. In this respect, the key word and consideration is “capacity” – an element that, in its truest form, is often missing from traditional order management platforms adopted within the sector.
Capacity alludes to all of the facets that lend to the creation of a product. This includes real-time CTP (maximum volumes that can be achieved by current working machinery and available labor); the allocation of components, parts and machinery that contribute to that production; the location of inventory in relation to the location of delivery; and – pivotally – the real-time capabilities of the downstream supply chain in providing everything a manufacturing operation requires (parts, materials, machinery, and maintenance).
Of course, all of these elements can be hindered by powers outside of a company’s control. If the past few years have taught us anything, material shortages, workforce gaps, geopolitical events and international distribution can be impacted by the unforeseen almost overnight. But, sometimes, shortfalls are far less dramatic. Simply, a customer may have altered their requirements to an extent that is beyond the existing agreement, or benchmark capacity.
The idea of being able to promise has to take into account all of these factors on either side of their core factory setup; this means, not just day to day, but also as part of future projections and long-term recurring agreements.
When analyzing these elements more closely, suddenly that initial ATS-based assumption that current operations should be okay to fulfill delivery, becomes a lot less secure, and a lot less certain.
Keeping the World Ticking Along
The reason why assuredness and certainty are so important, isn’t just down to the relationship between manufacturer and customer – although, that is of course still significant.
More broadly, it’s important to remember what manufacturing – and manufacturers – contribute to. Yes, they build food and beverage products, homeware, electronics, apparel, personal care, and cosmetics. But they also contribute to every aspect of the built world around us – where we live, how we’re kept safe, how our homes are powered, the services we use, the utilities we rely on, and the leisure we partake in.
Every bigger structure is made up of its contingent parts, which are also produced at some point in the chain by a manufacturer who has promised their availability at a specific time… to a specific place… as part of a specific, bigger project.
In essence, most of the non-natural world that surrounds us, is a sum of those manufacturing operations coming together, and if one link of the chain is to fall short on what was promised, then the whole process is impacted.
To analyze one example, you could imagine a new block of homes reliant on the installation of fire safety equipment, smoke alarms, exit doors, etc. There will be a set period allocated for the installation of this element, that has been decided based on manufacturers’ promises. Now, if any of those aforementioned factors across the downstream supply chain hinder inventory, stock, location of parts, or ultimate delivery, then it’s not just that fire safety element being delayed. It’s the entire block of homes.
It may sound too exaggerated, and in the past, there may have been more flexibility afforded to such possibilities. But in an Industry 4.0 era where manufacturers are judged on connectivity, automation and efficiency, the upshots of not foreseeing such a shortfall, or not delivering on the initial promise, are far more severe and far less forgivable.
A Change of Mindset, A Change of Tech
What the industry therefore needs, is an order management platform that incorporates true ATP capabilities – a system that can connect all requisite factors that dictate ultimate delivery of produced items, and that can then provide visibility of this capacity in real time.
It is a rallying cry that Blue Yonder has been leading for some time now, not just in manufacturing but across retail too. The first, important message has been to assure that the order management suites already adopted are usually open platforms that can embrace the addition of new rules. These rules can reflect all aforementioned capacity-deciding factors, and are often deployed quickly, to give companies quick access to end-to-end insight and a connected view of their ecosystem.
Additional benefits through a more intuitive platform come in the form of reducing manual interventions and increasing automation, enhanced reprioritization or reallocation of failed picks, reducing split shipments, improved inventory planning to locate items closer to their end destination, enhanced cost effectiveness as a result of this more strategic distribution, and of course improved sustainability records as waste is reduced and the last mile is optimized.
The biggest benefit of all, though, is that the manufacturer in question won’t be an unreliable link in such a complex chain. Concerningly, for an ever-widening direct-to-consumer (D2C) contingent, this unreliability is also transferred straight to the end customer as an immediate breaker of loyalty and an early hit to their e-commerce ambitions.
Just like the order management platforms adopted until now, manufacturers haven’t traditionally been equipped to present such holistic, accurate estimations of delivery to their customers and partners. As expectations rise in tandem with digitization efforts, sector players must now adopt a new mindset and a new technology.
Both should prize capacity clarity above all else, to ensure that promises really can be kept.