Checking Horizon: The confluence of ATP and Planning
One of the most interesting business discussions in any Available-To-Promise (ATP) project is that on Checking Horizon. This seemingly unassuming horizon, determines the timeline within which supplies are actually assessed against demands. The supply within the horizon is valuated as feasible, and thus a Sales Order within this horizon can be truly promised. A Sales Order outside of this horizon is deemed always feasible assuming that the supply chain can always react to the demand without any constraint.
The products depending on the industry we are dealing with can be Engineer-To-Order, Make-to-Order, Assemble-to-Order or Make-to-Stock. The ATP engines in the software can offer multiple ways to be configured depending on the industry being considered for such an implementation. The Checking Horizon would thus be very long for an Engineer-To-Order situation since one needs to take into account all the supply chain lead-times for availability calculation. In the same vein in a Make-To-Stock situation, the product is already in stock and thus the lead-time to fulfill a demand would be very less. Consequently the Checking Horizon would be short.
Consultants are often asked scientific ways to arrive at a Checking Horizon. Some rules of thumbs include consideration of Procurement Lead-Time or Production Lead-time based on whether the product is procured or produced. One would also add the Goods-Receipt times to be more accurate. However each industry is different and each product segment in a portfolio has its own dynamics. Some supply chains are very supple reacting to varying demands in a seamlessly responsive manner without any phase-effect. While others would take a while to react.
In a scenario where demands are fulfilled by manufacturing the product - one needs to look at Planning Time Fences. This is a time fence, within which planned orders could be converted to production orders based on true demand. And by true demand we mean the Sales Orders and not the Forecasts. However a supply chain cannot react with new Planned Orders within a Planning Time Fence. If Checking Horizon is longer than the Planning Time Fence, the planning systems would have the capability to build up supply inside of Checking Horizon. Any Sales Order falling outside of Planning Time Fence, however within the Checking Horizon would thus fail an availability test as the order gets created leading to a false negative in the system. In the same vein, a Checking Horizon shorter than Planning Time Fence leads to a false positive in the system. The ATP engine assumes supply chain can reach outside of Checking Horizon in direct conflict with what the Planning systems can do within the Planning Time Fence.
All in all, if the Checking Horizon is configured incorrectly in your design, it leads to a state of unstable equilibrium. Imagine a marble ball on top of a steep hill - this is a state of unstable equilibrium - a little nudge leads to the marble ball searching for equilibrium indefinitely. We also call this bull-whip effect in the supply chain. In contrast a stable equilibrium can be visualized as a state of the marble ball in a valley between two hill mounds. A nudge on this marble ball brings it back, searching for the same state of equilibrium - also known as simple harmonic motion.
Now who does not want stable equilibrium in your supply chain? This state is arrived at by the most optimal setting of Checking Horizon in your ATP design - one of the most crucial settings that can make or break the harmony between a Planning and ATP engine.
So if your Planning and Order Management stakeholders are just about to brush away Checking Horizon as an academic topic, ask them to think again!
