Gating Factor: Know the reason for your unfulfilled demand

Posted by Sanchay Kute on 06-May-2021 08:38:30

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Supply_DemandIntroduction

After due diligence and long planning cycle, the organisation is ready to meet the targets and fluctuations in the market. In second quarter of the year, there are huge orders being placed by the customers such that the demand is greater than the supply. In such situation, some of the orders are not fulfilled. And, due to lack of proper IT infrastructure, the planners are unable to understand the reason for unfulfillment and they are required to do the background checks to verify the reason. This requires a lot of time and efforts. So, what could have been an easier way to understand the reason without investing a lot of time and efforts?

Above is one of the many scenarios which planners face and are required to deal with ever changing market conditions. And, in such situations the time is of real essence to ensure the customer demands are met without much delay and hence, Gating Factor does exactly that, which as a tool helps the planner understand the reason for unfulfillment of the order or meet the forecast.

How does a gating factor ensure customer demands are met?

‘’A gating factor is anything that prevents you from fulfilling an order on time, for example, insufficient stock or manufacturing capacity’’.

Of the many functionalities that SAP Integrated Business Planning tool offers, Gating Factor is one such functionality which helps the organisation understand the reason for system’s inability to fulfil demand (Forecast or Sales Orders) for the requested quantity at requested date. This is offered as an app on the Web UI of the cloud-based SAP Integrated Business Planning tool, which is part of the Response & Supply module.

SAP IBP Web UI app

Predefined types of Gating Factors

The Gating Factors are predefined which the system uses to reflect as the reason for unfulfillment. These are:

  • Adjusted Quantity: If the adjustments made to receipts limit the system from confirming the demand qty, system used this as the reason.

  • Freeze Horizon: The end date of planned order is within freeze horizon and hence, cannot be produced to fulfil the demand.

  • Lead Time: The lead time (time taken to produce/transport finished product) is in past and hence cannot fulfil the order.
  • Product Allocation: The product allocation limit has been reached and the allocations cannot be met.

  • Resource: The production capacity of the given resource is insufficient and therefore the demand cannot be fulfilled.

  • Supplier Constraint: The commitment from the supplier to provide the material is insufficient to meet the demand.

  • Supply chain Model: The master data provided does not allow order fulfilment

Post integration

Post integration of transactional data elements such as stock, sales orders, purchase orders etc., the system is run (subject to scheduling based on requirement):

      1. Order Based Planning: Constrained Forecast Run using the Optimizer
      2. Order Based Planned: Confirmation Run
      3. Order Based Planning: Deployment Run
      4. Order Based Planning: Deployment run using Optimizer

These runs try to fulfil the demands and confirm sales Order. Those orders which fail to get any supply can be first viewed in ‘View Confirmations’ app for details related to order and then can be viewed in ‘View Gating Factor’ app on the Web UI:

Gating factors app

  • Version/Scenarios*: This field requires the Planning area/Version for which you would want to view the Gating items.

  • Gating Factor Type*: This field requires specification of Gating Factor type that you would want to view. You may select one, many or all.

  • Attributes: There are 115 attributes within this app, including some of the below:
     
    • Gating Factor Type: The Gating Factor types are reflected here based on the reason for unfulfillment of the sales order
    • Gating Factor For: Reflects the combination of Product (Material) and location
    • Affected Quantity: The Sales order quantity which could not be fulfilled is reflected here
    • Confirmation Status: Status of the demand if it is Confirmed fully, partially or unconfirmed
    • Confirmed Percent: The percentage of order quantity confirmed
    • Confirmed Quantity: The Quantity that has been confirmed by the system
    • Unconfirmed Quantity: The Quantity which is unconfirmed
    • On-Time percent: The percentage quantity which will be available for the customer on time
    • Revenue at Risk: The cost of the unfulfilled quantity which is at risk due to gating factor
      Please note: The quantity is known at Risk as the system expects clearance of the Gating factor post resolution, wherever possible, and fulfilment of the demand element.
    • Total revenue: The total revenue (in currency) for the demand element

To understand the details, the line item must be selected to ‘Analyze Demand’ which shows the detailed summary and the exact area of Gating.

The system provides step-by-step analysis of the demand and the step at which it encountered gating factor. This allows the planner to accurately identify the issue and take necessary steps.

Below is an example of a sales order which could not be fulfilled:

Sales order

Sales order 2

In our experience, customers have been very delighted with system’s ability to accurately preview the ‘problem area’. But this is not it! There is a ‘Graph View’ which displays above detailed analysis with use of Supply chain flow diagram:

Graph view

The above is Graph View and the details for the same can be viewed once you click the icon:

Description

Conclusion

To find out more or arrange a free discovery session, please contact Olivehorse. We will be happy to help your organisation for faster reaction to the glitches during demand fulfilment, so you would not only save on time and energy but also help service the customers very efficiently.

Read more on: Integrated Business Planning, Olivehorse, Business Intelligence, Web UI, Gating Factor