TRANSPORTATION MANAGEMENT WITH SAP® SUPPLY CHAIN MANAGEMENT

SAP Solution in DetailSAP Supply Chain Management

TRANSPORTATION MANAGEMENT WITH SAP® SUPPLY CHAIN MANAGEMENT

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CONTENTS

Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Increasingly Complex Transportation Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Transportation Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5Strategic Freight Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6Transportation Forecasting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Transportation Volume Forecasting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7Capacity and Equipment Tendering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Freight Order Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7Freight Order Taking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Available to Promise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8Routing Guide . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9Transportation Planning and Vehicle Scheduling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10Vehicle Scheduling and Routing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11Equipment and Compartment Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Carrier Selection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12Freight Tendering, and Booking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13Transportation Processing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16Freight Cost Management and Calculation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16Warehouse Processing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

From Goods Issue to Shipping . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17Yard Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Freight Settlement and Analytics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17Freight Cost Settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Event Management and Activity Handling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18Transportation Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Optimize Your Transpor tation Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

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EXECUTIVE SUMMARY

SAP® solutions solve the core dilemma of transportation – how to meet the unique delivery requirements of your customers while still achieving profitability. You can integrate business processes across your entire enterprise and extended transportation net-work. The applications enable you to perform continuous route optimization based on real-time events, improve asset utilization, collaborate with logistics service providers (LSPs), and support freight-costing and settlement processes.

The SAP ERP and SAP Supply Chain Management (SAP SCM) applications form the backbone of the SAP transportation management solution. SAP SCM employs a library of advanced, highly configurable planning and optimization algorithms to help you optimize task-, industry-, and company-specific trans-portation processes, automate decision making, and deliver real-time event notifications to the underlying business processes. Collaboration tools enable you and your partners to streamline your work processes and exchange information.

Commercial transportation has become an extremely complex procedure involving worldwide networks of business partners and LSPs moving raw materials, parts, and finished goods along global supply chains. Now more than ever, transportation operations require greater accuracy, speed, and flexibility to manage all the moving parts.

At the same time, transportation costs are rising while transpor-tation capacity planning is an increasingly critical and compli-cated endeavor. Your supply chain employs multiple modes of transportation to distribute products globally. Because you outsource at least some of your transportation support, the lines of responsibility between you and your trading partners are increasingly unclear. You need to meet all these challenges while maximizing capacity, minimizing costs, and meeting customer and shareholder demands for service and on-time deliveries.

Your transportation and distribution strategies should support real-time visibility into transportation events and integrated business and logistical activities. And your supply chain network should be tightly integrated and support transparent trans-portation processes to manage such diverse elements as freight procurement, shipment volume forecasts, shipment planning and execution, and transportation expenditures.

INCREASINGLY COMPLEX TRANSPORTATION ISSUES

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TRANSPORTATION MANAGEMENT

Figure 1: Transportation Management Process Life Cycle

SAP SCM enhances every aspect of your transportation operations – including order placements, the development of transportation plans, event tracking, the processing of deliveries and shipments, financial settlements with carriers, and reporting and analysis. The application uses powerful algorithms and optimization engines in conjunction with your specific business rules and logic to optimize shipments based on costs, service levels, and asset utilization.

To operate an effective transportation network, you need to connect all your logistics activities. SAP SCM provides an inte-grated way to streamline your transportation planning and execution operations – from strategic to postexecution process

management. With SAP solutions, you can more effectively manage every aspect of your transportation operations, includ-ing the following:• Freight contract management – Handle strategic and tactical

contract management processes• Collaboration – Plan equipment and resource capacities with

your carriers and other LSPs• Operational transportation planning – Plan sales, purchases,

stock transfers, deliveries, and order returns (including route and carrier optimization and tendering)

• Operational execution – Execute shipments-related processes, including document creation, freight costing, and completion of shipment processes

• Tender Management• Service Provider Management• Freight Contract Management

• Transportation Volume Forecasting• Capacity and Equipment Tendering

• Freight Order Taking• Routing Guide• Vehicle Scheduling and Routing• Carrier Selection• Freight Tendering and Booking• Transportation Processing• Freight Cost Management and

Calculation• Warehouse Processing and Yard

Management• Event Management and Activity

Handling

• Freight Cost Settlement• Transportation Analysis

Strategic Freight Management

TransportationForecasting

Freight Order Taking

Transportation Planning

and Execution

Freight Tendering

and Tracking

FreightSettlement and

Analytics

Freight Order Management

• Freight costs – Determine and account for freight-related expenses for accruals and payments to LSPs

• Transportation analytics – Report, analyze, and generate key performance indicators through the SAP NetWeaver® Business Intelligence (SAP NetWeaver BI) component and other analytical applications

• Event tracking – Obtain greater visibility into the status of shipments and provide real-time alerts about critical events

Strategic Freight Management

Logistics professionals face constant operational challenges, including the labor-intensive bid process. To keep global trans-portation costs down, maintain sufficient service contracts, and eliminate delays and ineffectively managed processes, these complex operations require expertise and specific technology.

To negotiate contracts with your LSPs, you must prepare, analyze, determine, and monitor freight-related data such as rates, lanes, modes, terms of agreement, and liability. You also have to communicate effectively with your partners about such issues. With LSPs competing for freight, you have to manage their expectations and volumes as you try to achieve the best service levels at the lowest costs.

SAP software for freight procurement helps you set expectations for upcoming transportation expenditures according to individual business units – which vary depending on the nature of their products – by shipping locations and lane. In addition, because your relationships with partners such as LSPs change as your supply chain evolves, you may want to renegotiate existing contracts to include new business while changing the way you allocate shipment volumes among your LSPs.

SAP software supports your entire strategic freight procurement operations by streamlining the contract negotiation process. The software helps you prepare bids, proposals, and responses, and award and manage contracts. You can also more efficiently manage contract negotiations by evaluating freight procurement expenditures – for example, annually or semiannually. You can employ the strategic freight management function by itself or in conjunction with integrated logistics processes.

Strategic freight management functions enable you to do the following:• Access historical shipment information via seamless integration

with the transportation management functionality of SAP ERP• Access analytical and planning capabilities via integration with

SAP NetWeaver BI • Collaborate with carriers via the Web• Securely interact with carriers via role-based authorizations• Define businesses based on geography, equipment types,

transportation services, and service provider profiles• Manage requests for quotations and collaborate with trans-

portation service providers about equipment availability and rates

• Upload histories and additional information to tenders via popular office-productivity applications

• Select and award business to service providers• Enable the freight purchaser to manage the tendering and

bidding process through a portal-based cockpit that carriers and shippers can use as single interaction point

• Evaluate and optimize bids, optimize assignments between LSPs and corresponding services, and optimize cost allocations

• Streamline the management of logistics contracts

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We’ve just explained some of your strategic and tactical consider-ations. Just as important are your daily operations, which probably represent your most time-consuming activities. From the time an order is received, meeting customer expectations requires efficient planning and execution.

SAP SCM simplifies and enhances your transportation planning processes. You can automatically route orders, collaborate with carriers, rate freight, generate documentation, coordinate with the warehouse, and ship product.

Freight Order Taking

Your approach to order management affects your entire business. Orders must be managed in concert with other operations such as manufacturing, warehouse, and export and import activities. With Internet-based selling models rapidly changing business requirements, you need to be able to ship any product anywhere as rapidly as possible. For that, you need real-time visibility into the status of every order to determine quickly how best to trans-port orders to their final destinations.

With SAP SCM, you can plan the transportation of shipments for many common order types such as sales and purchase orders, returns, and stock transfers. SAP has developed tight integration between SAP SCM and SAP ERP, and as a result, you can synchronize orders and order changes in real time. During order taking, this level of integration helps you accomplish the following objectives:• Use global available-to-promise (GATP) functionality to drive

material availability dates and order priorities• Integrate directly with the routing guide within SAP SCM for

transportation pricing and routing information• Provide immediate visibility to new and changed orders• Determine sophisticated conditions and rules for managing

orders by certain logistical criteria• Perform order splitting and set up “ship with” orders

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FREIGHT ORDER MANAGEMENT

Transportation Forecasting

Transportation forecasting functionality encompasses volume forecasting, capacity and equipment planning, and more, as follows.

Transportation Volume Forecasting

With the ongoing challenges of hiring drivers and the increasing demands on equipment, supply chain partners must work closely together. Shippers and carriers alike need to share information on how many shipments will be tendered and how many can be accepted. Planning-area functionality helps you forecast ship-ment levels and carrier allocations. You can use planning areas to determine shipment volumes by origin, generate weekly and daily forecasts, and collaborate with LSPs.

Capacity and Equipment Tendering

The planning-area functionality of SAP SCM is integrated with the transportation planning/vehicle scheduling (TP/VS) applica-tion to support carrier allocations. This collaborative tactical planning application enables your carriers to communicate their freight capacities and availabilities for specific time periods. You can use this information to determine the maximum number of shipments for each LSP per shipping and delivery location, transportation lane, time frame (day, week, or month), and transport. You can also allocate the minimum number of ship-ments per day, week, or month.

Figure 2: GATP Scheduling Logic

Available to Promise

Product availability plays an integral role in transportation planning. Production capacity doesn’t always tie in perfectly with the customer’s needs – and effective transportation planning can bridge that gap. SAP SCM closely ties global available-to-promise (ATP) functionality to order management. TP/VS functionality calculates when a product can be delivered using two key dates – the material availability and requested delivery dates. Factoring in durations for transportation, picking, and packing, for example, the GATP functionality calculates the material availability date. The material availability date also plays an important role for forward-scheduling orders if the requested delivery date is not critical – or if, on the other hand, there is not enough time to meet it. For example, a customer might request a shipment for tomorrow, but the normal lead

time is three days. The software will automatically try to locate a carrier for next-day delivery, but if unsuccessful, will forward-schedule the delivery to arrive as soon as possible.

GATP operations are performed to ensure that customer priorities and commitments are considered in the allocation of actual inventories. With GATP functions, last-minute critical orders can take priority on available inventory and be reallocated auto-matically to existing orders. The reallocation can occur either before or after the transportation planning process.

Another important task of GATP is to perform back-order processing before orders are actually executed. This process alerts you to conditions where the order priority has changed and the material currently planned for shipment should be considered

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Today Availabilitycheck

Pick/pack time

Transportationlead time

Loading time

Transportationduration

Unloadingduration

12/13/2007

Order date Transportation planning Load Goods

issueRequested

delivery dateUnloading

date

Item Mat. Quantity RDD

10 4711 10 12/13/2007 Schedule line

DeliveryDate

OrderQuantity

Conf.Quantity

12/13/2007 10 10

Materialavailability

Material availability date

for another order or group of orders. The TP/VS application also works with the available-to-promise functionality of SAP ERP or the GATP functions of SAP SCM to give you the flexibility to use the most effective approach for your business process.

Orders are used to generate transportation demands, or “freight units.” More precisely, the confirmed material of an order line item, or “schedule lines,” are used to create the freight units. User-defined rules determine whether one or more schedule lines are combined in one freight unit. The schedule lines are created based on the availability date of the inventory required to fulfill the order. Several schedule lines may be created if all the material required to fulfill the order line item cannot be confirmed at one time. In this case, more than one schedule line will be created based on when enough material will be available for the remaining unconfirmed amounts.

Routing Guide

Routing decisions have major impacts on service and costs. The routing guide within the TP/VS application generates feasible shipment plans at the time of order entry by determining routes, which freight units to include, the planning horizon, and which modes and equipment to use. You can view all possible routes based on carriers, capacities, real freight costs, and lead times, and then choose or predefine strategies to allow automatic selection of the options that best fit your needs. SAP ERP can also automati-cally trigger the routing-guide functionality when you create or change orders. This is especially useful for rush orders. For rush or last-minute orders, the ability to create shipments from orders automatically can reduce total cycle time from the moment a customer enters an order until the product is loaded onto a vehicle.

The routing guide can estimate freight costs, the availability of transportation resources, and schedules to determine transpor-tation routing even without orders. Quick freight-rate lookups and transportation capacity checks can be handled either directly from SAP ERP or from the TP/VS application.

Figure 3: The Routing Guide

After determining an effective method to deliver your customer orders by using the routing guide, you can later take advantage of TP/VS functionality to optimize routes even further. You decide how best to serve your customers while saving on freight costs.

TP/VS functionality provides visibility into all related transactional and master data throughout the order process. Order changes and deletions are visible in real time to TP/VS for planning purposes. SAP SCM uses sophisticated logic to help you manage these un-expected changes to your daily operations, such as automatically improving your equipment utilization or notifying users of sudden shipment-scheduling changes.

By viewing orders in real time over a large planning window, you can take advantage of consolidating orders to the same destination, or plan multistop loads more effectively across multiple destina-tions. You can view less costly modes of transportation that require longer lead times. You don’t have to commit inventory to your sales orders until the last possible moment, when you’re com-municating your shipment plans to the warehouse for picking and staging. This increases cycle times and inventory turns while reducing your inventory carrying costs.

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Another critical aspect of integrating order management pro-cesses is the ability to incorporate master and transactional data constraints in your transportation plan. You can use customer master records or sales order information to factor the proper constraints into your planning efforts. Such constraints may include product incompatibilities (chemicals can’t be shipped with food products), space limitations at customer locations (the customer can’t accept equipment over 28 feet long), and scheduling stipulations (the seafood must be delivered before 8 a.m. on Friday).

Appointment scheduling is becoming more important as shippers and carriers strive to better manage driver hours and driver usage. You can use SAP solutions to schedule appointments by directly assigning appointment times based on availability of loading docks or when facilities can accept orders.

Figure 4: Pickup and Delivery Appointment Scheduling in TP/VS

Managing large orders should be a seamless process. With SAP SCM, you can automatically split orders at the line-item level to create feasible freight units, which helps you plan appropriate

mode and equipment size. You can, for example, split an order the size of several trailer loads into many unique freight units to fit individual trailer capacities. You can do this without changing the actual order in SAP ERP, thus allowing greater flexibility and ensuring synchronization with your downstream order management.

Figure 5: An Example of Order Splitting in TP/VS

Transportation Planning and Vehicle Scheduling

TP/VS functionality can reduce transportation-related costs, increase vehicle utilization, and improve on-time delivery of shipments. It involves routing and scheduling vehicles, selecting carriers, and tendering shipments to carriers.

TP/VS functionality supports automatic transportation routing, scheduling, and carrier selection, enabling you to do the following:• Search for feasible solutions through sophisticated optimization

techniques that factor in costs and penalties

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Costs

Time

Earlier delivery/pickup not allowed

Later delivery/pickup not allowed

06.01 07.01 08.01 09.01 10.01 11.01 12.01 13.01 14.01 15.01

PickupDelivery

Material Availability Date

Requested Availability Date

Sales order 12310 Prod1 50K lb20 Prod2 50K lb30 Prod3 20K lb

Freight unit 12310 Prod1 50K lb20 Prod2 50K lb30 Prod3 20K lb

Delivery 90210 Prod1 10K lb20 Prod2 30K lb

Freight unit 123-000210 Prod1 10K lb20 Prod2 30K lb

Freight unit 12320 Prod2 20K lb30 Prod3 20K lb

Planned Ship. 105

Planned Ship. 104

Delivery 90110 Prod1 40K lb

SAP® ERP SAP Advanced Planning & Optimization – TP/VS

SAP ERP

Freight unit 123-000110 Prod1 40k lb

Creation of deliveries based on planned freight units

Split freight units are constructed out of originals using split rules or manual input. Orders are not changed.

Split freight units

Remainder freight units – may be further split

• Manage more than 30 unique hard and soft constraints sepa-rately or in combination with one another

• Simultaneously view schedules, pickup and delivery routes, load consolidations, and vehicle assignments

• Manage transportation planning from either the sales order or delivery document in SAP ERP (or both)

• Assign carriers based on equipment constraints, allocations, and continuous-move options (continuous-move options reduce carriers’ empty miles by assigning outbound shipments to equipment delivering inbound shipments)

Figure 6: TP/VS: Managing Your Transportation Operations from a Single Work Area

With vehicle-scheduling and routing functionality, you can reduce the total costs of all shipments while you maximize customer service. An optimization algorithm simultaneously plans shipments manually or automatically, consolidates orders, identifies transportation modes, determines delivery and pickup sequence, and schedules planned shipments.

Vehicle Scheduling and Routing

The SAP solution for transportation management determines the most effective transportation modes and routes, including the sequence of pickups and deliveries. The vehicle scheduling and routing optimizer automatically selects the least-cost mode of transportation to meet the customer’s requested delivery date and requirements.

With TP/VS functionality, you can minimize costs while managing real-world hard constraints, such as:• Vehicle capacities based on different units of measure –

weight and volume, for example• Transportation lead times• Transportation modes compatible with the customer’s

receiving and shipping facilities• Product compatibility restrictions• Appointment times• Delivery locations’ hours of operation

Some constraints are less important than others, and TP/VS takes into account these “soft constraints” by using “penalties.” Essentially, penalties comprise a scoring system that assigns a cost value to logistics contingencies, such as delivering shipments too early or too late, or to force customer priorities when modeling optimization decisions.

There are also direct cost factors, which include cost per distance, weight, volume, and time. These costs include variables such as cost per stopover and equipment. Such cost parameters help you determine which route and schedule to use and whether to employ commercial transportation, a company vehicle, or another mode.

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Equipment and Compartment Planning

In times of rising energy prices, the need to support more complex transport operations with flexible planning tools becomes in-creasingly important. An inability to plan transportation assets on an individual basis leads to inefficient use of these assets and can cause competitive advantages in service or product offerings to disappear. In addition, these enhanced capabilities will support the compliance with legal restrictions such as weight limits or hazardous goods restrictions. SAP SCM supports more granular planning approaches with the following advanced planning scenarios:

Truck and trailer planning• Separate independent planning for trucks and trailers to

enable, for example, drop-and-hook scenarios • Decoupling and coupling of truck and trailer in a single route• Flexible assignment of truck and trailer• No limit on number of trailers• Modeling of incompatibilities between trucks, trailers, locations,

and freight units (for example, to avoid sending a trailer to certain locations because of weight or height restrictions)

Compartment planning• Flexible and fixed compartments• Enhanced incompatibilities, such as restricting dangerous

goods to certain compartments only• Plan to concurrently transport different liquids/products (such

as grades of fuel)• Consolidation of liquid bulk orders from different customers

on one truck or trailer

Figure 7: Multicompartment Equipment Management

Carrier Selection

Carrier selection functionality helps you determine which trans-portation service providers you will use to deliver materials from their origins to their destinations. SAP SCM applies rules for carrier selection, including priority, business share, and least freight cost, allowing you to base your decision on those factors, as follows: • Priority – Allocate shipments to preferred carriers, when the

carrier has not yet exceeded its maximum shipment allocations• Freight costs – Select carriers based on carrier-tariff and

contract data stored in SAP ERP, or on transportation-lane cost data stored in the TP/VS application. (When using the former process, SAP ERP considers all applicable carriers with valid rates and transmits the data to SAP SCM, which chooses carriers charging the lowest freight costs.)

• Business share – Allocate shipments considering the business share your company has assigned to that carrier, which is based in part on freight cost

SAP SCM uses an optimization technique to help you select carriers that offer the lowest-cost solution for all shipments. This technique also considers constraints such as equipment availability and allocations, customer-specific conditions, and continuous moves. Constraints limit carriers’ minimum and maximum number of shipments to specific time periods, geographic locations, customers, and other factors. The continuous-move option allows you to plan for the use of carriers’ equipment to and from shipping locations.

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Vehicle Combination

Trailer Compartment

Truck

Figure 8: Continuous-Move Logic in TP/VS

After the carrier selection process, the optimization technique creates and assigns shipments to those carriers. You can also as-sign shipments manually, if necessary.

Freight Tendering, and Booking

Planning your tendering strategies in collaboration with your carriers helps you both streamline work processes and benefit from reduced handling costs, greater transparency, and en-hanced efficiency. Communicating through electronic data interchange (EDI) or e-mail, you can inform your carriers about your shipment plans, and your carriers can accept, reject, or change shipment requests. Your carrier may, for example, sug-gest alternate pickup or delivery dates and times.

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Shipment A Shipment B

1 Continuous Move: Basic Checks 2 Continuous Move: Enhanced Checks

Shipment A Shipment B12/18/200717:00:00

12/18/200711:00:00

12/18/200710:00:00

12/17/200715:30:00

SchenckerNagelKoehnlein

SchenckerKoehnlein

Shipment A

3 Calculation of Costs (Whole Transport)

W

ZTRUCK

TRUCK8 miles

W

Z

X Y

X Y

Shipment A Shipment B

Freight Cost Calculation Tool

WX

Z

Y

$2,000 $2,000

$2,000

Split Based on DistanceContinuous Move

Split Based on WeightContinuous Move

Split Based on Original Share CostContinuous Move

150 miles75%

50 miles25%

$500$1,500

0.5 t20%

2.0 t80%

$1,600$400

$1,62060%

$1,08040%

$800$1,200

Zone XY

Exact Costs

Continuous Move

Arrival time window

Start time window

Maximum end distance

Maximum start distance

Figure 9: Tendering in TP/VS

Figure 10: Ocean Carrier Booking and Visibility – Process Flow

TP/VS functionality creates tendering announcements from your shipment plans, providing access to the tendering data via a collaborative portal and other methods such as EDI, fax, and e-mail. Your transportation planners can use the Internet to offer shipments to carriers, respond to carriers’ offers, and super-vise the status of the tenders.

TP/VS manages tender responses for you by automatically accepting tenders and tendering to the next priority carrier if a previous tender is rejected, as well as providing the opportunity for the carrier to respond with alternatives such as different pick-up times.

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Scenario – Step 1:Create Booking

Scenario – Step 3:Create Delivery

Scenario – Step 2:Booking Confirmation

Scenario – Step 5:Send Shipping Instruction

Scenario – Step 4:Shipment Request

Scenario – Step 6:Create Shipment in SAP ERP

Scenario – Step 7:Receive Tracking Information

SAP® ERP SAP SCM Carrier

Sales Order

Shipping Instruction

Shipment Request

Shipment

Tracking Information

Shipment Status 1

Shipment Status 2

Shipment Status x

1

Booking ConfirmationBooking

2

2

6

6

7

7

8

Delivery4

4

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Ocean Shipment ManagementGlobalization and outsourcing of manufacturing processes to low-cost countries has increased the need for international transportation. Often, the ocean transport of an international multileg shipment presents a bottleneck as container vessels operate under regular sailing schedules. Missing the cutoff time in a port can have a significant impact on promised customer delivery dates or on production facilities that depend on timely replenishing of raw materials or components.

The ocean carrier industry has grown over time; however, com-munication to these carriers even today is often not standardized, or depends on manual or outdated processes (fax, phone). Auto-mating booking and streamlining documentation processes can increase business productivity and lead to faster interaction and better service by carriers.

Finally, it is more important than ever to control supply chain activities and have end-to-end visibility on events influencing your logistics performance. Tracking shipments on a container level and tying these events to your core enterprise resource planning (ERP) logistics processes will allow guaranteeing of service-level agreements and preparing for unexpected events such as port closures and severe weather delays.

The SAP® Supply Chain Management application streamlines your ocean shipment processes by supporting the following processes:

Booking• Send electronic booking requests to a variety of carriers instead

of using phone or fax• Take advantage of data quality checks to avoid input errors• Receive digital confirmation of reserved capacity

• Manage various characteristics of a booking, which may include, among others:– Specific carrier and vessel as well as arrival and departure

locations and date– Number of container space – Order details (weight, volume)

• Manage booking based on freight contracts

Shipping instructions• Streamline document creation and improve data accuracy• Receive digital confirmation that shipping instructions have

been received and confirmed• Handle shipping instructions that go above and beyond just

port-to-port instructions (such as terminal pickup)• Take advantage of e-commerce platforms’ ability to transfer

shipping instructions into bill-of-lading format

Bill of lading• Enables carriers to create the bill of lading based on electronic

shipping instructions• Ensures compliance of the export bill of lading with letters of

credit – party names, cargo description, and so forth• Allows shippers and freight forwarders to get faster delivery

of their bills of lading via e-commerce platforms so they can minimize container shipment delays

Tracking and tracing • Track the following standard events with the SAP Event

Management application:– Vessel: Loaded, departure, arrival, unloaded– Terminal: Empty-dispatch, full-in, full-out, empty-return

• Track intermodal events (rail) for door-to-door moves• Track trans-shipments through relay ports• Track unexpected events such as changes to booking order or

shipping instructions by trading partner

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The message-based integration to a multitude of ocean carriers can be simplified by taking advantage of SAP partnerships with multicarrier e-commerce platforms, or “ocean portals,” that have been in place since 2000. The ocean portals were formed for multicarrier access and cover a majority of the global container capacity being shipped internationally today. Besides streamlining electronic communication with one standardized message format, shippers can take advantage of data quality assurance measures and performance metrics provided by these ocean portals.

Transportation Processing

SAP ERP streamlines your transportation execution processes. Logistics execution functionality supports shipment execution. You can create documents, rate freight, and settle accounts with your carriers, and execute shipments through delivery and shipment documents in SAP ERP. After you review and are ready to execute your transportation plans, your TP/VS operations automatically create delivery and shipment documents from their respective sales orders.

Transportation processing relies on delivery and shipment documents, which facilitate the flow of information from shippers to customers and any service agents involved in the business transactions.

The processes involved in readying shipments for dispatch to customers include picking, packing, staging, loading the shipments, and posting goods issue. At check-in (when trucks arrive on your premises), you can record information about the means of trans-port such as driver details, truck weights, and arrival times. You can store all this information in the shipment document and print it on the transportation documents. You can choose from a variety of reports to select the shipments relevant for check-in and shipment completion.

With SAP ERP, you can perform the following transportation processing operations:• Manage transportation planning and shipment completion• Calculate shipment and settlement costs• Manage customer freight billing• Manage means of transport and utilities• Track and supervise shipments• Manage shipment costs

SAP ERP allows you to handle processing for both inbound and outbound shipments. You can control and monitor the entire transportation process – from the planning stage to goods issue at your shipping point (for outbound shipments) or vendor locations (for inbound shipments), to goods receipts at your customers’ locations or your plant. You can operate this func-tionality by itself or in conjunction with TP/VS processes.

SAP ERP leverages the TP/VS information. During planning, TP/VS functionality helps you make several decisions that are important during execution and used to supplement shipment processing, such as:• Planned shipping dates and times• Shipment stops or stages• Planned distances and times of travel• Weight and volume• Carrier information

Freight Cost Management and Calculation

You have to manage the determination of freight costs for all types of shipments. Shippers in many countries derive freight costs from freight rates they negotiate with their carriers. With hundreds of forms and methods of calculating rates, the ability to calculate freight costs precisely and settle them to the correct accounts is mandatory.

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You need to tie freight costs back to the right sales-order line item and be able to aggregate those costs via channel, product group, and so forth to determine the full cost of the customer order – and to ensure that the correct representation for each freight cost item appears in the general ledger.

Costs can also have a different basis from which you can calculate rates such as point-to-point, point-to-state, postal-code-to-postal-code, and other rate factors. Calculations can also include base rates, accessorials, fuel surcharges, weight breaks, and discounts you negotiate with less-than-truckload carriers.

You can apply the charges using the cost basis of each delivery item, delivery, handling unit, or shipment. The shipment-cost document allows you to pay multiple transportation service providers involved in each shipment.

Warehouse Processing

SAP solutions integrate warehouse and transportation manage-ment functionality. Warehouse management processes, which rely on delivery documents, involve picking, assembling, packing, and shipping goods from your location or from your suppliers’ location to your customers. To ensure that your distribution center processes operate as efficiently as possible, you have to communicate and share timely information with all your partners, including suppliers, carriers, customers, and express delivery companies.

From Goods Issue to Shipping

Warehouse management functionality supports rational packing processes, such as pick and pack directly during picking, or pack-ing at a packing station. You can print the necessary shipping documents – delivery notes, bills of lading, and invoices – directly from the application, or forward them to customers and partners electronically as delivery notifications.

Yard Management

Yard management functionality extends your warehouse management operations beyond the warehouse by letting you transfer goods to and from your transportation management application. With SAP solutions, the flow of goods in the ware-house is optimized by effectively managing all inbound and outbound trucks, trains, trailers, and containers.

The yard management process begins when goods arrive at their location and ends when they leave the location. The yard management functionality enables you to schedule activities for staging areas, doors, and loading ramps, and manage trucks, trailers, and containers at loading sites. It also ensures transparency of the stock on the site and of planned deliveries to let you plan warehouse activities and forward information to external partners. An alert monitor supports the controller by issuing warnings as soon as you exceed planned deadlines.

During the delivery, for example, trucks register at checkpoints, where the system directs them to doors for loading and unloading or to parking spaces to wait. Following loading or unloading, the system directs trucks to waiting areas on site, to other gates, or for release.

Freight Settlement and Analytics

Transportation doesn’t end with the shipment leaving the dock door. Critical steps in the process encompass managing the freight payments, settlement to financial and cost accounts, and analyzing metrics that enable you and your partners to perform more effectively. Freight cost settlement functionality enables you to understand the effect of transportation costs on the bottom line of your business units, sales channels, and products.

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Freight Cost Settlement

The settlement of shipment costs with the service agent is carried out per shipment cost item. Settlement includes:• Assignment and forwarding of the shipment costs to financial

and cost accounting software for creation of accruals and posting of payables

• Automatic settlement using the self-billing procedure or manual settlement with the transportation service agent

This process includes the following steps that the transference of a shipment cost document initiates:• Identification or creation of service purchase order during

shipment cost document transfer function• Creation of accruals and associated accounts for the freight

within service-entry sheet of shipment cost document• Determination of correct general ledger and cost distribution

for each shipment cost item within the account assignment function of shipment cost document processing

• Comparison of accruals with actual invoices for payment verification

• Invoice verification for manual or automatic settlement • Generation of payments to transportation service agents using

evaluated receipt settlement for automatic settlement

Event Management and Activity Handling

Event management is a key functionality within SAP SCM. The SAP Event Management application improves visibility within your logistics processes for both planning and execution. Thanks to the flexibility of the application, you can map, control, and check all required business processes. A role-based approach makes it possible to view the same business process from various points of view. Using SAP Event Management, you can notify key decision makers about critical business events that have occurred in your supply chain network. By actively notifying the responsible persons and making them aware of critical situations or exceptions, you can optimize reaction times and improve quality and customer satisfaction.

Figure 11: Event Management

SAP Event Management tracks and traces “objects” such as orders, shipments, deliveries, and TP/VS-related tender processes. The application receives information about supply chain events from your partners through a variety of channels and systems, including radio frequency identification terminals and EDI messages.

You can do this because SAP Event Management provides rules for determining how to respond to events. It also supports a list of expected events for all objects to watch. You can customize the rules and list of expected events, depending on the type of object you want to assign. Using this functionality, SAP Event Management also supports management by exception.

Transportation Analysis

SAP NetWeaver BI provides predefined reporting and analytical content. This information originates from several SAP applications such as SAP SCM and SAP ERP. To monitor your transportation operations, you can analyze the following information:• On-time arrivals, delivery times, or lead times• Reliability and quality of deliveries• Flexibility of deliveries and production• Inventory and transportation costs• Shipment volumes• Transportation service provider revenues• Shipment-cost statistics

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SAP solutions help you optimize your transportation management processes and make better-informed business decisions. You can support holistic order-to-cash, transportation management, and supply chain management processes while seamlessly expanding your global trade, event management, and inventory collaboration capabilities.

Additional benefits include the following:• Greater ability to provide accurate status and cost information

online• Enhanced visibility into shipments and orders

• Ability to collaborate more closely with carriers, suppliers, and customers to create more economical transportation processes

• Ability to achieve advanced shipment optimization• Ability to align processes with other departments to create

delivery efficiencies

To learn more about how SAP solutions can transform your transportation organization and integrate its IT systems for flexible, streamlined business processes, call your SAP representative today or visit us on the Web at www.sap.com.

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OPTIMIZE YOUR TRANSPOR TATION OPERATIONS

BUSINESS PROCESS SUPPORT SPECIAL FEATURES OF SAP SUPPLY CHAIN MANAGEMENT

Service provider management • Select and evaluate logistic service providers

Freight contract management • Negotiate, award, create, and monitor freight contracts with rates and volumes

Tender management • Prepare and create contract tenders for mid- and long-term contracting of transport capacity

Transportation volume forecasting • Determine midterm transport capacity based on carriers, geography, and other factors

Capacity and equipment tendering • Secure availability of freight space

Freight order receipt • Receive any types of requests for transportation services

Freight subcontracting, tendering, and booking • Order transportation services and reserve freight capacity

Routing guide • Optimize planning with rules-based processes for planning, vehicle scheduling, routing, and carrier selection

Freight cost management • Determine selling and buying costs and calculate profitability

Event management • Handle activities for track, trace, pickup, and delivery processes

Freight cost settlement • Settle accounts, pay and bill freight costs

Analytics • Analyze transportation-related key performance indicators and strategic freight management data

Business Processes Supported by SAP® Supply Chain Management

Scenario: Order Fulfillment ProcessA typical order fulfillment process encompasses a complex, labor-intensive set of steps. The SAP® Supply Chain Management (SAP SCM ) application helps you manage the process with support for order placement within the SAP ERP application, the develop-ment and optimization of feasible transportation plans, event management, delivery and shipment processing, financial settle-ment with carriers, and reporting and analysis operations.

You can apply the following high-level overview of a typical transportation management problem to most business situations. As an example, a consumer products company mass-produces appliance products, components, and spare parts. The company supplies various channel stores, which sell the products or components.

The company operates one manufacturing facility in California and supplies its customers from there and through distribution centers located throughout the United States and Europe.

The company delivers products to its customers by truck. The order fulfillment process includes the following steps:• Order entry• Interactive vehicle scheduling• Carrier selection• Tendering• Transference of the planning result• Picking• Shipment execution• Shipment costing• Shipment cost settlement• Reporting and analysis

Suppliers’ orders arrive into the company’s SAP ERP application, which automatically transfers them into SAP SCM. The global available-to-promise functionality of SAP SCM performs an assessment immediately after receiving the sales orders. The company uses the assessment to determine if it can fulfill the orders completely or partially. If it can fulfill all the orders, the company uses the transportation planning/vehicle scheduling (TP/VS) functionality of SAP SCM to plan the transportation.

The company’s dispatcher can either initiate the scheduling algorithm manually or automatically within TP/VS for all the orders for the following week. The application will determine how the orders will be routed to their final destination. The dispatcher accepts the plan, and initiates the automatic-carrier selection functionality within TP/VS. The application stores the names of transportation service providers that offer services to the company for each lane.

The dispatcher must consider several factors in the decision, including freight costs, vehicle scheduling, the selection of transportation service providers, and costs stored in tariff tables in SAP ERP for carrier selections for each transportation lane. After the dispatcher releases the planned shipments, the application communicates via the Internet with all selected transportation services about their availability.

The SAP Event Management application monitors the selected carriers to determine whether they respond on time to the company’s requests for quotations. If the application determines that they have not responded on time, it sends reminders to the service providers and alerts the dispatcher, who can choose the next-best carrier for that transportation lane.

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After completion of all the planning steps, the dispatcher transfers the results to SAP ERP, which creates shipment and corresponding delivery documents. The next step in the process is picking, which involves withdrawing material from the stock. SAP SCM can simultaneously trigger this process for all deliveries on the next truck.

In the shipment-execution stage, SAP SCM monitors the important stages of each shipment, as well as the status of each delivery. The SAP Event Management application collects this data from different sources and compares it automatically with the planned dates and timelines. Shipment costing occurs before, during, and after the transportation process. At certain stages, SAP SCM calculates shipment costs as projections, eventually fixing them in the shipment cost document. SAP SCM supports all complex tariffs that the company uses in its contracts with transportation service providers. The company uses the self-billing procedure to settle shipment costs with most of its carriers without having to approve bills.

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