Understanding Special Functions in Freight Procurement

The final result of the strategic freight procurement (SFP) process is the optimal generation of freight agreements for carriers. It is referred to as optimal generation because the best business shares are created for the request items. To do so, the optimizer helps to define optimal business shares. The optimizer proposes target shares, which are then used to calculate the estimated total spend for each carrier and each request item.

Spend estimation can be done separately from target share determination. Target shares can also be manually overwritten to simulate the estimated spend for individual carriers and request items.

When using the optimizer for target share calculation, you can define strategies that restrict optimizer calculations. Strategies contain conditions that define the restrictions for the optimization, as shown in the following figure.

Certain parameters are assigned to a strategy and can be maintained per condition.

• Incumbent:

  This option is selected to indicate that the carrier is incumbent, but is deselected if the carrier is nonincumbent.

• Maximum business share:

  Enter the maximum business share given to the carrier.

• Minimum business share:

  Enter the minimum business share given to the carrier.

• Maximum number of carriers:

  Enter the number of carriers to get the same maximum business share.

• Minimum number of carriers:

  Enter the number of carriers to get the same minimum business share.

In the RFQ type, you can define whether the optimizer processes one item, or all of the available items. It specifies the mapping between the agreement type and the freight agreement RFQ type.

Target share optimization takes rate table values into account by creating a simulated freight order and calculating its values.

This process can be repeated for many different scenarios, with different Tgt Share Strategies or conditions.

You can add an additional Target Share Strategy by choosing Insert. The same strategy is used multiple times, but with different strategy versions. You maintain the strategy version in order to define different versions, as shown in the previous figure, Comparison Cockpit: Optimization and Estimated Spend Simulation.

For each strategy, choose Insert→Conditions to add conditions.

As shown in the following figure, Target Shares are calculated for each carrier by choosing Run Optimizer.

By choosing Simulate Estimate Spend, the system calculates the spend per carrier for each strategy, as shown in the the figure.

The figure shows a graphical spend comparison graph, which compares the business shares and total spend between different strategy versions.

The optimization, simulated estimated spend, and graphical strategy spend comparison are created per RFQ item or for the entire RFQ.

Once the RFQ has been analyzed, you select Accept Preferred Strategy, and the RFQ status is set to Awarded. The figure shows a selected strategy.

The target rates are shown directly in the Agreement RFQ Calculation Sheet Items section and in the rate table of the respective item. Here you can enter a target value, including a tolerance range for every specified charge line item.

The target rate specifies the maximum acceptable rate that you have determined for a transportation service. If you select the Publish Target Rate checkbox, the carrier can view the target rate when you publish an individual freight agreement RFQ.

In customizing, choose the following: Transportation Management→Master Data→Agreement RFQs and Quotations→Define Freight Agreement RFQ Types.

This Business Add-In (BAdI) is used in the freight agreement RFQ (TM-FRA-RFQ) component. You can use this BAdI to define a logic to reward or penalize a carrier because of their past performance in a trade lane in the optimizer. When you run the optimizer, the system takes into account the strategy conditions and other constraints, and then takes into account the reward or penalty for a carrier from this BAdI. For example, if a carrier has a history of delays in delivery, you can add 10% extra cost to the cost a carrier has proposed. This ensures that the carrier is penalized when you run the optimizer.

This BAdI uses the GET_BONUS_MALUS_VALUE method.

The values for the Bonus-Malus functionality are taken into account in the optimizer run for carrier ranking in the comparison cockpit. The Bonus-Malus values influence the target share of the carriers, and therefore deliver a different position in the carrier ranking.

The figure shows an estimated spend simulation and carrier ranking in the comparison cockpit.