A forwarding agreement is a long-term contract that represents the contractual relationship with the customer that is purchasing transportation services from your company. This contrasts to a freight agreement which represents the contractual relationship with a carrier from whom you are buying transportation services. The definition of master data for calculating forwarding charges and freight charges is very similar. Except for the agreements, the same master data may be used in both processes.
A forwarding agreement describes the contractual relationship between the customer and the sales organization within your company. Forwarding agreements are the basis for calculating transportation charges and can involve one or more parties. You use forwarding agreements to calculate transportation charges billable to the customer or ordering party.
A forwarding agreement includes contractual data, such as the involved parties (your sales organization and the ordering party), terms of payment, validity dates, and document currency.
The system determines the agreement based on the organization, business partner, validity period, and preconditions. The standard determination uses the sales organization and customer. For complex determination, rules based on a BRF+ condition can be created. This allows rule-based determination based upon additional fields.
A forwarding agreement may cover several agreed scenarios. These scenarios are defined as items in the forwarding agreement. When performing a charge calculation typically only one item is considered (depending on the charge calculation level defined in the calculation profile). Therefore it is crucial to separate the items within one agreement by using limitation information such as preconditions and validity periods. Separating the items ensures that the right item is considered during charge calculation. The calculation is executed based on the calculation sheet assigned to the item.
The calculation sheet is a hierarchical table used to calculate transportation charges. It combines the charge types permitted for a document and the sequence in which the system takes these charge types into account, during the calculation. A charge item typically points to a rate table.
A rate is a price for a specific transportation service that is valid for the period defined by its validity. A rate is listed in a rate table, where the freight rates are maintained based upon the scale specifications.
A scale is a dimension of a rate table and defines the criteria based on which rates are retrieved, for example by gross weight or distance.
For all of these master data elements you can define templates to streamline the maintenance effort.
While scales, rate tables, charge types, and calculation sheets can be used interchangeably in freight and forwarding agreements, agreements are distinguished for their usage. There are some specific features that are only available in forwarding agreements.
You can choose service levels for forwarding agreement items. These can be defined transportation mode specific or independently of the transportation mode in Customizing.
For an item in a forwarding agreement, you can choose Follow Up→Calculate Consumption and open the Capacity Dashboard. There you can view the quantity consumed and the amount calculated in forwarding orders and forwarding settlement documents for the validity period of the agreement item. You can subsequently compare this data to the quantity contracted in the agreement. This enables you to analyze the usage of the agreement.
If you have a forwarding agreement with service products that have services, the system automatically adds the instructions specified for the service type to the Instructions tab page of the forwarding agreement. You can edit or delete these instructions, and also add additional instructions. Note that if you create a forwarding order from a forwarding agreement with instructions, the system includes the instructions in the forwarding order and subsequent business documents.
You can create forwarding orders and forwarding quotations based on service products.
You can create forwarding agreement quotations from within forwarding agreements to start the process of updating the forwarding agreements.
At the agreement item level in forwarding agreements, you can specify that you bill your business partners based on certain execution criteria, such as by the trailers used to fulfill the order, or the route taken to execute the order. During settlement, the system creates a single forwarding settlement document for all the forwarding orders that meet the specified execution criterion. By default, the settlement basis is at forwarding order level.
Service Product Catalog
While forwarding agreements represent the negotiated agreement between the LSP and customer service agent, product catalogs generally represent the available service products that an LSP has to offer. The service products are combined into a service product catalog. The service product catalog is similar to a forwarding agreement, the individual service products resemble forwarding agreement items.
In an ideal process, you create the forwarding agreements based on the service product catalog. Specific service products are selected and a forwarding agreement is created consisting of items that are generated from the service product catalog.
Strategic Freight Selling
Strategic Freight Management (SFM) impacts the scenario in which you propose, negotiate, and create agreements for long-term transportation service contracts with both transportation service providers and customers. Strategic freight management can be divided into two different processes.
Strategic Freight Selling
The LSP uses an TM system and receives an RFQ from a customer. In this case, the LSP needs to compare the customer‘s request with the existing services offered and needs to find the matching service products, adapt them to the customer‘s needs, and respond by creating and sending an appropriate quote to the customer. This process is unique to LSPs and does not occur in shipper scenarios.
Strategic Freight Procurement
A shipper or LSP, using TM, requests a contract proposal from one or several subcontractors (other LSPs or carriers), providing them with information such as requested volume and other prerequisites. This information is gathered by TM in collaboration with SAP Analytics tools. The system sends the request for a contract to the subcontractors as a Request for Quotation (RFQ) and the subcontractors answer with a quote.
The strategic freight selling process consists of four process steps that are designed to lead to a forwarding agreement.
- Data Analytics
Analysis of historic demand is crucial in allowing LSPs and carriers to evaluate whether a trade lane is in demand. This analysis is not mandatory for the strategic freight selling process.
- Product / Service Offering
Once the customer sends the RFQ, the LSP creates the leading document for the strategic freight selling process, the forwarding agreement quotation. This document contains all data requested by the customer.
- Pricing & Margin Optimization
Once the forwarding agreement quotation has been created, the correct rates can be derived for the customer. Since the LSP may already provide standard service product catalogs, the task of the sales agent is to determine the service products that match the customer’s requirements. Once the matching service products are found, the corresponding rates are drawn from the service product into the forwarding agreement quotation, where they can be amended if the customer requires some deviations from the standard services or has a particular discount applied. If the customer accepts the offer and signs a contract, the forwarding agreement quotation is turned into a forwarding agreement which acts as a contract between the LSP and the customer.
- Relationship Management
Similar to the data analytics process step, the system monitors the customer’s orders in order to decide whether the currently offered services and volumes are appropriate for the customer. Data analytics and relationship management are ongoing processes, while product or service offering, and pricing and margin optimization are instant process steps initiated by a customer’s RFQ.