Executing Merchandise Distribution

Objectives

After completing this lesson, you will be able to:

  • Execute Merchandise Distribution

Merchandise Distribution

Merchandise Distribution comprises two phases, the planning phase, and the processing phase:

The Merchandise Distribution planning phase can either be triggered centrally, that is, both the procurement and issue documents are generated by means of an allocation table. This is called the Push planning process. In the Pull planning process, existing stock transfer order, and/or sales order quantities are combined in a collective purchase order to the vendor at article/DC level. With both planning options, procurement- and issue documents are connected with each other, and this information is stored in the system as distribution data.

The Merchandise Distribution processing phase then starts with the goods receipt in the DC, and ends with the goods issue from the DC. There are three basic processing methods: cross-docking, flow-through, and putaway, as well as two optimizing procedures: cross-docking/flow-through, and cross-docking/putaway.

Cross-docking is the most efficient processing method in the DC, as the merchandise arrives at the DC already pre-picked by the supplier. This means that, in the DC, the unloaded handling units only have to be moved from the goods receipt to the goods issue area, without additional handling effort. The incoming handling units are marked for each recipient. However, vendor pre-picking usually comes at a cost.

The site distribution profile is used to define the basic characteristics of a site for merchandise distribution:

  • Do you plan to use cross-docking and/or flow-through at the site?

  • Do you want to use picking for deliveries in cross-docking?

In this profile, you also define the time for adjusting the distribution data. This can be done in a general default setting, but also separately for each business process (push, pull, returns), for example:

  • Goods receipt

  • Goods receipt, checking size of variance

  • Manual

This profile also allows you to define the time for generating follow-on documents (outbound delivery, distribution order), for example:

  • Goods receipt

  • After adjustment

  • Manual

The article distribution profile primarily defines the processing method, as well as the system reaction to quantity differences at goods receipt (over/under deliveries) by means of the assigned adjustment profile. The assignment of the distribution profile to the article (logistics view, DC) is a prerequisite for using the merchandise distribution functions for the article. Note: However, the processing method of the assigned article distribution profile can be overruled in the push planning process by means of the allocation table item category.

The processing phase starts with the goods receipt for the vendor purchase order in the DC. When goods receipt is posted, the distribution data is adjusted to the actual quantities, and then the merchandise is distributed among the recipients. In cross-docking, the merchandise is delivered already pre-picked by the vendor, thus picking at the distribution center is not relevant. The merchandise is then sent to the goods issue area, where goods issue is posted.

The stock transport orders (= purchase orders from store to distribution center, issue documents) are connected with the standard (vendor) purchase orders (procurement documents), and are displayed together in the distribution monitor. Here, the stock transport order item (white line) is displayed for the connected standard purchase order item (orange line).

When you are optimizing the supply chain, the logistics of goods that involve distribution centers are increasingly characterized by just-in-time processes (such as cross-docking) at the distribution centers. These fast processes are based on the fact that the quantity distribution among the DC’s recipients was already defined when the DC goods receipt is posted. This means the usual putaway and picking processes at the distribution center are not necessary for this merchandise. The advantages of this include lower handling costs, reduced stocks, and consequently less capital lockup, and a faster flow of goods at the distribution center.

If the vendor pre-picks/pre-packs the merchandise, the distribution center can process these packages, possibly containing different articles, using cross-docking. This is the leanest processing method in merchandise distribution, as no picking is required in the DC. Basically, only goods receipt and goods issue are to be posted. Other steps like adjustment posting, and generation of the outbound deliveries, can be automated according to customizing settings.

A prerequisite for the pre-picking/pre-packing process is that the procurement document (vendor PO) contains the information about the individual recipient quantities for each article. This is achieved by means of Supplementary logistics services (SLS), which are article-specific services supported by logistics. You can use the SLS function to order pre-picked merchandise from a vendor to be delivered to a distribution center. SLS sub-items are then created by the system during vendor purchase order generation. This is supported in both merchandise distribution planning processes, that is, in the vendor PO generation from the allocation table in the push process, as well as in the collective PO generation in the pull process.

The second phase in Merchandise Distribution is the processing phase in the DC, which starts with the goods receipt of the vendor PO, and ends with the goods issue from the DC. When a goods receipt in the DC is posted, the adjustment confirms the relevant processing method(s).

Cross-docking (CD) is the leanest process for the retailer, as it means that the external vendor delivers pre-picked merchandise to the DC. Therefore, the pre-picking details were included in the vendor's PO. This requires the use of supplementary logistics services (*SLS). After the goods receipt of pre-picked merchandise, it can be moved to the goods issue area right away for goods issue posting. The merchandise is now en route to the recipients (for example, stores).

There are two variations of Flow-Through (FT):

  1. Recipient-driven flow-through or customer-driven flow-through: Based on the stock transport orders or sales orders of the recipients (stores/customers), outbound deliveries are generated after goods receipt in the DC and adjustment posting. Picking is then carried out for these deliveries.

  2. Merchandise-driven flow-through (or article-driven flow-through): In the distribution center, merchandise is picked using distribution orders. For example, when a handling unit is full (for example, a pallet), the system can generate an outbound delivery for the contents of the handling unit. Merchandise-driven flow-through can only be used in conjunction with lean Warehouse Management (*lean WM) for the relevant storage location, as technically, the distribution order is a WM document, i.e. a WM transfer order.

The two Flow-Through process variations that are going to be explained in more detail in the next lesson.

Putaway (PA): Merchandise, is posted to a putaway storage location. Deliveries are then generated and used when merchandise is removed from storage at a later date.

You can use the optimizing procedures (CD/FT and CD/PA) so as to process different purchase quantities (for example, pallets, and cartons) and at the same time perform procurement in large handling units. The two optimizing procedures are combinations of the following processing methods: Cross-docking/flow-through, or Cross-docking/putaway. With these methods, the system uses cross-docking as much as possible, and uses the second processing method for the remaining quantities (which can not be cross-docked, for example because a handling unit has to be split up according to the adjustment profile).

The merchandise arrives at the distribution center for goods receipt and can be posted to a cross-docking storage location. Deliveries are then generated, and picking is not required.

Pre-Picked Cross-Docking:

For pre-picked cross-docking, the vendor must be told the quantities ordered by the individual recipients. This is mapped in the system using the SLS (Supplementary Logistic Services) function.

Since the recipients (stores/customers) do not necessarily order full units of each article, the vendor has to pre-pick the goods. This means that the vendor creates (possibly mixed article) packages for each recipient, which are all delivered to the DC, and from there sent further on to the recipients.

These packaged articles are not repacked between goods receipt and goods issue in cross-docking.

Outbound deliveries (not picking relevant) are generated for the stock transport orders. The pre-picked articles are taken to the goods issue zone, where the goods issue is posted, and the delivery note is created.

Goods Receipt in the Store

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