Exploring Transportation Management

Accurately receiving orders and efficiently processing them are critical capabilities in the logistics business. The software offers the following order management features:

Holistic integration and management of all transportation demand with order-to-cash and procure-to-pay processes, with change management in real time based on business rules to help ensure a closed-loop communication cycle.

Customer delivery commitments enabled through synchronized sales order scheduling.

Integration with order and delivery data, including full order access and visibility into the status of each order (document flow).

The following transportation requirements are currently supported by SAP TM:

• Sales orders

• Purchase orders

• Stock transport orders

• Returns

• Scheduling agreements

• Inbound / Outbound deliveries

SAP Transportation Management helps you optimize your transportation plan down to the level of individual shipments and containers – improving resource utilization and reducing transportation costs. You can consolidate domestic or international shipments, as well as shipments that use single or multimodal transportation. The software helps you achieve the right level of centralized or decentralized planning so you can identify synergies and meet your delivery goals.

The first step in the planning process is freight unit creation. Freight units can be built based on quantities (e.g., if you have a sales order for 100 to of steel, you need to split the quantity, e.g. in 5 times 20 to be able to transport the steel on trucks, which allow a max payload of 20to). Other criteria in freight unit building are attributes or characteristics of the items you need to transport. For example, if your sales order has two items, one of them is ice cream (which needs to be transported frozen) whereas the second item is chocolate (which should not be transported frozen), you may want to create two freight units based on temperature conditions required for transportation to avoid both items are loaded into the same compartment of a truck or even on the same truck.

Freight Units are built based on all transportation requirements – Order-based (purchasing, sales, stock transfer, returns) and delivery-based.

Freight Unit Building rules are used to create freight units. Freight demand can be consolidated or the planning quantity can be split across freight units via a defined split quantity. Compatibility rules ensure that freight units with different incoterms or goods with specific transportation restrictions (refrigerated goods, hazardous materials, liquids) are grouped accordingly.

In a short-cut process, the creation of freight units can be omitted and freight orders are directly created based on transportation requirements like sales orders or deliveries.

TM supports manual, map-based, or automated planning and dynamic replanning functions that consider constraints, utilize real-time location information, to optimize freight planning and tendering. The determination of the most efficient combination of modes, routes, resources, and optimal carrier selection by factoring in costs and penalties.

The following capabilities are offered in transportation planning:

• Freight can be interactively planned via drag & drop – to available resources or schedules.

• All available resource/vehicle types can be planned – trucks, trailers, compartments, bulk tanks, refrigerated trucks, containers & all schedules types for road, ocean air freight.

• Map visualization: Standard interfaces enable 3rd party geographical information system integration (e.g., from GIS vendors like PTV, Navteq/Nokia, ALK, RandMcNally, ESRI, …). SAP Visual Business is an infrastructure to visualize map data and build graphical applications on top of the map visualization.  SAP TM uses SAP Visual Business for map-based planning – route & distance determination, location and route visualization, drag & drop of freight units to lanes & resources.

• The Transportation Cockpit can display supporting data for making efficient planning decisions. Tabs can be selected to show related data summaries, for example, for freight order execution status, showing milestone status with traffic light colors and execution times. Additional tabs can display cargo management, carrier ranking, freight execution status, freight charges, etc.

• The user can work with different hierarchy views – Freight unit, freight order, trailer document, air & ocean bookings. Hierarchies provide a clear, hierarchical display of the freight assignments and activities – to which documents, locations, stages, loading/unloading of freight units, coupling/uncoupling of tractors and trailers.

• Optimizer planning is constraint and rule-based. Planning takes into account the source & destination locations, pick-up & delivery dates, un/loading durations, lane distance & duration, arrival & departure dates and times at each stop via transit duration, length of stay, cargo cut-off time, availability & schedules.

• Least cost transportation via fixed & variable costs. Fixed costs include vehicle resource, load costs & schedule costs. Variable costs vary according to transportation time, distance, quantity transported, route, intermediate stops (cost per additional stop) penalties (early or late pick-up or delivery).

• Product dimensions –weight and volume (all units of measure)

• Resource availability & capacities: Handling resources (for un/loading, e.g., equipment, forklift truck, door), vehicles (weight & cubic capacity, including decreased capacity for partitions), drivers – taking into account shifts, downtimes, qualifications

• Dependencies: ensures linked freight orders, freight units & resources are transported together

• Incompatibilities: Checks transportation restrictions (refrigerated goods, hazardous materials, liquids), …

Driver management helps you to track and interactively manage driver resources while assigning drivers to specific freight loads using default assignments, or interactively in the transportation planning cockpit or a Gantt chart view.

A critical need for efficient and effective transportation is the ability to execute a plan and adapt it to real-life events in a dynamic environment. Well-coordinated planning and execution can help you cost-effectively deliver goods when and where customers expect them, while handling delays and disruptions.

The transportation execution is integrated in real time with SAP Extended Warehouse Management (via PI). The integration automatically notes changes in freight documents until the freight has been received or loaded, and shares truck arrival and departure information between the two applications.

Integration to EWM supports the following scenarios:

• Order-based planning and execution

• Delivery-based planning and execution

• EWM / TM integration for cost settlement

• Changes in freight documents till the point of arrival and loading

• Communication of arrival and departure information with reversal from EWM to TM

Freight execution and capacity monitoring via event management includes tracking, with real-time event management features, such as map-based geographical tracking, alerts and notifications, and a reporting dashboard. Comprehensive shipment tracking supports tracking of freight units, freight orders, freight bookings, and containers. Tracking is supported across pre-, main- and on-carriage to support an end-to-end view. Depending on the role in the shipment, different information is presented in shipper, carrier, and consignee views.

Flexible communication is supported among business partners using B2B messaging, mobile apps, Web interfaces, file upload and download, print documents, e-mail, facsimile, and SMS messages. SAP TM offers comprehensive print document templates for road, sea, and air transport.

The integration with the SAP Global Trade Services application includes trade regulation compliance features for handling export declaration, import declaration, and transit and security filing.

Freight costing allows you to define rates based on numerous criteria. Examples are:

• Various origin / destination point classifications (Country, Region, Zone, ZIP-code, point-to-point, point-to-zip, point-to-state, zip-to-zip and state-to-state)

• Equipment (container type / size)

• Minimum, maximum rates

• Weight / volume, break weight, dimensional weight

• Distance, discounts

• Tolls, taxes, etc.

Charges can be based on conditions and events (e.g., discount for late deliveries) and agreements can be consumed.

Mode-specific capabilities in freight costing and settlement include:

• Rule 11 on freight order (rail)

• Resolution base for resources (rail)

• Railcar-based rating with day of week pricing (rail)

• Resource ownership based calculation (rail)

• Commodity-based charges (air and ocean)

• Prepaid and collect on ocean booking (ocean)

• Index table-based fuel surcharge calculation (road, ocean, air)

Rate tables can be maintained in and uploaded from Excel individually and in mass.

Transportation charges and distributed costs are calculated in the freight order and freight booking. From here an individual or collective processing can trigger the creation of freight settlement documents. From the freight settlement document, the creation of purchase orders and service entry sheets is started for transportation services. Purchase order and service entry sheets are then the basis of subsequent invoice verification processes or self-billing processes using standard MM capabilities. At the same point in time, postings into CO-PA (outbound) or material valuation (inbound) are initiated from the freight settlement document. This part of the process is called cost distribution.

The purpose of cost distribution is to:

• Record Delivery Cost on the Material for Inbound Scenario (Capitalize Transport Cost, increase Material Value)

• Record Transport Expense on Root Cause, e.g., Sales Order for Outbound Scenario (Distribute the Costs for the transport to the object that is "responsible" for the transportation requirement)

Cost distribution involves the following steps:

1. Distribution of the freight costs at the level of order / delivery items based on distribution rules, such as gross weight of the Order / Delivery items.

2. Processing of the distributed freight costs in the financials for either processing for material valuation or for expensing it at the account assignment of the source item.

The transportation process starts with "Order Management". Order management is the process of creating a transportation requirement. Transportation requirements can be sales orders, purchase orders, deliveries, and so on. In a second step, these transportation requirements are planned. SAP TM offers manual planning functions, optimizer planning and semi-automated processes (transportation proposal creation). Different aspects of planning supported by SAP TM are means-of-transport selection (e.g., rail vs. road), carrier selection based on real carrier rates, load optimization (3D-planning of container/truck utilization). Once the planning process is finished, SAP TM supports also the execution of transports. Execution includes delivery creation, document creation (print or electronic, like waybills), event management integration (track and trace) as well as warehouse integration (EWM integration). If you do not operate an own fleet, you need to make sure that the external carrier is paid for the services. SAP TM allows you to maintain freight agreements, calculation sheets, and rate tables to accurately define real carrier costs, which can be used for charge calculation (already in the planning phase, carrier selection), but also for settlement processes after the transport has been executed.

The main difference to a decentralized Transportation Management is the simplified document flow. In the embedded TM, you have the direct integration of sales orders, purchase orders, deliveries, and so on, while in the decentralized TM these orders are replicated as order-based transportation requirement and delivery-based transportation requirement.