Implementation of an S/4 HANA embedded Transportation Management System

The SAP Transportation Management Module implementation took place within the S/4 HANA (Greenfield) project at one of our West-Hungarian partner in the manufacturing/automotive industry where we implemented the latest generation of SAP ERP system.

SAP logistics module implementation

The company does not use its own vehicle fleet to carry out shipping tasks, but outsources it entirely to an external partner. Thereby in the system to be implemented we had to make the so-called “shipper scenario”.

The shipping, within that the shipment planning, freight organization and freight cost settlement processes form a complex unit, are all part of the company’s purchasing and sales processes, and are closely integrated into the various financial and controlling subsystems. The Transportation Management term stands for the capability of the coordination of these process chains.

Background: partners in the shipping process

The main actors in the shipping process are:

  • The Shipper, which company creates the shipping requirement,
  • The Logistics Service Provider (LSP), which carries out the shipment, and
  • the Consignee, who is the beneficiary of the shipment.

Depending on the point of view, a business scenario can look like this:

  • The applicant uses its own vehicle fleet to carry out the delivery, in this case the Shipper = Logistics Service Provider. This is the so-called “LSP scenario”.
  • The shipper outsources the task to a third party, uses a forwarding service, or the shipper can even outsource the whole coordination process to the service provider. This is the so-called “Shipper Scenario”.

Overview of the logistics task

At our partner company – due to the manufacturing profile – we had to handle both the inbound and outbound logistic processes. Thereby, from the company’s point of view:

  • The inbound process, where – naturally, depending on the incoterms – they have to bring the purchased items from the sites of the suppliers.
  • The outbound process, where – also depending on the incoterms – they have to send the sold items to the sites of the customers.

In the case of purchasing processes, the shipment planning is done based on the aviso sent by the delivery partner (which is technically the inbound delivery in SAP), while in the case of sales processes, using the dates and quantities already confirmed by the production area, the shipment planning is done based on the outbound delivery.

Our partner company has some contracted partners for the significant part of their shipping processes, with pre-agreed terms and conditions. In the remaining cases, the carrier is selected outside the system using other freight exchange portals. Therefore RFP (Request for Proposal) and tendering processes have not been implemented.

Background: the main components of the shipping process

The basis for planning a shipment are the items that we want to deliver individually or in a package from the starting point to the destination. These items have weight and volume data and they take up a certain place on the means of transport that has a given capacity, be it road, rail, water or even air.

Different date labels can be assigned to each item, such as when does a purchased product can be picked up at the place of departure or when it can be delivered at the destination, what are the open hours at a particular site, in case of a time window management when can the loading or unloading be done. That is, what are the expected (narrower interval) and possible (wider interval) start and end times of a given process step.

Therefore, the shipment planning is based on these parameters: the source and destination locations, the properties of items, means of transport capacities and the related dates.

During the transport organization, the planned shipments are grouped (in case of partial shipments – LTL: Less Than Truckload) and assigned to the transport device, and if the transport is carried out by an external service provider, the carrier can be selected (tendering, request for quotation), as well as ordering the shipment, receiving and processing the order confirmation. The freight cost – preliminary – calculation can also begun at this time based on the contractual parameters, or the price.

After the transport is carried out while the shipment was tracked, as closing the freight costs settlement (based on financial rules) and the distribution of freight costs (based on controlling criteria) are done, by receiving a supplier-service provider invoice or issuing a self-invoice.

SAP Transportation Management Module implementation: Requirements and solutions used

Although our partner company’s suppliers – as well as receiving partner’s premises are all around the world, they are typically concentrated in the EMEA region, mainly in West-Europe. Thus, the main preference was to handle road transport, but we had to find a solution for intermodal transport, both sea and air.

An average of daily 50 trucks go through the company’s premises (both in- and outbound processes), typically containing several partner’s products as partial shipments (LTL – Less Than Truckload).

Although the ‘Advanced Transportation’ version of TM supports shipment planning with automatic methods, an optimization engine, and a 3D visualization method is also available, the Basic version, which is part of the S/4 HANA basic license, and which was eventually implemented is based on manual planning.

Warehouse processes (including the service of raw materials and semi-finished and finished products) are served by the SAP EWM (Extended Warehouse Management) module, which, like TM, is also a novelty in the S/4 HANA system environment.

The combined use of these modules, although initially challenging for our consulting and technical team, has resulted in an integrated process in which shipments are planned as discussed above in the TM module, on the so-called Freight Order document, while for the on-site logistics execution the EWM module, which also manages the finished goods warehouse, is responsible. The mirror document of the Freight Order in the EWM module is the Transport Unit (TU), where the various steps, such as picking, packing, loading, take place.

It is clear from SAP’s development schedule that it includes maximizing the interoperability of these components in the short term by implementing a number of new functionalities! These are both technological and process efficiency improvements!

 

Background: SAP shipping solutions

As shown in Figure 1. SAP shipping solutions have a history of more than 30 years, starting with the 1987 release of the RT module in R/2. In the classic SAP R/3 (later ECC), LE-TRA (Logistics Execution – Transportation), which is still widespread and used today, appeared in 1993 with the introduction of SAP R/3 3.0. Both modules are designed primarily for the Role of the Shipper, complementing their processes managed in ERP systems, and their transportation management needs.

SAP Transportation Module implementation: The evolution of SAP TM solutions

1 . Figure – Evolution of SAP Shipping Solutions [1]

In this article, I will not specifically address industry-specific shipping solutions such as SAP TD or SAP TSW.

In the second half of the 2000s, it became apparent that the distribution-focused processes of the LE-TRA module could not respond to the growing complexity of shipping processes (including high optimization needs) and it was not possible or difficult to integrate with the uncovered Logistics Service Provider role as a business scenario as well as missing functionalities such as fleet management.

For these reasons, SAP has focused on completely new foundations and developed the SAP TM (Transportation Management) module. It is offered as a standalone product from 2010 starting with version 8.0. First SAP TM 8.0 also served the role of “Shipper”, but the Logistics Service Scenario has also appeared in it, although limited to road transport only. But the system provided a foundation and architecture on which SAP could build various functionalities step-by-step, such as the functionality that covered version 8.1 with different sea (FCL – Full Container Load, LCL – Less than Container Load) shipping processes which opened the gate towards the full Logistics Service Scenario. A major milestone was in version 9.0, the support for air transport, while in 9.1 the support for tendering, bid management processes and support for rail transport appeared. Today’s latest version is 9.6.

In addition to the stand-alone, decentralized version, in the mid-2010s, in line with the development and concept of the S/4 HANA, SAP marked TM as the ‘technology of the future’, and was officially appointed as the successor of the classic R/3 (ECC) LE-TRA module. The so-called ‘embedded’ version of TM was first introduced in 2017, in the 1709 on-premise version of S/4 HANA, and has since been developed by SAP on a year-by-year, version-by-version basis, achieving a high degree of integration and supporting more and more functionality.

In addition to decentralized, SAP offers two types of embedded TM versions in terms of functionality and license:

  • Shipping and Transportation (formerly Basic Shipping). Part of the basic S/4 HANA license, it covers SAP LE-TRA in functionality, extending it with some decentralized TM processes, such as a basic request for quotation function, or manual tendering.
  • Advanced Transportation. It is part of SAP S/4 HANA LoB (Line of Business) Solutions and requires a separate license. In its functionality, it is equivalent to the decentralized TM 9.6.

 

SAP Transportation Module implementation: SAP TM versions

2 . Figure – SAP TM versions [2]

SAP Transportation Management Module implementation: Further plans

Our partner company’s long-term plans also include the implementation of the Yard Management system, for which we will later examine the relevant SAP solution as a Proof-of-Concept, integrating it with the TM and EWM modules.

SAP Transportation Module implementation: Integrated sales process with SAP TM and EWM solutions

3 . Figure – Example: integrated sales process with SAP TM and EWM solution [1]

With the completion of the logistics execution processes, the Freight Cost Calculation and Settlement is supported by TM with a wide range of functionality.

The TM Basic version is also capable of tracking events after leaving the site or before arriving at the site (such as arrival at a partner’s site, loading/unloading, departure from a partner’s site, etc.). In the Advanced version, we also have the option of map-based display.

At our customer there is usually more loading and unloading points with particular contracts for the LTL shipments with highlighted carrier partners which we had to simulate in the system. Although TM supports weight or volume by default, at the request of our customer, we have introduced the crate meter as a reservation scale measure into the system as a novelty.

In addition, the complexity was due to the fact that while the route is travelled linearly, the cost calculation is based on a star scheme, taking our client’s site as a starting point.

In regard to the integrated processes there are two important priority why the charge calculation needs to be accurate:

  • With the highlighted carriers we made a self-invoicing process which is provided by the SAP MM module of ERS (Evaluated Receipt Settlement). In this way, the fee calculated in the TM, based on the parameters in the transport contract, can be handled immediately by the supplier’s invoice accounting, thus simplifying the process, increasing efficiency and reducing the possibility of errors!
  • Due to the close connection with the SAP CO (controlling) module, on the incoming side the product costing (CO-PC) receives the cost distribution result (via the inventory value), while on the outgoing side profitability (CO-PA) module receives it.

Background: “under the hood”

The SAP Transportation Management module, like most SCM (Supply Chain Management) products (e.g. APO, EWM), is based on SAP BOPF (Business Object Processing Framework) technology.

BOPF is an object-oriented (OO) ABAP framework, a general package of services and functions that focuses on a specific business object, in our case, for example, a Freight Order and related operations and methods. According to SAP’s original goals, this can speed up and standardize the development process.

Embedded TM applications run on SAP’s next-generation web (HTML5) based, so-called Fiori interface. This allows clients to take advantage of features such as visual shipment planning or even map-based shipment organization and tracking.

SAP Transportation Management Module implementation: Reporting

TM module supports the execution, monitoring and analysis of shipping processes with a number of standardized reports and dashboard-like applications thanks to the SAP Fiori interface and the built-in analytical solutions (Embedded Analytics). With the help of these, our client replaced a number of previously out-of-system, typically Excel-based processes upon the implementation.

Bibliography

[1] Lauterbach, Sauer, Gottlieb, Sürie, Benz (2019). Transportation Management with SAP. Boston, MA: SAP Press.
[2] SAP Help Portal: SAP Help Portal 19/08/2020 – https://help.sap.com

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Implementation of an S/4 HANA embedded Transportation Management System

Author: Tamás Ankucza

SAP Warehouse Logistics Competence Center

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