SAP TM 6.0 with Freight Forwarder's Perspective
By now most of you should be aware that SAP has launched its first comprehensive solution in the "Transportation" space. SAP TM 6.0 is a solution designed to meet business requirements of LSPs and Shippers. SAP TM 6.0 will be the transportation solution in which SAP will do future functional development. It is supposed to be one combined system for transportation planning / execution and transportation charge calculation (freight costing) unlike ERP LES-TRA and SCM-APO-TPVS
This blog is not meant to share with you what the capabilities of SAP TM are; it would definitely be covered in my following blogs very soon.
Since SAP TM 6.0 solution is designed keeping in mind the business requirements of Freight Forwarding companies, I am more interested to share with you some relevant information I have gathered on what a Freight Forwarding is and what do Freight Forwarders actually do.
Companies doing business in the transportation space are called by different names. But if we would try to classify them they would all fall under one roof as "Logistics Service Providers". Manufacturing firms managing their own transport (1PL), Freight forwarders, shipping lines (2PL), system service providers (3PL) and 4PL are few of them. Most of the activities like pick-up, interim storage, consolidation, transportation, and management of transport documentation, customs procedures, and physical delivery of the goods would either be done by one of theses or same would be out-sourced to others.
Freight Forwarders are supposed to be the experts in shipping and transportation business and thus take the onus from "Shippers" to move their commodities to the desired destination. Freight forwarding is all about the flow of international trade. It is the party who makes sure that internationally traded goods move from its origin to its destination:
- At the right place,
- At the right time,
- In good order and condition,
- At the most economic cost.
Few of the areas where core expertise is required, in order to accomplish smooth movement of goods in the international trade are:
Logistics: Close co-operation is required with transporters in every mode - road, rail, sea and air. Freight forwarders are constantly negotiating freight rates with transport providers, comparing the costs of moving cargo along different routes via different modes and then designing logistics infrastructures which provide the best compromise between cost, speed and reliability. Once a forwarder's recommendations with regard to cargo routing have been accepted it becomes the responsibility of the forwarder to ensure that the goods concerned are transported and delivered as planned. The process of designing and executing these logistics plans has earned for the forwarder the title "Architect of Transport".
Statutory Compliance: A vital ingredient to successful trading on world markets is that every transaction must comply with numerous statutory measures and their related procedures, especially those associated with Customs. It is in this area that the specialized skills and knowledge of the freight forwarder come to the fore.
Risk Management: To every international trade transaction there is an element of risk and the increased complexity of international trading as compared to local buying and selling requires that these risks are managed with tools which are correspondingly more sophisticated. International traders require that their forwarders be in position to advise and assist them in minimizing those risks which are particularly associated with the movement of goods - loss, damage and destruction, although the exposure of forwarders to the international environment in its entirety makes their counsel as regards matters like credit and currency risks very much sought after.
Finance & Payments: Forwarders are entrusted with goods which are very often dispatched under conditions where buyer and seller are not known to one another. Under these circumstances the forwarder must scrupulously ensure that all requirements of the door to door operation are complied with to the letter, especially as far as the accurate and timely production of documentation is concerned - excellence in this filed leads to prompt settlement for goods purchased and satisfied traders.
Integration: The ability to ensure the efficient and effective door to door movement of goods from country to country from the time an order is placed until finished goods are delivered to the final consumer places the freight forwarder in a position to make a unique contribution to the enhancement of value to the activities of exporters and importers. Freight forwarders thus act as a catalyst to bring the supplier, manufacturer and consumer as close together.
To conclude I would like to put together the responsibilities of a Freight Forwarder.
- Researching and planning the most appropriate route for a shipment (taking account of the perishable or hazardous nature of the goods, cost, transit time and security)
- Arranging appropriate packing (taking account of climate, terrain, weight, nature of goods and cost) and delivery or warehousing of goods at their final destination
- Obtaining, checking and preparing documentation to meet customs and insurance requirements, packing specifications, and compliance with overseas countries' regulations and fiscal regimes
- Offering consolidation services by air, sea and road - ensuring cost effective and secure solutions to small shippers with insufficient cargo to utilize their own dedicated units
- Liaising with third parties to move goods (by road, rail, air or sea) in accordance with customer requirements
- Arranging insurance and assisting the client in the event of a claim
- Offering tailored IT solutions and EDI (electronic data interchange) connections Arranging payment of freight and other charges, or collection of payment on behalf of the client
- Transmitting data by internet and satellite systems, enabling real-time tracking and tracing of goods
- Arranging air transport for urgent and high-value freight and managing the risk door to door
- Arranging charters for large volume, out-of-gauge or project movements by air and sea
- Acting as broker in customs negotiations worldwide to guide the freight efficiently through complex procedures
- Dealing with special arrangements for transporting delicate cargoes, such as livestock, food, medical supplies and other fragile goods
- Arranging courier and specialist hand-carry services
- Working closely with customers, colleagues and third parties to ensure smooth operations to deadlines
- Maintaining visibility and control through all phases of the journey, including the production of management reports and statistical and unit cost analysis
- Acting as consultant in customs matters
- Maintaining current knowledge of relevant legislation, political situations and other factors that could affect the movement of freight
In my next blog I will try to share with you all, the Capabilities of SAP TM 6.0 and its fitment to LSP industry.
