Non-vessel operating common carriers (NVOCC) are the type of sea freight forwarders, who operate as transportation or logistics intermediaries. NVOCCs book space on container vessels in large quantities at lower rates and sell space to shippers in smaller amounts. Smaller shippers, take advantage of the lower costs associated with being a big shipper.
With my knowledge on SAP’s TM solution, and my engagements with leading logistics & warehousing companies in Asia, I would like to present the key business processes followed by these companies and the extent to which SAP TM address those.
Global logistics company, its organization, departments and functions
A global logistics company has its operations in different countries across different continents. A typical logistics company from East Asia could have its operations in Japan, Indonesia, China, India, Europe and USA. The operations are primarily divided into few business units based on the nature of work done. These departments could be Export Forwarding, Imports Forwarding & NVOCC.
- Export Forwarding Department: This department is responsible to move the customer (shipper’s) goods onto the ocean vessel on time and managing the prerequisites like drayage & customs clearance. Sometimes it also offers services like storage & warehousing. Most of the cases the customer (shipper) already has negotiated and booked the container space onto the ocean liner.
- Imports Forwarding Department: This department is responsible to move the customer (consignee’s) goods from the ocean vessel and deliver it to consignee door step or store it in cargo freight station or warehouse. Services offered are drayage, customs clearance, storage & inland transport.
- Exports NVOCC Department: This department based on the consolidated volume of cargo to be transported does an estimation of number of containers (TEUs, FEUs…) and reserve the space on the ocean vessel. Most of the times shippers arrange on their own the transport of their cargo to NVO departments’ warehouse or the cargo freight station it owns. NVO department then consolidates the cargo from different shippers, estimates the number of containers required, procures the containers, reserves the space with the ocean liner, prepares a container load, loads the cargo into the containers, arrange the drayage to the container yard (near the port of departure) and delivers the containers to the ocean liner at the container yard. Services performed are storage, consolidation, procurement of container, ocean space booking, arranging drayage & arranging the export customs clearance.
- Imports NVOCC Department: This department is responsible to follow up with the ocean liners for the containers which export NVOCC department has shipped. Imports NVOCC department receives the docket of information from the exports NVOCC department for each shipment. Documents like, Freight manifest, house B/L issued by the export NVOCC, ocean B/L issued by the ocean liner and other documents provided by shippers like commercial invoices, packing list etc. are part of the docket. Ocean liner sends an arrival notice to the imports NVOCC department and the imports NVOCC department has to pay additional charges to the ocean liner if any are mentioned on the arrival notice. It also has to arrange for the imports customs clearance of the containers. Ocean liner issues delivery order to the imports NVOCC department based on which the containers are picked from the container yard and brought to the container freight station owned by NVOCC department. Drayage between the container yard and container freight station is arranged by the NVOCC department. Cargo is deconsolidated and can be picked up by the consignees by paying the appropriate charges if any which are due. Services performed are imports customs clearance, arranging drayage, handling and storage.
Organization of a Global LSP
Transportation by NVOCC department
SAP TM 7.0 Functionalities applicable to NVOCC transport
SAP TM 7.0, the latest available release provides variety of functionalities to meet requirements of a distribution intensive shipper community as well as logistics service providers. SAP TM 7.0 is capable of handling all the important modes of transports.
Mentioned below are some of the key functionalities offered by SAP TM 7.0 which could address the business processes of NVOCC department in a global logistics company.
- Organizational units, Locations & Business Partners
- Booking Order for space reservation
- Shipment Request, Charge Management & outputs
- Shipment Order, Charge Management & outputs
- Shipment & outputs
1. Organizational units, Locations & Business Partners: Sales organizations, sales offices & sales groups can be configured as per the LSPs geographical spread. Similarly Purchasing Organizations, purchasing groups, planning & execution organizations & groups can also be configured. Locations to identify companies own warehouses, cargo freight stations & external container yards & ports can be setup as master data. Business partners, purely from billing and payment perspective can be setup as master data. These can also be linked to the locations if needed. Business partners for shippers, consignee, service providers, agents etc. can be setup. For inter-company transactions different departments can also be setup as the business partners.
2. Booking Order for space reservation: By using booking order business object, LSP can request for container space to the ocean liner, on a specific vessel & voyage. Ex. Space to accommodate 20 TEU (20 Ft. Std. Container) and 10 FEU (40 Ft. Std. Container). Ocean liner can get this order electronically at the same time his confirmation can be registered in the TM system of LSP electronically. This confirmed space will then be used by the LSP to transport his cargo in the required number of containers and payment can be made to the ocean liner as per the usage.
3. Shipment request, Charge Management & Outputs: Customer’s (Shipper’s) shipping instruction can be registered in the TM system in the form of Shipment Request. Key information like different business partners involved in the transport (Shipper, consignee, Bill to party, Notifying party, Additional notifying party etc.), source, destination, intermediate locations etc, information on the cargo, INCO terms, mode of transport for main leg etc. can be entered. Documents provided by shipper like shipping instruction, commercial invoice, packing list etc. can be attached and saved as dossier. Notes can be stored under different text elements which can be printed on the o/p. LSPs use variety of dates which can be captured with the different date role codes.
Using the Transportation Proposal functionality the correct route can be stored in the shipment request, which facilitates to plan the drayage, ocean leg and on-carriage independently by country &planner.
With the charge management set-up ready, billing amount can be estimated. Customer freight invoice request can created, charges can be split between shipper & consignee and invoices can be sent. Various outputs can be created by configuring the PPF profiles.
With some enhancement the views & fields which are not available on the main front data entry screen, can be brought in front for ease of navigation and data entry.
4. Planning: LSPs do perform complicated planning & optimization routines, but mostly in NVOCC business basic planning is done. Functionalities like Plan Loading (Loading FUs into container), manual planning & optimizer planning are helpful. Multi-resource functionality for vehicle resources & TU resources can prove helpful. One step planning where the carrier selection is also done during planning is preferred. Tours may not be desired and direct Shipment orders are preferred.
5. Shipment Orders, Charge Management & outputs: Shipment orders for all the legs can be created as and when required. Using the charge management set-up, payables can be estimated and Supplier freight invoice request can be created in order to pay to the carriers.
What is missing is the functionality for Work Orders also called as Purchase Orders or Work arrangements for activities other than direct transportation like customs clearance, container purchase, handling etc. Though these could be incorporated into shipment orders there are many restrictions to it. A stand alone BO to create purchase orders/work arrangement directly without any link to FU or planning but a direct link to shipment request will be preferred. There is no definite timing when these orders would be created, and they have to be included as the transport cost along with the shipment orders for different legs from profitability estimation point of view.
Ocean bill of lading is issued by the ocean carrier against the main leg shipment order issued by the LSP, but in some cases the ocean bill of lading is printed by the LSP in the format required by the ocean carrier and sent to the ocean carrier. Ocean carrier then print it on this official stationary and send it back to the LSP on receipt of the payments for ocean transport.
6. Shipments & Outputs: Shipment object in the TM is overall object which covers the entire chain of transport and is primarily used for printing the Bill of lading (House bill of lading or Combined Transport bill of lading etc.), customs documents etc. This object is also used for track and tracing purpose with the event management functionality.
LSP can issue the house bill of lading to the shipper once his main leg is planned and ready for departure. Normally at this time he receives the ocean bill of lading from his ocean liner upon the payment of the transport fees. LSP on receipt of the billing amount from shipper prints its Combined transport B/L with the reference of the Ocean B/L and passes it on to the shipper.
To summarize the end to end transport process from Container Freight station of exporting country to the Container freight station of importing country, below mentioned steps can be executed in SAP TM using the key functionalities explained above.
- Shipment Request Registration
- Booking Order Registration
- Updating key information to Shipment Request
- Printing of Shipping Instruction / Shipment request / Confirmation
- Internal Operations, procuring container & preparing loading plan
- Plan Drayage (CFS to CY)
- Plan Ocean Leg (CY-CY)
- Payment to Ocean Liner & Drayage vendor
- Billing to Shipper
- Create CT B/L (House Bill of Lading)
- Additional payment to Ocean liner & Clear the container
- Plan drayage (CY-CFS)
- Payment to drayage vendor
- Pick-up by Consignee
Accounting functions like G/L accounts, specific accounting transactions of invoice matching, vendor advances etc. are not part of SAP TM solution. SAP ERP (ECC 6.0) provides all these as standard functionality and SAP also provides standard integration between SAP TM & ECC.
Overall SAP TM 7.0 is good fit to the business functionalities of NVOCC business. SAP TM 7.0 is presented with the modern touch with internet explorer based UI. SAP TM is capable of handling complicated LSP processes, what is required from the LSP is adaptation to the new solution. It also means change in the data entry operation, different way of looking at the processes but in line to the standard operating procedures followed by LSP.