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Can Merchandise Distribution Help a Retail Warehouse to Fulfill the Unpredictable?

We still feel unsettled when we stand in front of empty shelves at our favorite grocer. In Germany it reminds us of pictures we know from the German Democratic Republic. When my husband comes home from shopping, I am already used to ask, “Honey, did you get flour and toilet paper today?”

As people #stayathome they logically consume all food at home. This, and of course some cases of hoarding, leads to a skyrocketing demand at the local supermarkets for pasta, rice and several sauces and soups. The same is true for many hygienic products like toilet paper or soap which are needed much more because people stay at home the whole day and wash their hands more often. Consequently, our local grocers are facing an exploding demand. Beside of this, buying patterns are also changing as some people reduce the frequency of grocery shopping to a minimum and only go shopping once or twice a week.

What does this mean to a retailer’s warehouse or distribution center? How can they cope with such an unpredictable situation?

Thinking about this reminds me of a functionality that SAP developed many years ago for the retail industry. It takes on special importance in the current situation: Merchandise Distribution.

With Merchandise Distribution you can plan, control and manage the flow of merchandise from a vendor to a distribution center and then on to the store or customer. Cross Docking allows to move the goods through a warehouse in a fast and efficient way. You move the merchandise from goods receipt directly to goods issue without putting it on storage in between. Merchandise Distribution is possible for push and pull scenarios and is designed to handle unexpected shortages manually and automatically.

Merchandise Distribution involves a planning and a processing phase. Procurement documents, like purchase orders, are assigned to issue documents, like deliveries, in the planning phase to ensure later on a correct distribution.

 

Merchandise Distribution Phase 1 Planning

Push scenario
If you want to distribute merchandise centrally among many stores (push), Merchandise Distribution is planned using an allocation table as basis for the purchase order.

Pull scenario
If you supply your recipients with merchandise on a demand-driven basis (pull), Merchandise Distribution is planned using given orders from stores or other recipients as basis for a collective purchase order.

It may be helpful to switch from pull to push in the current situation for some merchandise to ensure that all stores in low- and high-density areas are replenished in the best way to fulfill consumer’s demands.

 

Merchandise Distribution Phase 2 – Distribution Processing

  1. Adjustments at goods receipt

Merchandise Distribution is designed to handle derivations between plan and reality, which is extremely important in the current crisis with disruptive supply chains. At goods receipt, the distribution data must be adjusted to correspond with the quantities actually delivered. You can specify whether the system should automatically adjust the data during posting of goods receipts, or whether you adjust the data manually. In the adjustment profile you can enter function modules that control how the adjustment is made. Several methods have been defined in standard and you can also enter function modules for your own logic. The posting of the adjusted goods receipt in the warehouse triggers automatically a stock posting in the integrated SAP ERP system, so the stock overview is accordingly updated in real-time.

The defined processing method determines how merchandise is to be treated in a distribution center immediately after goods receipt.

  1. Physical Distribution

Cross-docking

In this scenario, the goods are already prepacked for individual stores at the vendor. Unpacking or repacking is not necessary, and the merchandise can directly be moved from goods receipt to goods issue.

Flow-through

The “flow-through” processing method is relevant, if unpacking or repacking is necessary. The goods are moved from goods receipt to a specific flow-through zone, where they are repacked. Very common is the “merchandise driven” flow-through.

Example: The warehouse just received a large amount of pasta. In the flow-through zone you can already see several pallets in a line. Each pallet is assigned to a different store (A, B, C). There is already some other merchandise on those store pallets. Now, the warehouse staff takes one pallet with pasta from goods receipt and moves it directly to the flow-through zone. The staff walks along the line of store pallets and puts 8 cartons of pasta on the pallet for store A, 5 cartons of pasta on the pallet for store B, 3 cartons of pasta on the pallet for store C and so on. Once a store pallet is full, it can be moved directly to goods issue.

The posting of goods issue in the warehouse triggers automatically a stock posting in the integrated SAP ERP system, so the stock overview is accordingly updated in real-time.

Retail Merchandise Distribution enables a smooth flow of warehousing processes, in which merchandise is received in high quantities and distributed in an optimal way to different stores. This helps to save capacity and allows high throughput of goods at minimal costs to fulfill the unpredictable.

 

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