Planning Transportation in SAP S/4HANA TM based upon Advanced Shipping Notifications
This blog post will help readers to understand how SAP Transportation Management in SAP S/4HANA helps Shippers (Manufacturers, Retail companies etc..) to facilitate the Transportation Planning (Organizing Trucks with right capacity) based on the communications the Shippers receive from their Material Suppliers and Carriers via the well established EDI framework of Advance Shipping Notifications (ASN, Despatch Advice etc.) also referred to as EDI 856.
I would like to be specific to the current SAP S/4HANA On-Premise 2020 release.
Note: This blog post shares my personal insights based on my experience working with customers in Manufacturing and Retail industry and my insight into SAP solutions only.
Primary use case is for the Shipper customer base (Manufacturing, Retail customers) who are collaborating with their “Material/Article Suppliers” and Trucking Companies “Carriers” to have advance insight into what will be received into the warehouse. Also the assumption is that, such customers are using SAP S/4HANA for their Procurement and Inbound Logistics processes.
The Age Old Logistical Problem:
I personally am aware of this process back when i used to implement SAP R/3 and ECC solutions.
Shippers (Manufacturers / Retail companies) have long term agreements (Scheduling Agreements, Contracts, Blanket Purchase Orders) with the material suppliers. They also have regular exchange of the planned requirements (Forecast and Just-In-Time need of materials), call-outs to those material suppliers.
In addition to this most of the Transportation is on FCA basis (Free Carrier) could be as much as 80%, and very less, probably only 20% is DDP (Delivered Duty Paid). When it comes to FCA terms, then it means that the Shippers are responsible to organize the Transportation. These Shippers have to make sure that the Transport (Truck) organized by them reach the Supplier facility on-time and in correct capacity so that material can be picked in full and brought to the Shipper’s facility.
The only basis for such planning for Shippers (Manufacturers / Retail companies) is to receive advance information from the material supplier about the material, quantity of material, how is the material packed (Palletization), batches, shelf life expiry, and some references of the Purchase Order, Contract etc.
This information is received on continuous basis and sometimes also include changes/updates of the original ASNs. The Shipper has to manage this data and ensure that he is correctly planning the Transportation (which also means that correct information is exchanged by Shipper to the Carrier)
To add to this complexity, such ASNs or Despatch Advices are also issued by the Carriers once they pick the cargo from the Supplier and of course there is always a chance of quantity discrepancies.
How can it be managed in SAP S/4HANA?
With SAP S/4HANA integrated process (procurement, logistics and transportation), it should be possible to gain control over this complex problem.
Below is the overview of different documents involved and the three party view to the process:
Step 1: The buyer in SAP S/4HANA uses the Procurement module to issue the Purchasing Documents (Contracts, Scheduling Agreements, Releases / Callouts) and also create the “Technical Freight Units” which belong to SAP Transportation Management solution.
Step 2: The goods supplier will use the EDI 856 message to communicate the Advance Shipping information. This would include (PO Reference, ASN Number, Materials, Quantities, Packaging, Total Height, Weight of Packages, Date of Pickup etc. This information once received in the buyer’s SAP S/4HANA system can generate a new SAP TM object called as “Consignment Order“. You can read more about this object on the SAP Help
SAP TM provides TOR Generic Interface (API) to consume the EDI ASN message
Inbuilt logic in SAP TM will automatically make the link of the Freight Unit to the Consignment Order or Orders, depends upon how many ASNs you receive for the call-outs. The logic includes certain aspects which you can learn more when you start to work in the system.
SAP TM also takes care of the Updates against same ASNs if received.
The Buyer can use the Consignment Orders for Transportation Planning and generate a Freight Order (FCA Incoterm) and send it to the Carrier
The Buyer can simply skip the Transportation Planning aspect and keep the Consignment Orders in the system (DDP Incoterms) and wait until the Carrier (which the Material Supplier will organize) sends a Despatch Advice
Step3: Despatch Advice is issued by the Carrier and that could be used Creates/Updates the Freight Order with the correct linkage of the Consignment Orders (Step 4). Once again TOR Generic Interface (API) is used to consume the EDI Despatch Advice.
In the overall process SAP TM also provides a strong error handling functionality with user interface and to handle any kind of discrepancies occuring in the receipt of messages. More information you can get from the SAP Help
More Information on the TOR Generic Interface can be found below
In my next blog post I will give you a glimpse of above process in system.
Happy Reading !!!