Capability of Reduced freight cost with Grouping Rule for collective settlement in SAP Transportation Management (TM)

Freight cost is increasing in recent past and most of the Transportation planners are trying their best to reduce the ‘Freight Spend’ with smart ideas. Recently, I worked on a requirement for a Retail customer to provide a system solution in SAP Transportation Management (TM) so that the Collective Rate (say for example Freight spend for a week) is less than the total freight costs for seven shipments in that week for a particular destination. A truck (or shipment) goes daily to particular customers and the shipper pays to the carrier on weekly basis. Requirement is to pay less than 7X euro for 7 shipments each with freight cost of X Euro.

SAP TM has a functionality of ‘Grouping Rule’ in collective settlement. Prototyped to demo the solution to the customer and the solution has subsequently been accepted. My present blog is to describe SAP TM’s functionality of ‘Grouping Rule’ in collective settlement.

Prototyped with 2 freight orders as below for the sake of simplicity. Freight cost for 1^st freight order with 6.2 Ton is 80.60 Euro and for 2^nd freight order with 9.3 Ton is 111.60 Euro considering the below rate scale on gross weight.

Individual Freight orders with 6.2 Ton and 9.3 Ton have been shown in below image .

Now, collective settlement has been done for these 2 freight orders and the system has grouped the two freight orders with the reduced rate (10 Euro/Ton) for the higher weight scale on cumulated weight (6.2+9.3=15.5 Ton) for the week as in below image.

There are 2 main configurations for this Grouping rule functionality.

1. Grouping Rule is to be defined in transaction /SCMTMS/TCM_RULES. Freight orders are being grouped by Destination location in this case as required by the customer. There are other parameters (Calculation base) also possible.

2. Above configured Grouping Rule is to be assigned in Grouping rule for the relevant charge type in Calculation sheet as in below image.

Also note that this Grouping Rule works only with calculation at Header level (i.e not at item or stage level) in calculation profile.

This Grouping rule functionality enables the optimization of freight cost (obviously it also depends on the freight agreement or contract with the carrier). And it works for both LTL and FTL scenarios.

This Grouping functionality is available in both SCM TM and embedded TM in S/4HANA. This blog is based on my personal insights, observation and test in SAP S/4HANA 2021 release. Will appreciate your views / comment and feedback.