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"New Release of mySAP Supply Chain Management Creates Adaptive Supply Chain Networks
That Intelligently Synchronize Supply and Demand"
Source : SAP
Transportation Management and the Adaptive Supply Chain Network
Transportation Management is also known as :
Transportation Management System,
Smart Transportation Management,
Transportation Lifecycle Management,
Virtual Transportation Management,
Transportation Management Solutions,
Transportation Management Definition,
Transportation Logistics Management,
Transportation Management Software,
Multi Modal Transportation,
Transportation Management Associations,
Transportation Management Modules,
Transportation Management Development.
Supply chain management has come to the forefront of every
company's business agenda. Responding to the demands of
today's highly competitive global environment, traditional
linear supply chains with their sequential processes are evolving
into complex, global ecosystems that are highly responsive to
These "pull" (demand-driven) environments that work in
conjunction with traditional push environments are known as
adaptive supply chain networks (ASCNs). ASCNs allow all
stakeholders in the supply chain, both within and outside the
enterprise, to share knowledge, make collaborative decisions,
and sense and respond immediately to changing conditions. An
ASCN allows companies to restore order to a chaotic supply
chain for higher profits.
Key elements of the ASCN process are supply chain execution
and planning, and they are the responsibility of planning
professionals. Surprisingly, these two seemingly different responsibilities
are based on a common goal - profitability through
supply chain economics.
When execution and planning processes are used to cut costs
without considering their effects on the business as a whole, the
economics of the supply chain may be ignored. An ASCN provides
the framework for a high level of economic responsiveness.
Within the context of a fully integrated enterprise resource
planning (ERP) system, an ASCN can lead to profitable growth
that a company could not previously achieve.
An ASCN is the catalyst for enhancing a company's financial
position and improving its supply chain economics. Without an
ASCN, the potential for growth is limited to improving linear
processes and optimizing single points within the network. These
benefits rarely, if ever, improve the business ecosystem as a whole.
In today's global economy, all or portions of a company's supply
chain may be outsourced. Products flow in many directions
and in multiple modes. The lines between trading partners are
blurring. Part of the movement to globalization is the desire to
minimize costs. But the idea that rising transportations costs can
offset all supply chain economic gains has been highlighted in
the Gartner report "Higher Freight Costs Increase Need for
Transportation Management Solutions" (C. Dwight Klappich,
January 11, 2006), which stated, "Transportation budgets worldwide
could increase by as much as 25 percent during the next
few years, unless companies find ways to minimize the impact of
freight cost increases."
Transportation capacity planning took on a new urgency
when the Federal Motor Carrier Safety Administration enacted
hours of service (HOS) changes in October 2005. These HOS
modifications created an immediate decrease in logistics service
provider (LSP) capacity and increased overall driver personnel
costs by limiting the number of hours a driver can work.
Numerous articles have noted the issue of driver shortages, and
the situation is expected to plague the industry well into the
These challenges have raised the profile of transportation
management in the boardroom as companies strive to maximize
capacity, minimize costs, and still meet customer and shareholder
demands for service and on-time deliveries.
KEEPING PACE WITH TODAY'S TRANSPORTATION INDUSTRY
Commercial transportation has become a very complex process.
Raw materials and parts as well as finished goods must move
from point to point along a supply chain of logistics service
providers and business partners.
Companies in the huge transportation industry must have fast,
streamlined, and profitable business processes to satisfy their
demanding customers. These processes, supported by new transportation
and distribution strategies, feature real-time visibility
of transportation events and integrated business and logistical
activities. Transportation companies must adapt to external
trends such as deliveries tracked on the Internet, global trade,
and offshore manufacturing.
Today companies are aggressively looking to expand their ability
to reach their customers profitably and efficiently beyond their
existing ecosystems. They are exploring expanding to other
geographic areas, becoming third-party logistics providers, better
utilizing their own fleet, and sharing traffic with other companies.
Any of these changes truly requires the ability to be
A common thread that weaves all of these capabilities together is
an ASCN. Adaptive business processes enable companies to sense
and respond to real-time transportation events and disruptions.
An ASCN can connect better with the information chain for
improved collaboration with partners, suppliers, and customers
than a traditional, linear supply chain can. This connection can include cutting-edge technologies such as radio frequency
identification (RFID), wireless fidelity (Wi-Fi), global positioning
system (GPS), cellular, and ultra-wideband to provide global
visibility and help managers make profitable business decisions
in real time. For example, ASCNs often facilitate pull-based
material flows, which match shipment frequency with end-user
consumption. As transportation costs continue to increase,
this process needs to be managed closely, because pull-based
logistics often increases the total number of shipments. This
process also requires precise inbound and outbound shipment
Transportation is fast becoming a key factor in determining the
difference between profit and loss. It is the essential link between
the extraction of natural resources; the fabrication of industrial,
commercial, and consumer products; and the final distribution
of goods to wholesalers, retailers, and end users.
Historically, in a linear supply chain, commercial transportation
was a fairly simple activity: goods and materials were taken
directly from the manufacturer to the customer. But today within
an ASCN, transportation is a complex procedure performed
by a widespread, often global network of partners and LSPs.
Partnerships help shippers minimize inventory and manage
more sophisticated practices such as flow through and merge
in transit. This puts transportation efficiency and visibility
at center stage in a company's supply chain efforts.
In addition to being complex, transportation is a big business that
has produced a sprawling global transportation landscape. When
companies navigate today's transportation system, they have a
smaller margin for error than ever before. To meet customer
demands, companies must deliver goods to their destinations in
an economical and timely manner. To survive, companies need a
transportation organization that has fast, streamlined business
processes, works efficiently with network partners, and makes
timely, profitable decisions. Companies are responding to these
demands by focusing on improving speed, service, and flexibility
while reducing costs.
TRANSPORTATION BUSINESS PROCESSES:
ACHIEVING INDUSTRY-LEADING CAPABILITIES
A company seeking to achieve more efficient transportation and
greater profitability must make significant changes in the way it
performs every phase of the transportation process. It is important
to implement new transportation and distribution strategies
to improve carrier capacity utilization in a time of constrained
supply. A company must work efficiently with network partners
to take advantage of last-minute opportunities and react in real
time by having real-world visibility of transportation events.
The goal is to improve productivity by having process decision
support, total visibility, access to process metrics such as costs or
profitability, and performance scorecards.
An ASCN relies on a tightly integrated and transparent transportation
process to handle many elements such as managing
freight procurement, forecasting shipment volumes, planning
and executing shipments, careful handling and monitoring
of transportation spend, and having visibility to all activities
through key performance indicators (KPIs), scorecards, and
other important analytical tools.
management to select and
evaluate logistics service
-Freight contract management
for negotiation, awarding,
creation, and monitoring of
freight contracts with rates
-Tender management to
prepare and create contract
tenders for mid- and
long-term contracting of
forecasting to determine
midterm transport capacity
based on carrier,
geography, and so on
-Capacity and equipment
tendering to secure
availability of freight space
with relation to contracts
||-Freight order taking to
receive any kind of request for
tendering, and booking for
ordering transportation services
and reservation of freight capacity
-Routing guide for rule-based
planning, vehicle scheduling
and routing, and carrier selection
for optimized planning
-Freight cost management and
calculation for determination of
selling and buying cost including
-Event management and activity
handling for track and trace,
pickup and delivery, and adaptive
||-Freight cost settlement
for accounting, payment,
billing, and transfer of
freight costs; intercompany
settlement to support
-Analytics as the basis
for transportation key
and as input for new
tenders in strategic freight
To fully support the freight-procurement process, companies
must meet requirements for contract management, bid preparation,
bid proposals, bid responses, contract award, and contract
creation. These capabilities structure the relationship between
shipper and LSP by streamlining the contract-negotiation
The greatest benefit a freight-procurement solution can provide
is the ability to set expectations by channel and lane for the
expected transportation spend. LSPs are constantly competing
for freight, and it is challenging to manage their expectations
and volumes while trying to achieve the best service levels at
the lowest cost. A freight-procurement solution can provide a
centralized tool to manage this.
As a company's supply chain
evolves, so do relationships
with partners such as LSPs.
An enterprise may want to
renegotiate existing contracts
to include new business while
changing the way shipment
volumes are divided among
LSPs. The contract contains
rates, terms of agreement, and
other freight-related charges
such as accessorials, detention,
and minimum charges.
These charges provide information
for the optimizer to
make logistics decisions based
on costs, including decisions
about equipment allocations.
Today successful companies are actively managing the freightprocurement
process by looking at the large expenditure on
an annual or semiannual basis. Companies must control their
freight spend beginning with a freight-procurement process.
Once they do, the ability to take advantage of leakages in freight
spend become more easily apparent and, frankly, obvious. For
example, inbound transportation costs are buried in the cost of
goods when freight is prepaid. By moving to an inbound collect
model, companies can actively see and manage transportation
costs as a portion of the supply chain; costs are no longer invisible
and uncontrollable. Savings as high as 25% can be achieved by
moving from a prepaid to a collect freight model for inbound
Figure 3: Strategic Freight Management
Network Order Fulfillment and Visibility
Everything starts with the order, whether it is a customer order,
purchase order, return order, or stock-transfer order. The faster
a company decides on the best way to get the order to its final
destination, the more successful it will be at satisfying the customer.
To be competitive, a company cannot afford to manage its
transportation function in a vacuum; it must manage orders in
concert with other operations such as manufacturing, warehouse
management, and export and import.
In a pull-driven environment the ultimate source of demand
is the customer. Profitability can be realized by considering
the speed of consumption and monitoring the rate of return.
Companies must balance their supply chains based on a new
set of push and pull dynamics. They must anticipate their
customers' requirements and improve responsiveness to their
demands by bringing high-quality, value-added products to
market faster than the competition.
The business processes supporting transportation operations
need to be adaptable. Innovation that takes into account
customer expectations can yield a profitable and responsive
Consider how fast the world is changing due to Internet-based
selling models and the need to ship any product anywhere
within 24 hours. How quickly a company can respond and ship
product can dictate its competitive position in a marketplace.
Without complete real-time visibility of the status of every order,
there is no way to maximize cost savings or revenue potential
from order-fulfillment solutions - this can only be accomplished
through a completely integrated enterprise solution.
Strategic Freight Management
Through strategic freight management, companies
can develop an optimized, dedicated capacity and
cost framework for transportation management that
includes the following:
- Strategic collaboration and contract planning
with logistics service providers (LSPs) to adjust
proposed equipment allocation and freight
- Analytics to prepare bids based on historical data
and adjust future contracts
- Support for Web-based interaction with LSPs to
maintain address and service profiles and respond
- Support for requests for quotation for ocean and
land transportation processed via the Web.
These are easy to use (for example, with Microsoft
Excel spreadsheets), help maintain rates, and
let you attach other office documents for the bid
- Support for scenario-driven evaluation and optimal
LSP awards by region, mode, channel, or lane level
- Automatic document downloads for freight and
tariffs for billing and operations
Network Routing Optimization
Products and materials can move into and out of companies at
all hours, every day, anywhere in the world. Companies need the
visibility to know when orders are being produced, stored, and
For years, transportation was managed facility by facility, and
each shipment was planned independently. This method can
hamper a company's efficiency. Leading-edge companies have
moved from this model to the service-centric approach of
coordinated route planning across the enterprise that uses
resources as they move products and materials along the supply
chain. This approach also entails a high level of visibility that
lets companies support cost-saving transport methods such as
continuous moves, parcel zone skipping, multimode, and
merge-in-transit planning. Such visibility also enables them to
prepare for the move from cost center to profit center.
One of the most important aspects of a system-wide routingoptimization
solution is the ability to fully address the unique
demands of customers and suppliers when making fulfillment
decisions. Companies need to be connected to the sources of this
ever-changing information when making real-time fulfillment
decisions. For example, a customer-service representative (CSR)
must have complete visibility of fulfillment (for example, shipping
options, costs, and routing possibilities) in a single system to
make the best decisions on how to satisfy an order.
CSRs make decisions that can impact service and costs. They
need a routing guide to determine transportation routing at the
time of order entry based on freight costs, the availability of
transportation resources, and schedules. For example, a CSR
can make suggestions for increasing order size to minimize transportation
costs or identify cost options for various modes of
transportation. For rush or last-minute orders, the ability to
automatically create a shipment from an order is key in further
reducing total cycle time from the time the order is taken to
the time it is loaded on the truck.
Customers change orders at the last minute, and sometimes
suppliers don't give companies total visibility into what is arriving
in the receiving area. With a network-fulfillment solution,
companies have immediate, total visibility so they can include
their customers' last-minute changes on the next shipment
or take advantage of lower-cost and continuous-move
Routing is a highly complex decision-making process in which
many variables, including those discussed below, must be
Customer Delivery Requirements
Customers place many constraints that must be considered
when developing a solid network-routing plan. These include
delivery appointments, equipment requirements, managing
large orders and small parcels, special equipment such as
multicompartment trucks, special handling requirements, and
Understanding when and where the product will be available in
an inventory-strained environment is one of the most important
elements for meeting a customer's request on time and at the
lowest total cost. Companies must have solutions that coordinate
network-fulfillment activities seamlessly across their network.
Solutions that provide total visibility of warehouses and
manufacturing operations enable companies to take advantage
of efficiencies such as cross-docking and direct trailer loading.
Routing Decisions and the Cost of Doing Business
Transportation costs come off the bottom line, but they are a
by-product of getting products to market. These days, costs are
increasing and so is demand, while supply is decreasing. The
speed of delivery is more important than ever. Taking advantage
of every opportunity to lower costs while getting the product
to its destination on time means having access to every possible
routing option. This requires a sophisticated planning tool that
can create viable shipment plans by consolidating orders to
optimal shipment sizes, using the advantages of various transportation
modes, taking into account potential multistop and
hub location options, and staying within the constraints of the
Network Routes, Equipment Availability, and LSPs
Making shipments from point A to point B can be simple or
complex; it all depends upon real-world constraints. Equipmentavailability
constraints are becoming more prevalent as resources
are divided due to huge demand. Having a good relationship
with LSPs can help solve these problems through managed
contract commitments, automated forecasting and planning,
smooth shipment-tender processes, and maximizing the use of
equipment. With network routing software, companies and
LSPs can find the optimal solution to these situations.
Shipping and Receiving Facility Constraints
The facilities of companies and their customers can become
constrained. It is common for drivers to wait more than an hour
to load or unload their vehicles due to dock constraints. Careful
planning and execution can reduce the time shipments wait in
line and help the LSP's drivers manage their HOS. With a total
view of the network, companies can plan based on shipping
and receiving capacities, appointment schedules, and delivery
windows. At the same time, yard management software can
enable plan execution and equipment visibility at all times.
Shipping across borders adds another level of complexity and
legal regulation. Shipments leaving and entering the country are
checked and monitored in many ways. Letters of credit, sanctioned
party lists, certificates of origin, and shipper's export
declarations are critical pieces of information for complying with
government and financial regulations. Solutions that provide
easy access to and management of these documents can help
companies handle compliance regulations efficiently.
In the end, the goal is to reduce costs while maintaining a high
level of service. By considering real-world constraints, network
routing minimizes delivery backlogs and the cost of the entire
An Integral Part of a Fulfillment Solution
Planning and execution go hand in hand. Orders are received
throughout the day that often must be shipped as soon as possible.
Complete control from planning to execution is crucial in
supporting this demanding environment. Companies need to get
shipments sent on time and with the right documentation, as
well as with accurate LSP and customer communications. At the
same time, automatic processing of inventory status, order and
transportation costs, accounting, and important order events are
monitored and updated. A transportation management solution
can provide the control and monitoring needed to manage high
volumes of diverse transportation services.
Collaborative transportation planning between shippers and
their LSPs allows both partners to streamline work processes and
benefit from reduced handling costs and greater transparency
and efficiency. Shippers and LSPs can share information about
their shipment plans and resource availability. LSPs can share
their resource availability, which allows shippers to develop plans
based on delivering a lowest-total-cost solution. At the time of
tendering, further collaboration is possible to meet real-world
constraints such as delivery appointments and last-minute
changes in an LSP's resource availability. For example, an LSP
can suggest an alternate pickup or delivery date and time. A
transportation management solution can support communication
through standard communication methods such as electronic
data interchange (EDI), e-mail, or XML.
Reducing Workload by Using Automation and Control
The shipping process can be very task-intensive. Workers have to
pick products, stage deliveries, load trucks, print documentation,
bill the shipment, and remove the inventory from the system.
Often, all of these tasks are performed manu ally, but they can
all be controlled and automated based on a company's businessprocess
Companies need the ability to automatically carry out activities
such as posting goods issue for the deliveries in the shipment,
creating billing documents for deliveries in shipment, and
printing key documents and lists. At the user level, they need to
provide information such as the name of the driver at check-in,
seal and container numbers, and data validation.
Companies also need solutions to perform everything from
checks on dangerous goods to printing of shipment documents.
They need to create a close connection between transportation
execution, warehouse management, and foreign trade so that
goods issues or receipts, international documentation, and
controls can all be coordinated with the transportation plan.
All of these complicated processes can be made easier with
automated, Web-enabled collaborative functionalities.
Managing the Shipment Process
Companies need a variety of information to get shipments out
of the dock doors and to their destinations. Shipment processing
should easily support the ability to do the following:
- Create shipments to various customers, transfer locations such
as cross-docks, and port or customs locations
- Quickly adjust the transportation plan by changing the mode
of transport, the LSP, and even the route if necessary
- Define the packaging of goods and how they are loaded into
- Manage hazardous-materials requirements
- Specify, update, and track planned transportation deadlines
- Print and transmit critical documents required for transportation
such as bills of lading, material safety data sheets, and
certificates of origin
- Show shipment-specific text messages such as delivery
instructions and contact information
- Manage both inbound and outbound shipment
Transporting Dangerous Goods
Transporting substances and products that may be a risk to
public safety has special requirements. To fulfill the statutory
requirements for shipment of dangerous goods, it is necessary to check whether shipments containing these goods are permitted
in agreements made with the countries in which the shipments
take place. Therefore dangerous-goods checks should be
centrally defined in software for environmental health and
safety. Dangerous-goods checks need to be integrated into
transportation processes and ensure that dangerous-goods
master data is complete, the mode of transport is suitable, and
the dangerous goods are marked correctly.
Companies must manage the determination of freight cost for
all types of shipments. In many countries, almost all the freight
costs are derived from negotiated freight rates between the shipper
and the LSP. These rates come in hundreds, if not thousands,
of forms and methods of calculation. Companies need the ability
to not only calculate freight costs precisely but also settle them
to the correct accounts.
They also need the ability to calculate profitability across the
enterprise or even within a specific channel, product group, or
industry. Freight costs must be tied back to the right sales order
line item, and the correct representation for each freight cost
item must appear in the general ledger.
At the same time, the ability to minimize expensive processes is a
key goal. The freight bill payment process can be streamlined
with self-billing (or electronic receivable services) functionality,
which allows companies to pay the service agent without
receiving an invoice. In this situation, invoice verification is carried
out by the service agent. Companies never see the thousands
of freight bills that ordinarily would have been generated and
Analytics play an essential role in helping a company sense and
respond to important changes in the market. To make the right
decisions promptly based upon a complete, accurate view of their
business, companies must align execution with business strategy.
Throughout a company, employees must be able to find answers to problems quickly when KPIs fall outside acceptable ranges
or objectives are not met. Managers must have the tools to track
business activities to ensure that they are in line with overall
strategies. Clear metrics are required to achieve these goals.
Having centralized control and easy, role-based access to
essential data is critically important in supply chain management.
Predefined analytical applications delivered through a
user-friendly Web interface can give users at all levels secure,
filtered access to key information on supply chain activities and
processes. When this occurs, business intelligence is combined
with operational data that relates to business process, producing
a "one-stop-shopping" synergy of analysis and action. For
example, LSP performance metrics help identify the causes
of service failures and cost overruns by using scorecards and
analytics of internal and business-partner processes. With such
analytical applications, companies can monitor and control
the ways that LSPs provide their services.
With the fast pace of business today, companies must be able to
prepare for the unpredictable. Disruptive events caused by natural
crises can have a widespread effect on capabilities across an
extended supply chain. For example, during Hurricane Katrina
in 2005, a global chemical manufacturer required real-time information
about goods and materials on ships scheduled to dock in
the Gulf of Mexico. A primary concern was the potential risk to
the environment should shipments in the area become lost at
sea. It was also important for companies to address the needs of
customers by providing alternate shipments through unaffected
ports. This illustrates the importance of process visibility - in
particular, visibility into order status and disposition.
Companies need fast, accurate information and specific details
about orders. They need the visibility to plan their resource
needs and revise plans based on business objectives. And they
must reduce their time to action when responding to an
unplanned event or crisis by having real-time visibility across the
In many cases, this means companies must move from managing
expected outcomes of business processes to managing by exception.
This shift allows them to focus resources on the areas that
need the most attention instead of managing processes that
are working well. To have an overview of supply chain events,
companies need the ability to do the following:
- Monitor supply chain activities and compare plans and
forecasts with actual results
- Notify the proper employees about process deviations
in real time
- Simulate the consequences of an event, which provides
guidance for decision making
- Control the process throughout the adjustment of various
parameters such as process time and mode of transport
- Measure performance based on user-specific performance
Financial operations include more than the execution tasks of
freight, auditing, and payment. Executives need decision-support
tools that enable them to sense real-world disruption, as well as
financial and logistical tools to make informed, timely, and profitable
decisions. To achieve this, companies must have the ability
to integrate the financial chain into transportation activities via
accurate, real-time, activity-based costing, billing, and freight
auditing. It's also important that companies adapt to external
trends such as the increase in Internet-sourced and tracked
deliveries, growing global trade, offshore manufacturing, and
the economy's shift from heavy industry and low-value-added
products to consumer services and high-value-added products.
That's quite a list of capabilities to acquire, and analysts believe
that the strategy to achieve "superefficiency" in transportation
can yield high rewards. "Globalization, outsourcing, and shrinking
cycle times are adding risk, cost, and complexity to transportation
operations," says Adrian Gonzalez, director of the Logistic
Executive Council, ARC Advisory Group. "Companies that take
an end-to-end, process-centric perspective will achieve greater financial and operational success. Companies must recognize
that transportation management does not exist in a vacuum;
it's a process that interfaces with a variety of other business
functions, including order management, purchasing, warehouse
management, customer service, and financials."
Companies need adaptable business processes that are easy
to manage. Such processes enable a company to establish its
own unique way of doing things. Adaptable processes can also
connect with the information chain (for example, supply chain
event management, freight costing, and scorecards of compliance
with service-level agreements) for improved, automated
collaboration with partners, suppliers, and customers. They can
enable global capabilities via multimode planning of activities for
air, ocean, rail, road, parcel, and postal transportation modes.
In addition, companies need to integrate the financial chain
and transportation in order to have adaptable business processes.
Through this integration, companies can provide the best,
most differentiated services by quickly activating the latest technologies
such as collaboration, RFID, and voice recognition.
Companies also must have automated decision-making capability
in real time to connect the logistics chain, financial chain,
and information chain for improved, automated collaboration
with partners, suppliers, and customers outside of the enterprise.
SAP DELIVERS THE GOODS
SAP addresses the core dilemma of transportation - how to
meet the unique delivery requirements of customers while
still achieving profitability - by providing software that gives
companies a competitive advantage. With SAP' software, business
processes across the entire enterprise and extended transportation
network are integrated with flexibility. The software enables
managers to perform continuous route optimization based on
real-time events, identify revenue opportunities, and improve
asset utilization. Embedded analytics help managers increase
profitability by calculating net gains during the entire process
from bidding to delivery.
The mySAP Supply Chain Management (mySAP SCM) application
contains functionalities that are designed for the transportation
industry. Powered by the SAP NetWeaver' platform,
mySAP SCM leverages emerging technologies and "real-worldaware"
practices to transform traditional supply chains from
linear, sequential steps into ASCNs. In these networks, commu nities
of customer-focused companies share knowledge and
resources and adjust intelligently and profitably to changing
To Learn More
For more information about how SAP software can help
your transportation organization transform and integrate its
IT systems for flexible, streamlined business processes, call
your SAP representative today or visit us on the Web at
- Executive Summary
- Keeping Pace with Today's Transportation Industry
- Transportation Business Processes: Achieving Industry-Leading Capabilities
- Freight Procurement
- Transportation Planning: Network Order Fulfillment and Visibility
- Network Routing Optimization
- Routing Guide
- Transportation Execution: An Integral Part of a Fulfillment Solution
- LSP Collaboration
- Reducing Workload Using Automation and Control
- Managing the Shipment Process
- Transporting Dangerous Goods
- Freight Costs
- Network Visibility
- SAP Delivers the Goods
- To Learn More
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