Thursday, August 17, 2017

Leverage SAP to track shipments

If your business involves selling product then inevitably you need to move that product, whether it be from your suppliers to you, or from you to your customers. If that is the case then you will also be interested in knowing how those movements, or shipments, are doing.

If they are experiencing a delay then it could potentially impact the promise you made to your customer... If the goods are delayed on route to your warehouse then you could potentially impact the plan for the warehouse folks who may have arranged a special shift to receive the goods in...

Wouldn't it be nice to know that the plan that was laid out up front was being followed? We can't force our suppliers to comply but there are ways to measure compliance and react to deviations to the plan just as soon as you are made aware of them. How can we accomplish that?

There are a couple of things that help with this situation. Consider the following:

  1. Standard SAP transactions to capture the plan - Sales Order to manage the promised delivery date made to your customer. Purchase Order to manage the schedule for the arriving shipments. The purchase order acknowledgement (or confirmation) is a critical document here as it informs us, in a timely manner, as to what schedule the supplier can deliver the goods to our locations.
  2. EDI (Electronic Data Interchange) - Take these above transactions and automate them so that you can get timely, accurate information from your suppliers.
    • Outbound 850 (Purchase Order) - Send the PO to your supplier
    • Inbound 855 (PO Acknowledgement) - Receiver the confirmed schedule, price from the supplier. If accepted, this will be the agreed planned schedule against which we will measure against
    • Inbound 856 (ASN - Advance Ship Notice) - Supplier sends us a notice that the product has shipped and gives us the carrier tracking number
    • Inbound 214 (Carrier Tracking Status) - The carrier tells us the shipment was picked up, delivered and any other key status changes in-between, including delays
  3. SAP Event Management - Standard SAP tool used to track business processes, comparing the actual execution of a process against the plan for that process. In this case we would take the order and the confirmation and create a date / time when we expect the products to ship. We then wait for the ASN to come in and generate an inbound delivery. SAP EM then takes this information off the delivery and matches it up with the expected ship date from the PO. If they differ we would adjust the status to delayed. We then start to match up the carrier tracking number with the 214 status messages we are receiving from the carrier to see if we get a delay notification of a shipment en-route. Finally we receive the goods and capture the actual date against the planned date.
  4. Monitor and Adjust - Using SAP EM you can proactively react to any deviations to the plan by either adjusting the route, shipping method, or, if this is not available adjust the expectations on the recipient of the goods... This leads to much improved customer satisfaction.
  5. Post mortem - Following the end of the process you have all the figures needed to measure the compliance to the plan by both the supplier and the carrier. Combine this with historical shipments and compare across suppliers and carriers and you can make better decisions on how you wish to move your goods in the future. It will also be very useful information to share with the supplier and carrier when renegotiation of contract rates is on the table... "Your DIFOT (Delivery In Full On Time) measure was 83% when we were contracted at 95%... How are we going to improve and why should I pay a premium for that type of service?"
If you do these things well, and in unison then you will see a marked improvement in customer satisfaction and a great deal of cost savings... The Supply Chain is a large part of the bottom line and any savings in this area leads to a much improved profit margin.

If you wish to learn more of SAP EM and leveraging it, together with EDI, to deliver a true DIFOT metric then ping me at kevin@erpgenie.com.

If it's not worth tracking then it's not worth doing!!!