· AUTHOR: Álvaro Riazor, SENIOR SAP SCM/TM CONSULTANT · DIGITAL SUPPLY CHAIN SERVICES

SAP TM facilitates contract negotiation and creation with your chosen carriers


Nowadays, efficiency in transportation management is becoming more and more one of the key aspects of effective supply chain. However, we need to remember also that transportation management is not only about planning and optimization. The reduction and negotiation of the freight costs is a fundamental point in every industry as bases for good performance.

Strategic Freight Procurement

The main challenges companies are facing are related to the globalization: new trade lanes need to be created and used for the transport of the goods; demand increase; fast delivery is a must. All this leads to carrier capacity challenges.

 

Companies noticed that this increase of transportation demand, requires a more efficient cost control in order to get a good ratio of cost/quality for the transports.

 

The research of this cost-effective solution today is not that simple as it was in the past. The procurement process to get this benefit is usually pretty manual and time consuming:

 
  • Employees need to deal with big amount of data in order to get a clear vision and obtain good rates from the carriers. This process can be very tedious, inefficient and the analyses of the current transportation processes might be not very accurate, ending up with a freight agreement which doesn’t cover all the real needs.
  • Missing transparency and structured approach. When negotiating with the carriers, the high amount of data including the own company rates from the previous years, the rates received from the carriers, the historical data about the loads and other information used over the negotiation rounds, can lead to confusion.
 

This traditional process is manual and mainly done using Microsoft Excel. SAP Strategic Freight Procurement as part of SAP Transportation Management solution (SAP TM) helps to aggregate and analyse high volume data and optimize the procurement process.

 

With SAP Transportation Management, it is possible to substitute a manual and tedious activity with a process supported on the historical analysis from the previous transports thanks to the integration with tools like Business warehouse (BW) or SAP Analytics Cloud which will help to extract all the transport information from SAP TM in order to understand in a time perspective which quantities have been transported, for which routes do we have a bigger demand, how the carriers have operated during the time period selected, which costs are we paying currently, etc. This can be the base for forecasting.

 

Based on these data we can have an idea about which will be our transportations demands and with this information on hand the Freight Procurement process can start.

 

SAP Strategic Freight functionalities will help to centralize all the activities related to the bidding phase and connect with the carriers in an easy way. You will be able to send a request for quotation to all the carriers selected and they will integrate their rates and capacities proposed back. In order to do this and from the new update on of SAP S/4HANA (02/2021) the new FIORI Carrier Collaboration App can be use facilitating the process even if the carrier does not use an SAP TM system. Your carriers can access the Manage Freight Agreement RFQs app to monitor and respond to the requests for quotation (RFQs) and he can also use Microsoft Excel to respond to your RFQs with their rates.

 

After receiving the responses from the carriers and thanks to the comparison functionality included on SAP TM Strategic Freight Procurement, we will be able to do a manual comparison for simple cases defining a carrier ranking or, if we are in front of a more complex scenarios, we will be able to use the powerful comparison optimizer in order to get an idea of which can be the most efficient solution based on the business share assigned to the different carriers under different strategies configurable in the system. Both options are supported by graphical representations and excel integration.

 

In addition, it is also possible to run a simulation to understand and estimate the future freight costs in the different scenarios. Once the preferred strategy has been selected, with SAP Strategic Freight Procurement you will be able to create the new freight agreements for each carrier with just one click, closing the process in a very easy and quick way. In conclusion, with the functionality included in SAP Transportation Management we will get rid of outdated process, evolving to an easier, simpler, quicker and integrated solution for the freight cost optimization.

MORE ABOUT THE AUTHOR


ÁLVARO RIAZOR
SENIOR SAP SCM/TM CONSULTANT
DIGITAL SUPPLY CHAIN SERVICES

 

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Comments :

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