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May 13, 2009
Migrating 3rd-Party Warehouse & Carrier Integration Systems to SAP Software
Bruce Rishel, CSCP
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• 3rd party logistics scope• Key strategy drivers• Why use a 3PL?• SAP software logistics benefits• Concerns of using SAP software with 3PLs
- Capability- Deployment strategy- Realization & 3PL impact
• SAP software with 3PLs analysis• Overall assessment• Take home thoughts
Agenda
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• Warehousing- Receiving- Storage- Picking - Packing
• Shipping- Domestic- International
• Reverse logistics- Returns from customers- Returns to vendors
3rd Party Logistics Scope
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Key Strategy Drivers
• Cost- Reduce interface costs in supply chain- Reduce 3rd party software costs- Common processes and tools, one logistics system, one set of processes across
sites• Flexibility
- New operating requirements in developing countries- Quickly meet business transformation goals- Rapid rollout of new or closure of unneeded warehouses
• Visibility- Reduce balance on hand discrepancies- “See” inventory across the supply chain
• Vendor independence- Ability to change 3PL providers with relative ease
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• Focus on core business• Free up capital move from fixed to variable cost model
- Warehouses- Material handling equipment- IT infrastructure
• Specialized logistics knowledge• Negotiating leverage with suppliers/bulk discounts• Administration shared across clients• Market presence – easier access to emerging markets
Why Use A 3PL
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• Interfaces to 3PLs- Interface setup and maintenance- Multiple points of potential failure / balance on hand
discrepancies- Overhead means it is difficult to react quickly to changing
market conditions• Lack of visibility – information stored in different systems /
updates not instantaneous • Dependency - “Locked-in” to the 3PL provider because of
difficulty interfacing to a new provider
3PL Disadvantages – IT Focus
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SAP Soft-ware
Purchase Order Purchase Order Change
Material Master
Delivery Document
Return Delivery
PO Goods Receipt
Goods Issue
Material Moves – 3PL Generated
Return Delivery Goods Issue
Balance on Hand
Production OrderProduction Order Goods Issue
Material MoveMaterial Move Update
Schedule Agreement
Sales Order Changes
3PL
Schedule Agreement Receipt
3PL Architecture
Sales Order
Production Order Goods Receipt
Carriers-FedEx-UPS-TNT
Shipment Number
Shipment Information
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SAP Software Logistics Benefits
• One common platform• Simplify the supply chain• Rapid deployment• Cost avoidance• Reduce number of SOX monitoring places vs. 3PL WMS• Stronger negotiating position with 3PL’s – cost reduction if they
can reduce their IT support costs• No more 3PL “lock in”
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SAP Soft-ware
3PL Architecture with SAP Software
Carriers(FedEx
UPSTNT)
Shipment Number*
Shipment (via XSI)* Tracking performed through web access on parcel tracking tab of the delivery header
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3PL
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SAP Software
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3PLs with SAP Software
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Early Concerns
• Capability- Is SAP software appropriate for a 3PL environment- Can we run operations on “standard” SAP software – how much customization?
• Deployment strategy- How long will it take, resource requirements / cost
• 3PL impact- Will dictating the WMS be a deterrent to 3PLs doing business with us in the future
• Realization- Will we realize the savings and benefits projected
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Capability
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Capability Review – External AnalysisGartner Magic Quadrant Comparison
SAP ExtendedWarehouseManagement (SAPEWM)
Current 3PL WMS Tools
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• Gartner “Magic Quadrant” key findings- WMS is the most modified part of the supply chain- WMS market is going through consolidation- SAP EWM application has a strong track record - SAP software has a strong integration to overall supply chain
Capability Review – External Analysis
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Systems Deployment Comparison
3PL Systems• Activities to deploy
- Creation of storage location within plant- Deployment of 3PL WMS- Configure interfaces- Minor testing of SAP software changes- Major testing of interfaces- 3PL support- SAP software to 3PL reconciliation
processes and resources- Infrastructure- Interfaces to Carriers
• Ongoing running costs for 3PL
• Time to deploy 2-3 months
SAP Software Logistics• Activities to deploy
- Creation of warehouse within plant- Minor configuration changes from copied
warehouse- User ID’s set up and role allocation- Minor testing of SAP software changes- Interfaces to Carriers
• Time to deploy 2 weeks to 1 month
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Fully integrated with SAP software
Reduced interface costs & simpler architecture
Reduced 3PL costs
Single IT support team
Drive standard security policies
Logistics supply chain, order & shipment status information integral part of toolset
Enhancements may be limited to SAP software release schedule
Requires secure access to client’s network from warehouses
Testing for non-logistics upgrades
Removes 3PL dependency for operations & IT services
Numerous SAP user groups to understand how other SAP users manage inventory in 3PL environment
New warehouse could be deployed in 2 – 4 weeks
Easier to drive common process & standards
Easier to change 3PL providers
3rd party staff transacting on SAP software
Warehouses down during SAP software maintenance
Strengths Weakness
Opportunities Threats
SWOT Analysis – SAP Software Logistics
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Deployment
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Deployment Scope
MiamiRaleigh
Mexico
Switzerland
Australia
Singapore
Tokyo
Hong Kong
Toronto
Israel
London
Paris
Nashville
Shanghai
Belfast
New Zealand
Beijing
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Pilot Sites
3PL Site Volumes
Based on # of outbound deliveries for 3PL sites May to July 2008
Post- Pilot Sites
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
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Footprint
- 100% standard SAP EWM…except for:• Forms
- Putaway label, pick list, pack list, pack label, manifest• Custom RF transactions
- Storage unit bin relocate- Material staging area scanner
- RF capabilities• WebSAPConsole• Integrate existing RF hardware with SAP software
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Footprint – Newer SAP Software Functionalities
- Dynamic cycle counting• Required new OSS Note: 1162196
- Pre-picked handling units• Handling unit storage after packing
- Does not require extensive handling unit configuration- Facilitates receiving by package in downstream sites
• Required new OSS Note: 1287760
- XSI for carrier integrations• Two way interface for FedEx and UPS• Single outbound interface to TNT
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Realization & 3PL Impact
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SAP Software Logistics Pilot Review
Pilot Goals Pilot Results
Reduced implementation costs ~100K reduction per site
Reduced time/resources to implement No interface testing/3PL testing resources not required
Improved visibility to warehouse info by whole supply chain
Visibility to pick/pack status as well as packing details
Shorten transaction time Min of 30 minutes cycle time removed (interfaces)
Removal of interfaces Interfaces removed
No impact to warehouse operations Pilot sites had no service impact
BACKGROUND• Two sites deployed• Approximately 29% of shipping volume transferred to SAP software as part of pilot
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• IT- Hardware savings - no need for hardware to support 3PL WMS- 3PL WMS software license fees- B2B integration maintenance cost
• Future deployments- Smaller team - Less testing since no interface testing required- Less time on site (lower travel expenses)
• Personnel reductions - IT support- Failed flow/balance on hand reconciliation
Cost Reductions
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• Minimal disruption during transition• Stock balances accurate; no reconciliation required• Picking and shipment requests are triggered from SAP software dates
directly. No additional emails.• Warehouse visibility to order managers eliminates many potential
questions• Forms processing and re-processing simple to perform• Access to SAP software (for both terminals and RF) uses managed
access through the firewall; authentication which is secure, robust and easy to install
Client Operations View
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• Transition of warehouse staff to SAP software process using RF terminals was issue free; training and ongoing support was ‘at the right’ level.
• The SAP logistics tools are seen as having the same level of functionality, and implementation did not reduce warehouse efficiency.
• Operations is intuitive.• Response time and issue resolution is good.• Dates are triggered from SAP software dates directly. No additional
manual instructions or emails are required.
Warehouse Operations View
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Take Home Thoughts
• Combining 3PL logistics with SAP software can provide the benefits of each solution to an organization
• Template methodology speeds implementations and standardizes processes
• Significant cost reductions can be realized by using SAP software at your 3PLs
• Supply chain integration and visibility are both improved using a single system (SAP software) for ERP and logistics
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Thank you.
Contact Information:Bruce Rishel(214) [email protected]
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