Seamless 3PL Integration with SAP-TM

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1 Orange County Convention Center Orlando, Florida June 3-5, 2014 Seamless 3PL Integration with SAP-TM Hemant Vakharia SAP America, Inc. Randy Boom - John Deere

2 LEARNING POINTS SAP-TM s ability to integrate with 3PL processes Models for Integration

3 Agenda Impact of 3PL Trends in 3PL Collaboration Business Driving Forces 3PL Services and SAP-TM

4 3PL Impact - Financial U.S. spending on 3PL services steadily rising In the U.S., 3PL providers account for 16% of total logistics spending in 2008 In 2002, this figure was 10%, thus an increase of 6% in 6 years! 77% of Fortune 500 Outsourced some portion of logistics and supply chain functions in 2008 Up from 64% in 2005

5 Trends in 3PL Services Spending

6 Trend Continues. Source: Armstrong & Associates ($Bil)

7 3PL Spending by Region N.A. EU APAC LatAM Others 3PL Spending Total Logistics Spending $143 $170 $113 $15 $46 $1,613 $1,696 $1,524 $247 $1,224 Source: Armstrong and Associates, 2009.

8 3PL Revenue by Region

9 US 3PL Market Breakdown

10 Driving Forces Near-shoring / Re-Shoring Increasing Ocean Freight Rates Shrinking differential labor costs True costs of in-transit and safety stock inventories Position products closer to customers Omni-Channel fulfilment and the Amazon Effect Customer-centric fulfilment initiatives Make products available to buy and to return anywhere in the supply chain Forcing companies to re-think their network and the partners in the network that provide value-added service

11 Why Outsource? Lack of internal expertise: No expertise for the dealing with Ocean Booking. Supplement Internal Expertise Opportunity: Reduce costs and improve service, and financial performance Opportunity to increase resource capacity or improve asset utilization Increase inventory turns Build more flexibility in logistics processes Expansion into unfamiliar markets Ability to divert capital investments

12 3PL Services Freight Management Option 1: Carrier Selection, Routing, & Scheduling Option 2: Ocean Booking, Freight Forwarding Operations Option 3: Warehousing Option 4: Freight Bill Auditing and Payments Option 5: On-site Load Building Option 6: Shipper acts as 3PL (Own Fleet)

13 3PL Carrier Selection, Routing, Scheduling Provide a one-stop shop of transportation planning and routing Shippers send out the Orders/Delivery needs to 3PL 3PL s consolidate, Schedule, Provide Optimal Carrier Selection Shippers Routing Guides provide the Business Rules to 3PL

14 3PL Carrier Selection, Routing, Scheduling Shipper Headaches: How to send the transportation needs to the 3PL? How to enforce the business rules based on routing guides provided? How to validate that the carrier selected is the best and least cost? How to measure 3PL and carriers performance?

15 3PL Integration Option 1 Send Orders/Deliveries to SAP-TM Rough Plan using business rules/routing guide in SAP- TM Send the rough-planned shipments to 3PL 3PL validates, assigns appropriate carrier, notifies carrier, books carrier/capacity 3PL send the EDI back, update shipments based on these 3PL confirmed shipments

16 3PL Option 1

17 3PL Option 2 Ocean Booking 3PL Provides Ocean booking service May use their own Carrier network, or exchanges like GT-Nexus

18 3PL Option 2 Ocean Booking

19 3PL Option 3 - Warehousing 3PL Manages warehouse, and provides picking/packing and shipment services Have EDI capabilities

20 3PL Option 3 - Warehousing

21 3PL: Option 4 > 3PL Provides Freight Audit and Payment Services

22 3PL: Option 4 Shipper Headaches: Freight visibility and accrual on the per-shipment basis is extremely difficult Shippers have to accrue freight in a lump-sum, based on history, or based on what 3PL asks for Always playing the catching-up game to manage freight spend Challenging to manage the working capital Freight recovery and profitability reporting is a challenge

23 3PL: Option 4 Flow: Freight accruals and calculation in TM 3PL s can use New Carrier Portal, to validate charges, and clear disputes Accruals and profitability will be at the shipment level Could also enable ERS

24 3PL Option 4

25 Carrier-Portal: Create Dispute

26 Invoice List: Export

27 Option 5: On-site Load Building 3PL s and carriers may have a dedicated planner assigned to shipper The planner is located at shipper s dock, and manages building loads

28 Option 5: Load building (Cockpit)

29 Option 5: Load building (Cockpit)

30 Option 6: Shippers with Own Fleet: 3PL Shippers with own fleet want to maximize return on asset / asset utilization Shippers may want to act as common-carrier for other shippers Create opportunities for load-sharing, and building revenue stream with SAP-TM

31 Option 6: SAP-TM: Shippers with Own Fleet

32 References 1. Coyle, Novack, Gibson & Bardi (2011), Transportation- A Supply Chain Perspective, 7e, Published by Cengage Learning 2. Logistics Management Magazine (Nov. 2013), Published by Peerless Media, LLC. 3. Anderson & Associates, www.

33 BEST PRACTICES RDS packages available: Truck Transportation for Shippers Ocean Carrier Booking for Shippers

34 KEY LEARNINGS SAP-TM provides a scalable framework for Logistics Processes SAP-TM provides flexibility to run selective processes Shippers need to change direction and need a system that supports their strategy

35 FOLLOW US

36 THANK YOU THANK YOU FOR PARTICIPATING Please provide feedback on this session by completing a short survey via the event mobile application. SESSION CODE: 3306 For ongoing education on this area of focus, visit

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