Protagonists in Fulfillment Networks

April 9, 2008 by Bernd Mosbrucker

With increasing customer expectations of service levels and order lead time, order fulfillment is becoming a more and more complex task. That’s why it is increasingly managed in networks of partners that include manufacturers, shippers, customers, logistics service providers (LSPs), and specialists like customs brokers or insurance agents.

Of course, each must play its part. But the players in the fulfillment network also have to cooperate efficiently. LSPs often operate the fulfillment networks and connect to global and regional partners. The LSP viewpoint considers a manufacturer’s operational horizon, and focuses on the overall network.

Manufacturing companies and retailers as shippers are increasingly willing to hand over the complete management of the fulfillment process to the LSPs. Such management includes value-added services like packaging, labeling, and simple assembly of components along with complex production steps, inventory management and billing, and even accounting services on behalf of the shipper.

Even the definition of complete demand and supply strategies is being outsourced today. LSPs must implement tailored logistics processes for different supply strategies, such as a push-based model with long lead times or a demand-driven approach that immediately responds to customer orders.

Moving from an asset-based role, LSPs can grow their offerings naturally, based on the need for value-added services beyond pure warehousing and transportation. Increasing costs for assets and fuel cut margins of pure “execution” logistics companies and foster this kind of evolution.

Outsourcing logistics and keeping control

By outsourcing management and processing of their fulfillment operations, shippers want the benefits of improved service levels that enjoy clear budgets and seamless integration of processes. Nevertheless, they are unwilling to lose visibility into and decision-control of the process itself. Even today, outsourcing logistics often mean connecting to a black box. Shippers and customers do not see what is going on in the fulfillment process. As a result, they have no means to influence, approve, and change operations during a process run by the LSP.

Another threat for shippers with outsourced logistics is the loss of a close relationship with customers. Last-minute opportunities for additional product sales no longer become visible, because customers increase interaction with logistics partners and reduce operational contacts with the shipper of the goods.

When the responsibility for services is outsourced, the need for integrated communications and shared process management between shippers and LSPs increases. The goal is not only to monitor what is going on, but also to provide real-time information about transportation for simultaneous visibility into processes, finances, and logistics. With these views integrated to its in-house fulfillment solutions, the shipper has the same level of control it would have if it were still operating transportation with its own fleet and own staff.

Seamless connection

Enterprise service-oriented architecture (enterprise SOA) is the key enabler for connectivity and continuous electronic collaboration between shippers, LSPs, and end customers – not in a centralized manner that focuses on one company, but in a manner similar to that of the Internet, on a peer-to-peer basis and in real time. Enterprise services allow seamless connections among business processes across company boundaries by supporting established electronic communication patterns and protocols like EDIFact and ANSI X.12. With enterprise SOA, establishing out-of-the-box fulfillment networks becomes possible.

Since its release in November 2007, SAP Transportation Management 6.0 (SAP TM) has provided enterprise SOA functionality for connecting with different EDI standards, existing communication patterns, and important platforms in the various modes of transport. For example, SAP TM supports out-of-the-box integration with GTNexus and Inttra, the two major connectivity and business platforms used by ocean shipping companies for booking vessel capacity and real-time tracking. The complete life cycle of transportation can be represented in one seamlessly integrated application – whether goods are moved by truck, by ship or by plane.

Real-time relationship

SAP TM is not only the key enabler of simplified on-boarding of partners with enterprise SOA. The application architecture is also designed to provide non-stop flexibility and adaptability of activities such as loading, unloading, coupling and uncoupling trailers and trucks, and goods movements.

SAP TM can process updates and changes coming from the business partners involved. The application allows users to adjust business decisions to changing situations and compare original customer requests with the current work status, eventually communicating decisions to the partners involved by fax, mail, or standard electronic messages.

SAP TM thus creates a real-time, peer-to-peer relationship between shippers, LSPs, and the consignees of goods. Examples of such usage include door-to-door services, subcontracting with carriers, and centralized customer freight invoicing. The network is managed on a transactional basis, with one specific bill of lading, sales order, or delivery as the common point of reference.

Freight costing and billing capabilities are seamlessly integrated with financials and accounting in SAP ERP. In addition, the application allows calculation of the complete routing of goods already during order creation and considers all means of transport and carrier rates. Based on this routing guide, the proposed movement alternatives can be compared immediately.

SAP TM manages complete end-to-end processes in transportation, including planning, optimization of resources, routing, and tracking. As an open, scalable, and high-volume solution with out-of-the-box connectivity, SAP TM allows innovation with adaptive and profit-driven strategies in multi-company fulfillment networks.

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