Since the recent release of mySAP SCM 5.0, the two most common questions asked of me about TP/VS are:

• Where does it reside in SAP’s transportation solution?

• How do you plan an optimal solution for scenarios involving more than one transportation option?

First, let me address where TP/VS resides in SAP’s transportation solution. SAP transportation management is composed of three pillars: planning, execution, and freight costing. TP/VS focuses on planning transportation and represents the planning pillar of the transportation management solution in SAP. By using TP/VS, you can improve the transportation planning process while reducing the planning cycle time. In this way, the transportation planner focuses on the most important tasks.

The two other pillars that R/3 and mySAP ERP Central Component (ECC) cover, execution and freight costing, support the inbound and outbound processes. You can see how these three pillars of transportation management compare between R/3/ECC and TP/VS in Table 1.

Let’s start with an example to explain the scope of TP/VS. Figure 1 describes a TP/VS scenario that represents all of the supply chain nodes and agents. In this figure, you find nodes in the supply chain for outbound, inbound, or internal transportation processes. The vendors and plants are for inbound processes in the procurement area. The plants, distribution centers, and customers relate to outbound or distribution processes.

Figure 1

Transportation model supply chain elements

You can define different means of transport to carry on transportation activities in complex processes. TP/VS handles any means of transport; therefore, it is able to plan scenarios with mixed resources such as a maritime scenario illustrated in Figure 2. In this scenario, a distribution center located in Barcelona transports items to Palma de Mallorca using a truck, a ship, and a second truck or van on Mallorca Island. Three legs or steps compose this scenario, also called multimodal because several modes are involved.

Figure 2

Maritime scenario involving three transportation legs

You can plan many other scenarios or situations with TP/VS: a single warehouse supplying multiple destinations, routes with multiple pick-up and drop-off stops, cross-docking, vehicle with itinerary (modes of transportation that have defined departure schedules), such as trains and ships, or mixed scenarios combining previous ones.

You can model any means of transportation available, such as railways, ships, airplanes, trailers, trucks, and vans in the transportation processes. You can freely define new Means of Transport by following menu path IMG>APO>TP/VS>Basic Settings>Maintain Means of transport (Figure 3).

Figure 3

Define means of transport

The transportation lane element of TP/VS in Figure 1 allows you to define connections among logistic nodes (customers, vendors, plants, warehouses). It contains the required information for defining and planning the trips between nodes: distance, estimated time, means of transport, and allowed carriers. For instance, in the maritime scenario in Figure 2, you could transport items to the island by ship or airplane based on criteria including cost of the means of transport, urgency, order value, or ship/airplane schedules.

Now, how do you plan an optimal solution for those scenarios? TP/VS manages transportation with several tasks that I group into two phases: vehicle scheduling and TSP relationship management.

Vehicle Scheduling: Optimization

When planning, the first task a planner faces is to answer questions such as “What’s the appropriate means of transport,” “What’s the best route,” and “Could I consolidate deliveries?” TP/VS answers these questions starting with the transport demands and proposing optimal and feasible solutions, while respecting constraints across supply chain. Optimization is the heart of TP/VS.

It is important to understand how the optimizer tool in TP/VS works to translate company processes into parameters so the optimizer tool can make appropriate decisions. It supports the automatic planning process. You can execute it from Interactive Vehicle Scheduling or a background transaction. The optimizer tool considers two things at the same time: optimization formula and constraints.

The optimization formula tries to obtain the best shipping scenario regarding routing and load consolidation by minimizing incurred cost. The formula for these costs, which represent the three questions in the planner’s first task, is as follows:

Optimization costs = Fixed transportation cost + variable transportation cost + service level penalty cost

You encounter fixed transportation costs when the planner determines the means of transport or vehicle for a particular shipment. A planner often must consider the balance between service and cost. For example, sending material by airplane may improve the service level, but the fixed cost of air shipping is higher when compared to shipping material by truck.

Variable costs incurred during the planned shipment refer to the distance (cost per kilometer or mile), duration (cost per time), cost per unit, stopovers, and quantity cost (per unit and distance).

Finally, customer satisfaction and service level variables factor into the service level penalty costs. The optimizer tool assesses the costs that result from service level issues, such as early or late arrival, to find the lowest cost solution.

You maintain all of these costs in the master data or in the cost profile in SAP APO (Figure 4) by following menu path APO>Master Data>master Data for TP/VS>Maintain Vehicle Scheduling Cost. As with other optimizers, the figures usually don’t represent real costs, but a method to drive the optimizer tool to obtain the best solution.

Figure 4

Costs related to service level in the cost profile that show penalties due to early, delayed, or non-delivered shipments

To clarify all of these concepts, let’s take a simple example. You have three deliveries with the same delivery date and two available trucks to ship the deliveries (Figure 5). Customer 1 has a 20-ton shipment, customer 2 has a 10- ton shipment, and customer 3 has a 10-ton shipment. Truck 1 can hold 30 tons and truck 2 can hold 10 tons. You have several options to satisfy your customer demands:

A) Take truck 1 (30 tons) and load deliveries 1 and 2. Take truck 2 (10 tons) for delivery 3.

B) Take truck 1 and load delivery 1. Take truck 2 for delivery 2 and return to load delivery 3.

C) Take truck 1, load delivery 1, and return to load delivery 2. Take truck 2 for delivery 3.

D) Take truck 1 and load deliveries 1 and 2. Then return truck 1 to the plant and load delivery 3.

Figure 5

Three customer deliveries with several shipping options

What’s the best option? It depends on two of the factors in the optimization formula I described earlier: transportation cost (fixed or variable) and the service level agreement with your customers. Option A is the least expensive, but the long distance for truck 1 to travel means that you cannot deliver the shipment on time. In this case, option B might make more sense because you can deliver the shipments on time. Options C and D are logical, but from a cost point of view they are worse.

This is a very simple scenario that only takes a few elements and factors into account. Reality is more complex with thousands of deliveries. A good plan requires that you analyze all of these variables to find the best solution from both cost and quality of service points of view. The first step in this process identifies the scope and scenario you want to optimize. Selecting different sales order documents or purchase orders allows you to identify the scope and, therefore, the scenario.

Additionally, this optimization process is limited by physical constraints and timing restrictions. The physical dimensions of your transportation vehicles (truck, van, trailer) determine the maximum load capacity, translated into maximum number of pallets, volume, length, or weight. The process uses up to eight dimensions as inviolable constraints during the optimization. Working hours for the truck, customer dock hour availability, vendor pick-up times, train schedules, or ship departure times add more complexity.

Compatibility and incompatibilities among products, vehicles, and locations is an additional factor to consider. This is especially important in cases involving forbidden mixes of items in a truck (e.g., frozen and unfrozen products), or when customers require specific means of transport, as might be the case with a location that is difficult to reach.

You can define compatibilities between different object types in the screen shown in Figure 6, which you access by following menu path SCM Settings>APO>TP/VS>Optimizer>Define Compatibility Types. With this setting, I could create an incompatibility type between vehicle and location based on the codes (field name). After that, I could create the incompatibility between Truck and customer code 34556, corresponding to a customer that only accepts shipments by van.

Figure 6

Define compatibility types

The parameters that drive the optimization process are grouped in the optimization profile (Opt. Profile), which you define in the TP/VS settings or directly from Interactive Vehicle Scheduling via transaction /SAPAPO/VS01 or by following menu path SCM IMG>APO>TP/VS>Optimizer>Define optimization Profile (Figure 7).

Figure 7

Optimization profile with a scenario selection based on the ATP order category

With this profile, you guide the optimizer to find the best solution. For instance, you can skip planning of low weight orders, leaving those to parcel companies. In Figure 7, the ATP Categories tab allows you to define the scope of the scenario. By selecting sales order and deliveries, you are defining an outbound scenario. The rest of the tabs define the scope of the planning process and allows you to restrict it as needed. For example, you can restrict the locations to plan (North Zone, East Coast), which truck or means of transport to plan or use, and which period of time (Horizons) to consider.

A common characteristic of any optimizer tool is the capability to assign weight to variables — the planner decides which criteria are the most important. As shown in Figure 8, the planner decides how to balance service level and transportation cost with weight assignment. In this example, delivery earliness is not a critical factor for this company in the Weighting of Cost Factors, so the planner sets this value to zero.

Figure 8

Optimization gauge and multipliers weighting

You perform space optimization through load consolidation, but optimizer cannot handle complex space assignment. You should model space assignment using dimensions: number of pallets, mass, volume, length. For example, you could depict a truck with a constrained resource of 30 pallets, 30 tons, and 40 cubic meters. You cannot model, for instance, space occupied by wheels or other specific restrictions.

The planner then manipulates planned shipments with consolidated deliveries manually if needed, especially for portions of demands or urgent deliveries. Figure 9 shows the interactive planning transaction where planners can interact and adapt the results or build their own shipments. You can access this functionality via transaction code /SAPAPO/VS01 or by following the menu path APO>Transportation Planning/Vehicle Scheduling>Planning>Interactive Vehicle Scheduling.

Figure 9

The circled button represents the new dynamic route determination functionality in interactive planning click here to view a larger version of this image

By using drag and drop, I can create new shipments, including non-assigned freight units, such as sales order items or deliveries. I select a Freight Unit (sales order, purchase orders, stock transfer orders, or deliveries) and assign it to a transportation resource (truck, van, ship). Then the system tries to find the required loading, unloading, and transportation activities that compose the route or itinerary.

Relationship with TSPs

Nowadays, third-party logistics (carriers) are key players in the transportation processes. Once you determine planned shipments, a TSP or your own resource must execute it. This involves three steps:

Step 1. Select a carrier.

Step 2. Communicate new orders to your service providers.

Step 3. Integrate the carrier into your supply chain.

These three steps are essential best practices in transportation processes. You can model all of these using different approaches in TP/VS.

Step 1. Select a carrier. Outsourcing transportation services makes selecting a carrier important to maintain your company’s reputation with your vendors or customers, while at the same time saving money. The goal of carrier optimization is to find the carrier that can execute planned shipments with the lowest cost.

mySAP SCM 5.0 has increased flexibility in this area, offering several selection criteria, including different options to assign the carrier for a determined shipment automatically. These options include business share maintained on the transportation lane, and prioritized TSP costs maintained manually in APO master data or based on real freight costing coming from R/3.

Continuous movement in mySAP SCM 5.0 allows improvements in the carrier selection based on the identification of continuous routes. This saves transportation costs because the same carrier can execute various shipments.

When selecting a carrier, you can take into account limitations (allocations) due to carrier capacity, such as maximum ships per day or week, to check if the proposal is realistic. SAP note 445118 gives you more information about this topic.

Step 2. Communicate new orders to your service providers. In this step, technology now plays an important role. Now you have the option of XML communication, which is more flexible than EDI. EDI, XML, and email offer integration methods with your transportation partners.

In the screen shown in Figure 10, a carrier reviews its assigned shipments and can either accept or reject them, or change the proposed dates. These actions are integrated into the alert monitor, so the planner can react to changes or rejected shipments. mySAP SCM 5.0 incorporates decision rules, so the system performs actions automatically for overdue tenders. These actions include automatic rejection, reassignment, or a trigger for an alert.

Figure 10

Internet collaboration allows TSPs to accept or reject shipments click here to view a larger version of this image

Step 3. Integrate the carrier into your supply chain. As a best practice, you should integrate carriers as part of your supply chain to respond quickly and efficiently to orders. This means that the carrier should be able to access information easily. Internet and collaborative processes fulfill this requirement. For the allocation used during the carrier TSP selection, you can integrate the TSP in the tactical planning, providing access to weekly or daily information about its capacity.

Integration with R/3 and ECC

Remember that APO is a planning system, and therefore it is never the system responsible for execution or costing, which always happens on the R/3 or ECC side. In this case, once the planner accepts the shipment document, you can publish the delivery and shipment to your ERP system, where the execution process starts. You can integrate mySAP SCM 5.0 with R/3 Release 4.6C and later, but some scenarios (delivery split, working with shipping points, or dynamic route determination) require later releases. These restrictions are explained in SAP note 832393.

Experience demonstrates that integration is usually the main difficulty when you connect external, non- SAP systems to R/3. In this sense, the integration between APO and R/3 through Core Interface (CIF) maintains the transportation solution integrity through one common flow and mapping of documents. As with other APO modules (Production Planning and Detailed Scheduling, SNP), execution and costing always happens in R/3, but standard integration provided between TP/VS and Logistics Execution System (LES) in R/3 makes it simple.

Sales orders or purchase orders, deliveries, and shipments flow between both systems depending on the planned scenario. You perform freight costing in the LES transportation processing system, which contains contractual freight rates and agreements permits to calculate final cost based on pricing procedures and condition techniques.

An example of integrated document flow for the outbound process is described in Figure 11. First, you send sales orders created in R/3 to APO via CIF, which generates the transportation demands. Once you have created the planned shipments, tendered them, and assigned them to the carrier in APO, they can generate deliveries and shipment documents in R/3 for execution and freight costing. The system maps the information from APO, such as means of transport, deliveries consolidated, legs, and carrier into the shipment document.

Figure 11

Document flow for an integrated outbound process click here to view a larger version of this image

Regarding the document update process (steps 2’ and 3’ in Figure 11), you maintain both systems in sync. Changes in R/3 deliveries drive updating in APO and vice versa. mySAP SCM 5.0 has improved this integration by offering dynamic rules to control the actions that you execute when, for instance, an order is changed.

Usually sales orders are not constrained by transportation restrictions, although sometimes you must perform a splitting process prior to consolidating the load. You carry out this process before the optimization/planning process. With this process you reduce deliveries that are too heavy or sales order items that are impossible to accommodate into any means of transport by following splitting rules. The problem with large sales orders is not new. This splitting functionality was included with SCM 4.0, but improved with mySAP SCM 5.0.

For example, if your largest vehicle has a maximum capacity of 30 tons, you cannot allocate a sales order item containing 50 tons. mySAP SCM 5.0 introduces new functionality by using correlated splits to distribute large orders on multiple trucks or transportation resources.

In addition to transactional flow, this interface facilitates the integration and uniformity of master data because most of the data comes from R/3. CIF integrates data related to the customer or provider, such as address, plant, or distribution center addresses as well as carrier data and product data, such as weight or size.

What’s Happening: Alerts

Management by exception is important in the planning/optimization processes. It is critical to know when abnormal situations are happening in your shipments. For instance, if someone changes an order’s due date when it is included in a shipment, this can cause an error when generating the shipment or planning the order. This could affect your agreement with your customer, or it could cause other problems with master data or resource availability. With the dynamic integration introduced in mySAP SCM 5.0, alerts warn planners when order changes in R/3 affect already planned shipments or continuous movement.

At this point, let me underline the link to global ATP, particularly backorder processing. In this case, considering new planned delivery dates because of transportation restrictions allows you to react to the transportation issues. You could contact the customer to make him or her aware of the issue or seek out alternatives.

Dynamic Route Determination

Supported by new TP/VS functionality included in mySAP SCM 5.0, you can determine dynamic routes during the sales order entry, providing a direct decision support. That is, during sales order entry, online routing determination and scheduling occur with consideration to carrier allocation and resource capacity check.

When you create a sales order, the system displays a new screen, offering shipment proposals. After you select the appropriate shipment, the system triggers the ATP check process and displays the ATP screen with the delivery proposal. You can trigger dynamic route determination in the SCM system using the Dyn. Route Determination button in Figure 9 as well.

Adolfo Menéndez Fernández

Adolfo Menéndez Fernández is the application architecture manager at Repsol in Madrid. Previously, he worked at SAP Consulting Spain as the logistics consulting manager. He studied at the University of Oviedo, where he earned an electronic engineering degree. He is a certified SAP consultant in supply and demand planning (SNP and DP), order fulfillment (Global Available-to-Promise), production planning and detailed scheduling (PP/DS), as well as procurement and materials management (MM). Adolfo has more than 10 years of SAP implementation experience in the consumer product goods, pharmaceutical, automotive, furniture, textile, chemical, oil & gas, and steel industries using SAP ERP logistic modules (including PP, MM, and sales and distribution [SD]) as well as SAP SCM (DP, SNP, and PP/DS). He is APICS certified in Production and Inventory Management (CPIM).

You may contact the author at asturiasadolfo@yahoo.com.

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