SAPPHIRE - SAP WM and XSI with 3rd Party Logistics Providers

1© 2009 Perot Systems Corporation. All rights reserved. All registered trademarks are the property of their respective owners.

May 13, 2009

Migrating 3rd-Party Warehouse & Carrier Integration Systems to SAP Software

Bruce Rishel, CSCP


• 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


• Warehousing- Receiving- Storage- Picking - Packing

• Shipping- Domestic- International

• Reverse logistics- Returns from customers- Returns to vendors

3rd Party Logistics Scope


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


• 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


• 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


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


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”


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


3PL


SAP Software


3PLs with SAP Software


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


Capability


Capability Review – External AnalysisGartner Magic Quadrant Comparison

SAP ExtendedWarehouseManagement (SAPEWM)

Current 3PL WMS Tools


• 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


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


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


Deployment


Deployment Scope

MiamiRaleigh

Mexico

Switzerland

Australia

Singapore

Tokyo

Hong Kong

Toronto

Israel

London

Paris

Nashville

Shanghai

Belfast

New Zealand

Beijing


Pilot Sites

3PL Site Volumes

Based on # of outbound deliveries for 3PL sites May to July 2008

Post- Pilot Sites

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4,000

6,000

8,000

10,000

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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


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


Realization & 3PL Impact


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


• 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


• 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


• 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


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

30© 2006 Perot Systems Corporation. All rights reserved. All registered trademarks are the property of their respective owners.Proprietary and confidential. © 2006 Perot Systems Corporation. All rights reserved. All registered trademarks are the property of their respective owners.

Thank you.

Contact Information:Bruce Rishel(214) [email protected]

Documents

SAPPHIRE - SAP WM and XSI with 3rd Party Logistics Providers