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Logistics 4.0 – Reducing Complexity

In the mechanical and plant engineering industry, logistics is in a transitional phase, with the trend leaning toward more frequent deliveries, smaller quantities, increasing pressure on deadlines and cost as well as more complex delivery chains with increased interconnectivity. The variety of non-standardised IT solutions is becoming a problem, and the result is greater complexity, processing complications and a lack of transparency and compliance. Best practice examples demonstrate that integrating logistics applications into an organisation's ERP system can resolve these problems with great efficiency.

According to a recent McKinsey study, parcel deliveries in Germany are set to double by 2025, while express deliveries are forecast to increase by 40% – a trend that will also be felt in B2B sectors such as mechanical and plant engineering. In addition, logistics will face massive challenges resulting from a movement toward batch size 1, real-time data processing, just-in-time inventorying, shipping replacement parts with a quick turnaround time and increased interconnectivity with suppliers. 

Numerous non-standardised IT solutions

The logistics chains processes that have evolved over the years are no longer up to the increased demands of complex, internationally connected markets (Logistics 4.0). The number of shipments is rising, while box sizes are shrinking. At the same time, the need for information is growing throughout the supply chain. While the extent of information on orders, delivery and tracking is practically exploding, the problem is that many of the data are located in the separate information silos of special applications such as courier, express and parcel services (CEP). Many shippers work with the PC applications of their specific shipping service providers. Different user interfaces mean more complex initial training for new employees, and significantly less flexibility for how and where employees can be deployed within a company. Incompatibility between PC applications also leads to problems in data storage, since information on processing and shipping is located in separate databases.While there are interfaces for these CEP solutions, in many cases, they're unidirectional; in other words, too little information – such as important tracking data – flows back into the ERP system. This makes certain data more difficult to access. That's a real problem, particularly in light of the trend toward faster data exchange in an interconnected delivery chain. Additionally, important compliance requirements are not met, such as verification within the EC (Entry Certificate) in the case of VAT-exempt deliveries to other EU countries.

Serious deficiencies in shipping logistics

Here's a typical problem when a shipper receives an invoice from its transport services provider: Let's say, for example, that 300 shipments per day with around 3,000 items per invoice have to be checked. Unfortunately, the transport data from the CEP service provider and the shipper's order data are not in the same format. On top of that, they're also stored in different databases. Auditing is therefore limited to random checks. Closer inspection reveals great potential for optimisation throughout the entire process chain, from the calculation of shipping costs to invoicing.
A mechanical engineering business ships hundreds of packages every week to customers all over the world and uses SAP-ERP for these shipping orders, expanded to include logistics add-ons. These make it possible to precisely calculate the shipping costs in advance by automatically scanning the rates of different transport services providers (TSPs) based on the size and weight of a shipment, as well as the individual terms that apply to the shipper from its TSP. The right shipping method and service provider can prevent accruing unnecessary express or overnight costs and save up to 20% in expenditures. A mechanical engineering company can additionally use the track-&-trace data from courier services such as UPS, DHL or shipping companies for its Entry Certificates. As soon as the recipient has confirmed the receipt of goods, this status information flows directly into the company's SAP system and the Entry Certificates are automatically processed.These data finally enable complete, automated invoice assessment and replace the need for manual auditing. The system pays for itself at the user company within just eight months. The key to improved logistics processes and the extensive automation of processing steps is complete integration into the ERP system. 

Integration in SAP-ERP reduces complexity

"The replacement of incompatible external PC applications and CEP solutions has made it possible for us to significantly reduce the level of complexity," explains Mercoline Shipping Logistics Product Manager Steffen Udolph. With its logistics add-ons, Mercoline provides the interfaces to all of the relevant transport service providers. A mechanical engineering company can now process all of its shipping orders for CEPs and shipping companies directly in its SAP-ERP system. Even the packaging process is integrated. Instead of the overly complicated operation in SAP, now, required data like document numbers or packaging materials are scanned via the add-on using a barcode scanner. Shipping labels are created individually for the specific CEP or shipping company. Finally, electronic data relating to pieces of information such as tracking, for instance, are equally exchanged with the CEPs and shipping companies directly from the ERP system. All orders are available in an overview for employees to inspect via logistics monitoring, so the status tracking of shipments sent via shipping companies and CEPs is monitored using the SAP-ERP system. As an optional feature, a tracking link can be sent to customers so they can follow a shipment.

Greater transparency and effective work organisation

Integration into SAP-ERP makes logistics processes more comprehensible and significantly more effective. The integration of all processing steps into the SAP-ERP system standardises all of the processes and allows employees to always work with the same familiar user interface. All data are located in a single database and media disruptions are a thing of the past, reducing the potential for processing errors and increasing data security. Having the same methodology for all of these tasks means that employees can be deployed more flexibly and that training is simpler. Another fringe benefit that should not be underestimated is improved customer service. The automated processing of tracking information makes the statuses on all shipping orders for CEPs available throughout a company in line with user authorisation guidelines. It can also help your sales team to effectively answer customer inquiries. 

 

On the road to Logistics 4.0

Integration into SAP-ERP makes the new challenges faced by shipping logistics manageable, because all of the information flows together in the ERP system. The entire process – from order placement and transport management to transport tracking and evaluating tracking information – is interconnected. Product Manager Steffen Udolph sums up the benefits of SAP integration: "EDI data exchange with partners and the automated processing of customs declarations and Entry Certificates are integrated into the ERP platform. The Mercoline add-ons not only build on one another, they're also interlinked."