Migrating 3rdParty Warehouse

& Carrier
Integration
Systems to SAP
Software
Bruce Rishel, CSCP

May 13, 2009

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

Agenda

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

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3rd Party Logistics Scope

Warehousing
- Receiving
- Storage
- Picking
- Packing
Shipping
- Domestic
- International
Reverse logistics
- Returns from customers
- Returns to vendors
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Key Strategy Drivers

Cost
-

Flexibility
-

New operating requirements in developing countries

Quickly meet business transformation goals
Rapid rollout of new or closure of unneeded warehouses

Visibility
-

Reduce interface costs in supply chain

Reduce 3rd party software costs
Common processes and tools, one logistics system, one set of processes across
sites

Reduce balance on hand discrepancies

See inventory across the supply chain

Vendor independence
-

Ability to change 3PL providers with relative ease

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Why Use A 3PL

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

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3PL Disadvantages IT Focus

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

2006 Perot Systems Corporation. All rights reserved. All registered trademarks are the property of their respective owners.

3PL Architecture
Material Master
Sales Order
Sales Order Changes
Production Order
Production Order Goods Issue
Production Order Goods Receipt

Carriers
-FedEx
-UPS
-TNT

3PL

Material Move
Material Move Update
Purchase Order
Purchase Order Change
PO Goods Receipt
Delivery Document
Goods Issue

Shipment Information
Shipment Number

SAP
Software

Material Moves 3PL Generated

Return Delivery
Return Delivery Goods Issue
Schedule Agreement
Schedule Agreement Receipt
Balance on Hand

2006 Perot Systems Corporation. All rights reserved. All registered trademarks are the property of their respective owners.

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 3PLs cost reduction if they
can reduce their IT support costs
No more 3PL lock in

2006 Perot Systems Corporation. All rights reserved. All registered trademarks are the property of their respective owners.

3PL Architecture with SAP Software

Carriers
(FedEx
UPS
TNT)

SAP
Software
Shipment (via XSI)
Shipment Number*

* Tracking performed through

web access on parcel tracking
tab of the delivery header

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3PL

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SAP Software

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3PLs with SAP Software

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Early Concerns

Capability
-

Deployment strategy
-

How long will it take, resource requirements / cost

3PL impact
-

Is SAP software appropriate for a 3PL environment

Can we run operations on standard SAP software how much customization?

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

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Capability

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Capability Review External Analysis

Gartner Magic Quadrant Comparison

SAP Extended
Warehouse
Management (SAP
EWM)

Current 3PL
WMS Tools

2006 Perot Systems Corporation. All rights reserved. All registered trademarks are the property of their respective owners.

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Capability Review External Analysis

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

2006 Perot Systems Corporation. All rights reserved. All registered trademarks are the property of their respective owners.

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Systems Deployment Comparison

SAP Software Logistics

Activities to deploy

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

Creation of warehouse within plant

Minor configuration changes from copied
warehouse
User IDs set up and role allocation
Minor testing of SAP software changes
Interfaces to Carriers

Ongoing running costs for 3PL

Time to deploy 2 weeks to 1 month

Time to deploy 2-3 months

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SWOT Analysis SAP Software Logistics

Strengths

Weakness

Fully integrated with SAP software

Enhancements may be limited to SAP software

Reduced interface costs & simpler architecture

Reduced 3PL costs

release schedule

Requires secure access to clients network from

warehouses

Single IT support team

Testing for non-logistics upgrades

Drive standard security policies

Logistics supply chain, order & shipment status

information integral part of toolset

Removes 3PL dependency for operations & IT

services

Numerous SAP user groups to understand how

other SAP users manage inventory in 3PL

environment

3rd party staff transacting on SAP software

Warehouses down during SAP software

maintenance

New warehouse could be deployed in 2 4

weeks

Easier to drive common process & standards

Easier to change 3PL providers

Opportunities

Threats
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Deployment

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Deployment Scope

Belfast
Toronto

Mexico

Nashville
Raleigh
Miami

London
Switzerland

Beijing

Paris

Tokyo
Shanghai
Hong Kong

Israel

Singapore

Australia
New Zealand

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3PL Site Volumes

Pilot Sites

Post- Pilot Sites

16,000
14,000
12,000
10,000
8,000
6,000
4,000

Mexico (Greenfield)

Beijing

Shanghai

Hong Kong

Tokyo

Miami

Paris

London 2

New
Zealand

Australia

Toronto

Singapore

Raleigh

Belfast 2

Israel

Switzerland

London 1

Nashville

Belfast 1

2,000

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

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Footprint

- 100% standard SAP EWMexcept 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

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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

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Realization & 3PL Impact

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SAP Software Logistics Pilot Review

BACKGROUND
Two sites deployed
Approximately 29% of shipping volume transferred to SAP software as part of pilot

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

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25

Cost Reductions
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

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Client Operations View

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

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Warehouse 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.

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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

2006 Perot Systems Corporation. All rights reserved. All registered trademarks are the property of their respective owners.

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Thank you.
Contact Information:
Bruce Rishel
(214) 215-5743
bruce.rishel@ps.net

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

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