| Status | Approved |
| Owner | VAN OS-ext, Nico |
| Stakeholders | Najaite Nidboufker |
Issue
A Geographic Information System (GIS) provides GEO location coordinates for locations, it can calculate real life transportation distance and duration between locations, and provides visual representation on a map for routes.
One of the benefits of actual distance and duration determination in SAP is that it supports milk run planning. With a milk runs several deliveries are combined into one transportation order. This makes that the overall transportation charges are lower than when these deliveries are offered in separate transportation orders.
With a milk run the charges are determined in the following way: charges determined from first pick up to the last drop off + $ per additional drop off + $ additional km for detour. These charges are currently determined with the help of the carrier's website and manually maintained in SAP.
Determining a milk run opportunity is not easy as the following conditions need to be met:
- The combined cargo should fit in the truck.
- Drop off locations should geographically be in the same region.
- The total duration should fit in a driver's shift considering travel time, loading and unloading duration.
This could explain that when analysing 77.045 shipments (Apr 2023 - June 2023), only 491 were milk run shipments. That is only 0,64%. Belgium and Brazil are outliers as respectively 3,2% and 2,6% of their shipments are milk run shipments.
Using SAP TM without GIS server, the system can support on monitoring truck capacity. With defining transportation zones customers can geographically be grouped. Without actual distances this is only a very rough planning and often not sufficient for milk run planning.
Recommendation
Having SAP TM integrated with a GIS server is a more mature solution. Planning can be done on real life transportation distances and duration. This can be used in transportation planning, charge calculation and sustainability reporting.
With this more accurate data and visualisation, transportation planner have better tools to utilise milk run opportunities. Belgium should then no longer be an outlier with 3,2% of shipments being milk run shipments (if globally 3,2% of shipments were milk run, that would be 2.311 shipments or about 10.000 per year).
When benchmarking, this estimation has to be considered very conservative, as research has shown that milk run planning of freight can lead to 15% - 25% of costs savings (reference at See Also).
The more accurate data will also make the solution future proof where Automatic Planning can be used to accomplish further optimisation.
Background & Context
Technical Background
There are three main functions in SAP TM where a Geographic Information System (GIS) is being called:
Location Master Data creation
Distance and Duration Determination
Visualisation
Location Master Data creation
During the creation of Location Master Data, the system stores the geographical data of the location. On default the system is taking country code level coordinates as stored in the system. When GIS server integration is activated, then the system will pass the address data to the GIS server which will return the geographical coordinates based on this address data.
Distance and Duration Determination
There two main processes where distance and duration is being determined;
Freight Order creation
Optimizer Planning
The system doesn't execute a call to the GIS server for each determination. Instead the system will check the buffer table first: Distance and Duration Determination table (DDD). When the combination between two locations is unknown, then the system will do a call to the GIS server to determine distance and duration. Once received, the system will store the result in the buffer table.
Visualisation
With the use of SAP Visual Business, a visual representation on a map can be displayed in the Freight Order and Transportation Cockpit.
Business Benefits
Milk run validation
During manual planning a milk run can be created. The milk run can be validated with actual travel duration, loading and unloading duration, and maximum number of working hours for the driver. Users can then more precisely determine if a normal delivery can be turned into a milk run, without relying on guessing based on experience. This will increase the number of milk run transportation orders as a result from Manual Planning.
Automatic planning
To implement automatic planning that includes milk run planning, actual transportation duration is essential. Similar as with milk run validation, the system has to determine actual durations to be able to generate correct milk run planning results.
Charge Calculation
Where charges are calculated based on actual distance, when the system has determined the actual distance based on a GIS result, the system can automatically calculate the correct charges. This calculated amount can be used for validating the invoice. When there are large discrepancies, the carrier can be challenged to justify the difference.
Sustainability reporting
The Corporate Sustainability Reporting Directive (CSRD) strengthens the rules concerning the social and environmental information that companies have to report. The rules ensure that investors and other stakeholders have access to the information they need to assess the impact of companies on people and the environment and for investors to assess financial risks and opportunities arising from climate change and other sustainability issues. Companies subject to the CSRD will have to report according to European Sustainability Reporting Standards (ESRS).
With actual distances in the system, Syensqo will better capable to have accurate CO2 reporting and it will be easier to comply with the CSRD.
Sustainability in planning
When optimising transportation planning, CO2 impact can be taken into account by preferring more sustainable routes and means of transport in the transportation network.
Assumptions
Number of milk run orders
As part of transportation optimisation, Syensqo would like to increase the number of milk run orders as they have a cost benefits.
Automatic planning
Transportation planning is mostly a manual process within Syensqo, however for a future proof system automatic planning could be considered within the current scope of the ERP Rebuild project, or as a future improvement.
Charge Calculation
Most agreements with carriers are based pick-up and delivery location. However, when milk run orders are provided then these kind of charges are not applicable and charges need to be calculated per (additional) stop and milage.
Most freight agreements are setup with pick-up and delivery location, due to limitations on charge calculation capabilities at shipper.
Agreements in North America are more prone to be calculated based on milage. When North America is scoped for SAP Transportation Management then correct distance determination is important. For more detail on North America scope see TM KDD Way Forward with BluJay.
Sustainability
Not only does Syenqo would like to comply with CSRD regulations, it is part of Syensqo's strategy to have a positive impact on climate and nature. Optimizing transportation capacity and reducing CO2 emissions fit into that strategy.
Constraints
When the GIS provider doesn't cover all countries
Not all GIS servers cover the whole world. Especially China GIS integration is best serviced with a Chinese provider. SAP TM configuration caters for this, but it requires extra setup time to make this integration as another set of interfaces is required.
Automatic planning
When initially setting up SAP Transportion Management, it is always preferred to have a solid solution for supporting manual planning. This keeps control with the user that have the best understanding of the business process. Some planning steps could be automated, but a careful approach is advised. When users have a solid understanding of the system's functionality, then more and more automation and optimisation can be implemented to return better planning results, like milk run orders.
Milk Run Charge Calculation
As described at the issue statement, transportation charges for milk run are determined by taking charges for first pick up to last drop off + $ per additional drop off + $ additional km for detour. If charges cannot be calculated based on the full distance then for this scenario there is a need for an enhancement in the charge calculation. The system will then calculate the additional km for detour.
Impacts
- GIS server is a 3rd party offering. If GIS integration is decided.
- Implementing a GIS server takes about 10-15 consulting days.
Business Rules
Loading / unloading duration - Loading and unloading durations need to be setup to cater for correct total duration calculation.
Maximum shift duration - To limit the full duration of a Freight Order, business rules are to be defined during detailed design. Maximum duration can be different per region and per scenario.
Manually planning - Transportation planner needs to be mindful of milk run opportunities during planning. When consolidation opportunities exist then shipments should planned together.
Automated planning - During setup of optimizer planning, the system should optimize combining shipments into a milk run where possible.
GIS service providers
For consideration, the following GIS service providers are among of the most well known:
- ArcGIS / ESRI - https://www.esri.com/en-us/home
- HERE - https://www.here.com/
- PTV - https://www.ptvlogistics.com/en
- Rand McNally - https://randmcnally.com/
- Trimble ALK - https://transportation.trimble.com/
- ...
Evaluation
GIS integration makes the SAP TM solution much more mature. There are definitely some business benefits, especially when milk run planning is involved.
However, the system can run without this feature. It should be on Syensqo business representatives, that know their business best, to estimate what their preferred approach is here: do not integrate with GIS / have integration with GIS on the road map / at go-live have GIS integration.
Option A: Use TM without GIS | Option B: Integrate with GIS | |
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Costs |
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Optimisation |
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Charge Calculation |
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Sustainability |
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User friendliness |
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See also
Ivana Sulírová et al. (2017), State-of-the-art approaches to material transportation, handling and warehousing, pp 862.
Kai Furmans and Stefan Nickel (2015), Milk Run Design: Definitions, Concepts and Solution Approaches, pp 220.
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