Integration of a Third Party Logistics Process in SAP Business ByDesign

06.02.2018

In order to focus on their core business, many companies pursue the route of outsourcing logistics processes regarding goods flows from the supplier to their site and to the customer to external companies – so-called third party logistics service providers for warehousing. To map the goods flow movements, SAP provides a pool of predefined SOAP services in order to implement an integral third party logistics process with relative ease.

At the same time, the communication between the third party logistics service provider and SAP system can occur directly or via a middleware between both entities. The latter is particularly attractive if the third party logistics service provider has either limited technical options for the service mapping or additional information from other external application systems (e.g. tracking information from outside) is to be appended to the corresponding SOAP messages.

To ensure the third party logistics process can be mapped in SAP, some preconditions need to be established.

1. Creating a new business partner data set for the third party logistics service provider with the role of supplier and logistics service provider
2. Determination of the output channel XML for outgoing logistics processes in the third party logistics supplier base.
3. Third party logistics service providers and your own company have each saved a company-specific identification number on the master data for the sender and recipient identification (e.g. DUNS or GLN)
4. The place of business of the third party logistics service provider was mapped as an organisational unit in the organisational structure.
5. The warehouse location of the third party logistics service provider was activated for externally managed warehousing
6. Numbering format for third party logistics receipts (e.g. delivery note for stock transfer, customer and supplier returns)
7. A communication arrangement was created. This communication arrangement comprises a communication system (interface-specific master data of the third party logistics service provider), authentication-specific data and the service provider communication scenario.

The communication scenario cited in point 6 describes the SOAP services for incoming and outgoing communication with the specified third party logistics service provider in order to map the goods flow.

The incoming and outgoing services are outlined below in the sequence from ordering at the supplier (Procure-to-Pay) through to delivery out to the customer (Order-to-Cash).

1. Requirement for inbound delivery execution (outgoing service)
After the buyer has released an order in the SAP system, an order replication is automatically sent electronically with all planning data of the order (quantity, delivery date, specification) via SOAP message in XML format. This service primarily serves to provide the third party logistics service provider with the most important key data at an early stage so that he can plan his resources promptly in line with planning data.

2. Replication of the inbound delivery notification (outgoing service)
This optional outgoing service allows the buyer to provide the third party logistics service provider with updated or also other additional information in SAP.
a. Updated information can typically be deviations in the delivery quantity or a delayed delivery date. From a business viewpoint, this service represents a despatch notification.
b. Additional information can typically be attachments or the appending of batch and best before information, which the supplier has communicated to the buyer after shipping the goods. This information can be added to the notification so that the third party logistics service provider can post the goods receipt with the correct batch information.

3. Confirmation of the inbound delivery execution (incoming service)

The third party logistics service provider confirms the goods receipt to the SAP system with this service. After sending to SAP, this creates an inbound delivery document, which is released automatically or manually depending on the process settings maintained in SAP. After the release, the SAP system automatically generates a supplier invoice request in order to settle outstanding payables with the supplier.

Next a sales order is created and released, this occurring either automatically – for example via an e-commerce interface from an online shop – or manually by a sales employee. After the customer requirement for the order can be planned, released and covered by the available stock, the system generates a delivery request.

4. Requirement for outbound delivery execution (outgoing service)

The third party logistics service provider receives a delivery request from SAP, to deliver the amount according to the order by a certain date. The SAP system then communicates the latest possible shipping date to the service provider by which the goods must be sent, so that the customer receives his goods according to the agreed availability.

5. Confirmation of the outbound delivery execution (incoming service)

This service concludes the logistics-relevant section with the order-to-cash scenario. The third party logistics service provider provides SAP with feedback on the outbound delivery of the goods to the customer. After sending to SAP, this creates an outbound delivery receipt, which is released automatically or manually depending on the process setting. After the release, the system automatically generates a customer invoice request in order to settle outstanding receivables with the customer.

6. Inventory notification (incoming service)

A sixth service enables the third party logistics service provider to send an inventory alignment to the SAP system. This is then necessary, for instance, if the goods were damaged during the order picking or entry into storage and can no longer be sold, the best before date is reached or has expired, or simply an inventory difference with the mirrored inventory in the SAP system has occurred. The third party logistics service provider sends this inventory difference to the SAP system.

After sending to SAP, this creates an inventory notification receipt, which is released automatically or manually – after checking – depending on the process setting. After the release, the SAP system updates the inventory in the mirrored third party logistics warehouse according to the inventory notification from the third party logistics service provider.

Although the predefined third party logistics communication scenario does not provide any services for creating supplier and customer returns, these processes can be utilised separately via existing services from the SAP Service Explorer in a new communication agreement.

A third party logistics return can only be booked if an return-based inbound delivery notification has been received at the third party logistics service provider, against which inbound logistics can be booked.

When implementing a third party logistics return process, both for suppliers as well as customer returns, it is therefore necessary to check and determine whether the returns inbound delivery receipt is first created from the SAP system or whether the third party logistics service provider is permitted to create an inbound delivery receipt in SAP using SOAP services. In both cases, the SAP system sends the inbound delivery notification about the service in section 2 to the third party logistics service provider.

Which option is considered for a third party logistics return process depends on the technical options of the third party logistics service provider and the requirements of the company in respect to a returns process.