Q: Why should I use SAP TM? (Transportation Management) when I have basic shipping capabilities in SAP ERP / S/4HANA?
A: It depends on
– What you are selling and shipping
– Your desperation to shave an extra cent off shipping costs.
– How competent and resourceful is your 3PL.
If you are selling soaps and toothpastes where the product ‘costing’ has logistics cost cushion to absorb a fixed transport and storage cost per case charged by your 3PL, you are probably better off leaving the shipping to a 3PL Just bother the on-time delivery and let him update to you the status of delivery. Let your 3PL use TM.
If you are selling coal, cement, corn and steel, where technically YOUR managers are more learned and resourceful (because 3PL companies are not necessarily creative or have incentive to reduce logistics costs given the convenient agreements in place), you may perhaps be able to save a cent here and there with carrier selection and freight procurement. This needs some ‘Econometrics’ of freight costing depending on the availability of transport resources (Trucks, containers) and how to ensure their availability at all times. (because you are shipping half a million tons every day). Here the deep relationship with carriers is important. Because they too are investing in your business. Based on your Business commitment.
Simple Answer – When you sell and ship bulk commodities where shipping cost is a significant cost of the product (>10%), you can consider SAP TM for a closer control of freight costs. (Recovery of freight costs from standard product cost)
When freight costs more than 50000 Rupees for an FTL, their (customer’s) hackles raise anyway. So, at times your customers may insist they will deploy their resources to pick up the cargo. Here its important that pricing at EXW and DDP have that exact differential. (Else customer will call you a fraud). Because if your customer is more talented than you at saving freight costs, you clearly leave a lot to be desired. TM or no TM.
101 – When you implement anything on SAP, write down the objectives. Clearly in so many words. KPIs too. Of the Application and the managers / users who are using that application. Time bound. Do not overcomplicate with things like TCO. TCO is zero for almost everything is life since 5th century AD.
