For shipment companies, saving cost is one of the main goals to implement Transportation Management. This is largely done by consolidation, load planning and by selecting cheapest carrier. Facilitation of carrier selection is one of the important features of SAP Transportation Management.
SAP TM helps assign the appropriate carrier for a freight based on customer-specific rules. This can include several factors like, cost, geographic locations, minimum transportation allocation, and even relationship of the carrier with the shipper!
The goal is to assign a carrier with lowest rates under defined constraints. Carrier Selection in SAP TM can be done both manually and automatically. When one assigns a carrier manually and a violation of defined rules occurs, the warning messages are merely displayed. But on the other hand, for automatic carrier selection, SAP TM provides a Carrier Selection Optimizer. This optimizer assigns the most-effective carrier for the business document.
Strategies for carrier selection
Multiple strategies are available for carrier selection in SAP TM. The following 4 major strategies are considered during automatic carrier assignment to build carrier ranking list.
- COST & PRIORITY – Each carrier can be assigned with internal cost (not real word cost, but costs which aid in carrier selection process). The system chooses the carrier with lowest cost. Similarly, priorities are defined for the carriers and the system picks the carrier with highest priority.
- BUSINESS SHARE – SAP TM has tools for shippers to sign contracts with carriers and guarantee an amount of business to be allocated to that carrier, which when not met can lead to penalties. System also considers the capacity of carriers based on the routes or regions.
- ALLOCATIONS – SAP TM also allows carries to assign a certain quantity of capacity of resources to their business partners. Basically, they can set the minimum and maximum capacity restrictions for a certain business partner.
Source: SAP Learning Hub
- CONTINUOUS MOVES – To avoid any empty movement of resources of carriers, this strategy is utilized. It can either allow carriers to accept additional freight order immediately after executing the first order. Or do a round trip where destination of the first order is same as source location of the second order. Below figure explains the concept of capacity utilization better.
How can Krypt Help?
Are you looking for implementation of an altogether new solution or wish to automate your carrier selection process to help save cost and reduce dependency on a single vendor? We offer Rapid Deployment Solution for SAP Transportation Management, tailored to meet your business needs – up & running within few weeks.
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