hartung:consult

www.hartung-consult.com Phone: +49 30 - 39 04 93-0

Data Interchange with a 3PL via EDI

hartung:consult White Paper

Data Interchange with a 3PL via EDI

hartung:consult White Paper

Data Interchange with a 3PL via EDI

Reasons for using 3PL
Today companies want to sell their products and gain resources worldwide. Here the logistic challenges are shipment and storage of the goods. 3PL (3rd Party Logistics) are logistic service provider with focus on transport and stora ge of goods. 3PL often do have own infrastructures (transport vehicle, storage capacities and transaction places). Due to the complexity of distribution, 3PL further take care on additional services (value-added services) like custom+ clearing and the forwarding of freight. Sometimes they also act as a distribution central and do purchase orders. Moreover 3PL can take care on billing, assembly of products, wrapping and labeling, as well as handle returns and repairs.

Customer advantages
Flexibility: 3PL are advantageous in cases of high fluctuation of storage capacity. Thus, for example in times of high production rates more storage capacity is required than in times when production is weak. With an own fixed size depot, its capacity is not well used. A 3PL provide the required storage capacity on demand. Cost- and time saving: The 3PL itself can use its storage capacities dynamically for different customer, raising the total used capacity and lower the costs for each customer. 3PL are focused on storage and shipment of products. By sharing transport companies for different customers the 3PL can bargain better price conditions, and can do a more effective work than its customers alone. Low capital commitment: 3PL-customers do not require big storage capacities with maintenance costs, and therefore lower their capital commitment. By outsourcing the logistic, the customer can concentrate on his core competence, e. g. product development and manufacturin g.

Warehouse Management System vs 3PL

A company-wide warehouse management system (WMS) manage s all internal and external warehouses. Based on the data of the WMS, sales department does the distribution, the inventory will be checked and shipment orders fr om and to the warehouse will be created. However, the WM S and the management system of a

3PL are two different and independent software systems. Even both are e. g. SAP systems, they might be customized in a different way and processes of the same kind might require data in a different way. For example, in some companies additional information for the sender, e. g. billing orders, were saved in the company name data field instead of the according one. This approach is based on the knowledge and habitual procedures of sales employees. It is n ot wrong, but a individual use expression, which has to be taken care of. A 3PL must get specific shipment orders, sent back feedback advices for e. g. serial numbers of the shipped goods, and give a report on in- or outgoing goods, so that the customer WMS is always up to date. If the 3PL is also distributor, the material data must be synchronized. To do this a unique electroni c data interchange between WMS and 3PL is required

EDI Standard
Electronic data interchange (EDI) is the structured transmission of data between organizations by electronic means. It is used to transfer electronic documents or business data from one computer system to another, i.e. from one trading partner to another trading partner without human intervention. EDIFACT is the most common global and interbranch standard. It is being used for all kinds of commercial and non-commercial activities. The standard describes so -called EDI transactions, which defines the data interchange of concrete busines s processes, like the transmission of an order for a shipment. According to the great number of business processes, the EDIFACT standard transactions are suitable for different business areas. The transactions define the required data and data structures for its processes. Thus, reports, advices of orders, invoices, dispatch notifications and other documents can be created out of the IT-databases and communicated to the software system of the business partner. Talking about 3PL following transaction are mos t common: 846 940 944 945

Inventory Advice Warehouse Shipping Order Warehouse Stock Transfer Receipt Advice Warehouse Shipping Advice

Using this, the inventory can be synchronized and shipping orders with appropriate booking of in- and outgoing goods . The selection of concrete to be used EDI transactions must be determined within the framework of a technical specification.

Project Method
EDI transactions are formal definition; the concrete used data demand a deep analysis of the according processes. To connect a 3PL to a WMS, following project phase or steps are required: 1. Definition of a functional specification which data must be when communicated, which scenarios have to be taken care of Drawing of a technical specification which in- and output format or structures are usable for the processes, which interface should be used, when and where must be executed what Implementation and verification tests

2.

3.

The definition of the functional specification requires more than only good knowledge on warehouse management, EDI and 3PL. Communicating and analyzing with experts from the participating departments, e. g. sale and storage is crucial. Only by this interdisciplinary exchange the full requirements can be identified and an adequate specification be defined. Therefore, the responsible consultant should be integrated in the early phases of the project. Based on this functional specification, the consultant can create the technical specification. Of course, a final coordination and verification of the specifications is required before starting implementation phase. In most 3PL data interchange projects the interdisciplinary work is being avoided, not sufficiently processed, or not accompanied by the consultant. These often not fully acquired specifications leads to problems in the productive phase and costly involved post-work.

SAP System and 3PL Interface

SAP is the leading software for warehouse management in world -acting enterprises. The Intermediate Document (IDoc) is a SAP document format for transferring data for business transaction with foreign and external SAP systems. IDocs consists of a header line, multiple data segments and status sets, and SAP offers a set of functions to generate and import datasets in or for IDocs. There are different IDoc data structures, so-called IDoc-types. They are based on concrete e.g. delivery processes and are not identical with the EDI transactions. Nevertheless IDocs are suitable for transmission of data to and from SAP systems within EDI transactions, as it is standardized and easily created and imported in/out of SAP. But the corresponding data must be selected. It may be, that not all data sent from a 3PL have to be integrated into the SAP system or that data is sent from the SAP system which is not needed or not even used because of its business process character and specification. Therefore a thorough analysis and consultation with the 3PL partner is required. IDocs on EDI transactions can be used to transfer the relevant data. In connection with a data conversion system, e. g. Seeburger EDI, the data in the IDoc structure can be converted into the EDI structure. Advantageous of using IDocs in this case is the reduced effort on SAP system and its implementation. Many system are already able to import IDoc data, which makes it also attractive to be used. There are non-official suggestions of SAP according the selection of the best IDoc-type for the EDI transactions. Important in this context is that the IDoc-type defines only the containers for the data transport. The EDI transaction indicates which message type and therefore also which SAP function module must be used for processing. The challenge lies in determining the appropriate IDoc to the EDI transaction. Here, the SAP consultant is needed, who can match the SAP structures with the specifications and selected EDI transaction.

Example Scenario
In the following the use of EDI transaction on the example of the transmission of a shipment order to a 3PL and its reactions will be shown. The example scenario differs on the two cases of a shipment to a customer and another 3PL. This is a classic scenario, if a company drives a distribution business location out of its manufacturing location. In this case 3PLs offer to be storage location and distributor for the region. Products or goods arrive out from other warehouses or factories.

The order for the shipment of goods for a 3PL (location A) will be transmitted using EDI transaction 940. In here the goods to be sent, receiver address and other data will be transmitted. Once the shipment is done, it will be reported using EDI transaction 945. In here data, like serial numbers of the shipped products will be reported to the WMS and booked into the order. EDI transaction 945 can be used in case of a completed delivery, if the 3PL takes full responsibility for the shipment process. The shipment will be closed by receiving EDI 945 message. In the case of a relocation of goods or products to another 3PL (Site B), a message of this second 3PL in the form of EDI transaction 944 is sent on the receipt of the goods. Then, the good movement booking for the 3PL at site B can be carried out on WMS side. For the shipment order from SAP to 3PL, IDoc -type DESADV is suitable. This IDoctype is made to give detailed information about the shipment. This includes the kind of shipment, one or more receiving locations and data about the shipped goods. It can also include multiple different single positions, package or orders.

To confirm the receipt of a EDI message, the EDI standard use the EDI transaction 997. To simplify the presentation, this has been omitted here. In some cases a different way to ensure the successful receipt of the message is being used. In cooperation with a data convert tool like Seeburger EDI, which then transmit the data to the 3PL, the data from a SAP system can be stored in an IDoc as a file (XML or TXT). The file will be deleted by Seeburger EDI after successfully data transmission. Here, EDI transaction 997 is not necessary on SAP side.

Conclusion
The connection of a 3PL to an existing warehouse management system is not a trivial task. 3PL and warehouse management systems u se different data structures and processes for the same tasks because of their different business process design. The development process of the interface of the two systems requires an interdisciplinary collaboration, and early integration of the responsible IT consultant. SAP systems offer with IDocs a data exchange structure, which can be utilized for most 3PL EDI transactions. The decisive factor is the selection of required and to be processed data and the choice of the appropriate IDoc-type, depending on the project specification. The IDoc-type, then provides the container in which the data of an EDI transaction from or to an SAP system will be transmitted. As professionals in 3PL operations and SAP, we would be pleased to assist you in organizing your 3PL solution process. We do have long and deep experiences with international industries and be able to help you in identifying your specific application requirements; best data interchange solutions from your SAP system to your 3PL partner and accompany you in the development process in every phase.

About hartung:consult
Permanent improvements for clients is the philosophy that has informed the way hartung:consult thinks and does business since 1988. Through its success, the business consulting firm, specializing in SAP solutions and services, has steadily grown and now has over 200 employees worldwide in locations in Europe, Asia, and the USA. hartung:consults highly qualified professionals concentrate on providing services to global as well as local clients in a variety of industries. The company distinguishes itself through its creativity, flexibility, and expertise. Our solution oriented methods address a problem in its entirety, adopting solutions that fit the clients vision.

R. Gegusch, hartung consult