Optimizing Sales And Distribution In SAP ERP.pdf
Halima Wallace
Strong inbound and outbound logistics are crucial to the success of a business. Theseprocesses affect production, profits and customer service. There are many challenges ingetting logistics right, and the costs of not perfecting these processes can be enormous.But putting the right controls in place can help your business achieve success.
Logistics coordinates the movement and storage of resources such as goods, equipment andinventory. For manufacturers, logistics starts with the incoming supply of raw materials andcarries through to the delivery of finished products to customers.
Logistics teams are responsible for making sure each of these steps run smoothly, includingpurchasing, accepting inbound delivery, storage, packaging, inventory management, shipping,outbound transportation and delivery. Choreographing these processes gets complicated whenvolume grows and there are multiple products to manage. Companies that use severaldistribution channels and operate facilities in different locations face another layer ofcomplexity.
In 2019, U.S. businesses spent $1.63 trillion onlogistics, equal to about 7.6% of GDP. To generate the best returns, a company needsto have the right supplies at the right place at the right time. Its manufacturing linecannot run unless it has all the necessary materials to build its product or items todistribute in the requested amounts. If the company does not have enough stock to fill anorder, it may lose a sale or make a customer unhappy by forcing them to wait for the item.
Inbound logistics brings supplies or materials into a business, while outbound logisticsdeals with moving goods and products out to customers. Both focus heavily on thetransporting of goods. But inbound is all about receiving, while outbound focuses ondelivery.
Inbound logistics is the way materials and other goods are brought into a company. Thisprocess includes the steps to order, receive, store, transport and manage incoming supplies.Inbound logistics focuses on the supply part of the supply-demand equation.
The primary challenges of inbound logistics are high costs, uncertain delivery dates andunpredictable lead times. These make it hard for businesses to maintain ideal inventorylevels and improve warehouse efficiency and productivity.
Inbound shipping inefficiencies: Some companies spend too much oftheir budget on shipping. To cut costs, you need to negotiate preferred rates withfewer carriers and consolidate inbound shipments to make full truckloads. You canalso set vendor inbound compliance standards (VICS) on price and service. Analyticscan help you identify any waste of time or money.
Information vacuum: One frequent challenge is not knowing the exactlocation of a shipment, when it will arrive and how much it will cost. This lack ofknowledge causes some companies to carry extra inventory, make purchases too earlyand suffer delays in production and customer deliveries. Real-timeinformationsystems allow a company to track and trace shipments and communicate withsuppliersto make sure accurate data is captured when entering materials.
Surges in deliveries and receiving: Without proper planning,businesses can end up juggling too many deliveries simultaneously. As a result,their yards become clogged with trucks, causing confusion among drivers about whichdock to use. Peaks and lulls in deliveries makes it hard to effectively staffreceiving personnel, as well. A weak receiving process leads to errors and a backupof materials. Solutions include scheduling arrivals, routing deliveries to specificdocks and maintaining a consistent pace throughout the day. Warehouse management software(WMS) can help with logistics. Another technique is cross-docking, where thereceiving department matches incoming inventory to open orders. When workers unloadproducts, they move them directly to another dock to load onto an outbound truck,without ever storing them.
Processing returns: Returns processing is an afterthought for somecompanies, leading to lost sales when stock is not put back into inventory quickly.Inaccurate inventory counts and reduced customer satisfaction are additionalproblems. Create clear, efficient processes for returns and communicate theimportance of returns management to staff to combat this issue.
Supplier reliability: A company needs dependable suppliers thatoffer competitive pricing and quality. However, reliable suppliers can be difficultto find and keep. To make this easier, try steps such as:
Balancing supply and demand: Ensuring there are enough incomingsupplies to meet customer demand can be difficult due to seasonality, competitiveinfluences, economic conditions, pricing volatility in raw materials, fluctuationsin selling cycles and more. The best way to balance supply anddemand is throughdata. Software can compare incoming inventory to your order pipeline. It can alsomonitor the status and location of inbound deliveries, predict demand based onhistorical patterns, find opportunities to consolidate purchases and more.
Model your current process and measure performance.
Look forinefficiencies related to cost, waste, quality loss, duplicate work, informationgaps and delays. The presence of invisible or intangible costs in inbound logistics,such as inventory carrying costsand the impact of poor customer service, can complicate matters. Compare youroperation to industry benchmarks and competitors.
Analyze your choices.
Understand how your decisions affect costand efficiency. For example, if the procurement department makes purchases in largequantities to receive volume discounts, are those savings offset by the expense ofholding and managing excess inventory? The major cost drivers for inbound logisticsare purchasing, supplier management, transportation, receiving, warehousing,material handling and inventory management.
Develop strategies to address inefficiencies system-wide.
Account for trade-offs among activities. Investing in automation and analytics willenable more data-driven decision-making.
Build strong relationships with suppliers: Strong supplierpartnerships can yield benefits such as better terms, reduced lead time, costsavings and a sense of security during market fluctuations.
Prioritizingthis relationship helps your supplier understand your business better. A suppliercompliance plan explains your requirements and penalties for mistakes such as latedelivery or not following route guidelines. Such a program can reduce freight andwarehouse costs, improve speed and accuracy, and increase customer satisfaction.
Use a transportation management system (TMS): This softwareautomates, manages and optimizes freight operations. A TMScompares shipping quotes and service levels among carriers, schedules the shipmentand tracks it through delivery. These details help a company reduce costs, increaseefficiency and gain full visibility into its supply chain.
Combine deliveries: Less-than-truckload (LTL) shipments have highershipping costs and longer receiving times. Sometimes there are barriers toconsolidating shipments, such as different handling needs (some goods needrefrigeration, for example). If a business struggles to make full truckloads, athird-party logistics provider (3PL) can combine its partial loads withthose ofother customers.
Outbound logistics focuses on the demand side of the supply-demand equation. The processinvolves storing and moving goods to the customer or end user. The steps include orderfulfillment, packing, shipping, delivery and customer service related to delivery.
Warehouse and Storage Management: A company keeps a certain quantityof goods on hand to meet demand. Outbound logistics processes store these goodssecurely in the right conditions and organize them. Inbound and outbound logisticsoverlap in warehouse management. But outbound logistics deals with outgoing finishedproducts. For companies that sell finished products they receive from suppliers,inbound logistics concentrates on product acquisition and outbound logisticsfulfills orders sent straight to customers and distributes the products to retailoutlets.
Inventory Management: Software often plays a central role ininventory management, a process that determines the best place to store goods in thewarehouse for fast order fulfillment and the order picking and packing operation. Inventorymanagement goals include inventory and order accuracy as well as maintainingproduct quality by preventing damage, theft, obsolescence or spoilage.
Transportation: The modes and methods of shipping products varydepending on the type of goods. For example, huge items like heavy machinery mayship in small order quantities by truck. Perishable items like fresh flowers mayneed to be transported by plane in refrigerated containers.
Distribution Channels: The ways your product reaches thecustomer, called distribution channels, affect how you organize outboundlogistics. Distribution channels can be broadly categorized into direct(when you sell directly to your customers) and indirect (when you sellthrough an intermediary such as a wholesaler or retailer). There are manydistribution methods, including direct toconsumer, value-added resellers, dealer networks, dual-distribution,omnichannel and drop shipping. When choosing distribution channels, considerlogistics complexity, cost, speed, quality, customer satisfaction andcontrol.
Delivery Optimization: Optimizing delivery involves not onlyreducing costs but meeting ever-increasing customer expectations for speed andvisibility. Often, these two things go hand-in-hand. Route planning software groupsorders more efficiently for delivery, sorts packages by route, plots the best coursewith an eye to traffic, fuel consumption and other variables, and assigns routes todrivers.
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