4PL SAP Integration – 5 Pitfalls to avoid


6/1/2020

by Jodi Abrams

What is a 4PL and what is involved integrating it into SAP?

Just like 4D adds another dimension over 3D, a 4PL adds another dimension to your 3PL logistics operation. A 4PL will provide technology, people and processes which will enable customers to have full visibility as to the status of shipments in the supply chain and provide the ability to make proactive decisions to reduce overall supply chain costs.

What Does a 4PL Do Exactly?

A 4PL is at the top of your logistics operation and can manage the co-ordination of multiple 3PL’s. They are your supply chain integrator and can manage all of the logistics relating to your supply chain. They provide proactive opportunities to supply chain challenges, including the ability to provide alternatives on service-level, carrier and delivery time to minimize cost while meeting the operational needs of your business. A 4PL is able to send, receive and monitor orders (carriers & suppliers), book, tender shipments, perform shipment tracking, provide operational reporting capabilities including supplier and carrier KPI reporting. Typically – all of this integration is done using EDI and IDocs.

Like any large SAP integration project, there are potential pitfalls along the way. Some key things to look out for are:

1. Choosing a 4PL that has all of the capabilities you need

Your first step in this journey will be to choose a 4PL to partner with. There are a wide range of services that they offer. Consider what is important for your business and dig into the details before you decide. Some capabilities to keep in mind are:

• Does the 4PL have a strong and integrated 3PL carrier network? This will ensure total cohesion in your supply chain.
• Is the 4PL staffed worldwide to handle transportation management planning on a worldwide scale or in areas you operate in and support your modes of transport?
• Does the 4PL have a robust set of EDI transactions you can use for quick and efficient communication and updating of SAP?
• Is the user interface for the 4PL portal easy to use and understand? Is it multi-lingual if required for your international user base?
• What sort of reporting is available? Do they have information on shipment visibility, event monitoring, tender management?
• Do they handle advanced requirements such as capacity planning, order optimization, shipment consolidation and freight auditing?

2. Sending the Wrong Traffic Through Your 4PL

One of the key steps in preparing for you 4PL partnership is determining what will and what won’t go through your 4PL. Though the 4PL provides a valuable service in planning and sourcing your freight – there is also a cost associated with this. Consider the following scenarios as some you might want to keep out of your 4PL and manage yourself to save cost and complexity:

• If the customer or vendor is within close proximity to you, you may want to plan that freight on your own
• Consider using the 4PL for air, freight train or vessel, and handling full truck load or LTL on your own

These decisions are then managed in SAP by configuring and maintain the appropriate condition records utilizing information such as PO Type, supplier and incoterms.

3. Managing Transit Time Appropriately with Your 4PL

Your date calculations for inbound freight will require input from the 4PL in terms of what to take into account so you have something reasonably accurate for planning while leaving some buffer. This date will then get updated from the 4PL as the finalize their planning and allow a more firm date as an input for MRP. You will need to decide at which stage of the process you will take the date from the 4PL as firm. Is it when the supplier confirms? Is it when the freight is actually loaded on the vessel? This decision will affect the accuracy of the date.

4. Be Open to Enhancements

In order to make the most of what your 4PL has to offer, you are likely to need some enhancements to pull out from or take in additional information into SAP. Some of these areas to consider are:

• Additional master data your 4PL needs on a delivery or PO to populate their web based portal such as: vendor master data, price unit and per unit multiplier, routing guides, data to determine division, plant and company
• Managing PO changes and deletions ensuring the right information is transmitted on your EDI feeds
• Adding pricing information to your scheduling agreement IDOC outputs – standard SAP does not do this by default
• Adding Inco terms, ship date and payment terms description to your PO so that your 4PL and suppliers can have visibility to this

5. What Changes to Allow After Your Shipment Information is Sent to Your 4PL

Once you send your transactions to your 4PL, your supplier can have the opportunity to respond to your requested quantity and delivery dates. Ensure to work with your 4PL in advance about what is/isn’t allowed to be edited from all sides. For example, up to what point can your planner change the quantity or dates? Is there a confirmation from the supplier that locks this in? Or perhaps a point when the freight has been planned by the 4PL. Whatever the case may be, it’s important to have an agreement on this in advance.

Consider whether your supplier can send partial lines, or confirm just 1 schedule line at a time vs. confirming the whole PO. This can affect your ability to fill full containers, and your ultimate freight costs.

Once you have an agreement on all of this, your 4PL should be able to set up their portal accordingly to limit the functionality.

 

A 4PL can provide a wide range of services for you. The more you choose to utilize the bigger and more complex your integration project will be. Ensure you partner with a system integrator that is knowledgeable not only in the SAP functional side of things, but the EDI and IDOC side as well. This will keep information centralized and reduce the need to go through multiple communication steps to get the information out to the right people. It will ensure a smoother process from configuration and development right through to testing and go-live.



Author

About the Author: Jodi Abrams

Jodi is an expert in SAP and eCommerce integration, and is Vice President of Applications for CONTAX.