Optimizing Transportation Costs with SAP TM: Harnessing the Power of Grouping Rules and Collective Settlement

Optimizing Transportation Costs with SAP TM: Harnessing the Power of Grouping Rules and Collective Settlement

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Introduction:

Transportation costs have been increasing in recent days due to multiple factors and most transportation planners are trying to reduce the cost associated with transportation in the best way possible. In this blog, you will come across how the “Grouping Rule” functionality of SAP TM can be used to create a collective settlement for multiple freight orders, where the user has the option to sum up the values of the calculation base with the scales of different dimension (as mentioned in grouping rule) and determine the rate for collective value.
The SAP TM system controls the grouping based on the resolution base. Using the grouping rule, the rates will be fetched for the combined data source value of the charge items but not individual data source values. In this blog, you will understand this in a better way using a sample scenario.

Sample Scenario:

From the plant carrier XYZ ships the material to a particular customer every day and the shipper pays to the carrier on a weekly basis. Requirement will be to pay less than seven times of the amount, whereas each shipment cost some X amount. Using collective settlement along with the grouping rule, the total freight cost can be saved rather than spending for each shipment and this was agreed upon with the carrier to post freight settlement on a weekly basis and the total weight shipped that week.

Requirement is to group the orders based on vehicle type

Setup the rate table charges as agreed.

Example:

rate table charges

For this particular scenario we will create two freight orders:

1) Create an order against a ship to party of gross weight 350KG and the plan freight unit to create a freight order using a vehicle type. The charges for the freight order will be calculated as below:

Total Charges: 350*30 = 10500 INRorder creation against a ship to party

2) Create a second order against a ship to party of gross weight 550KG and plan the freight
unit to create a freight order using the same vehicle type. The charges for the freight order will be
calculated as below.

Total Charges:  550*20 = 11000 INROrder Creation against Shipment

The sum of the charge amount of the above two freight orders will be:
Freight Order 1 (10500) + Freight Order (11000) = 21500 INR

Note: Please note that the vehicle type of both freight order should be same as we have mentioned “Group by” as vehicle type in grouping rule

In order to create the collective settlement document for the freight orders, navigate to freight order worklist or Freight orders for settlement worklist and select the freight orders that you have created and click on collectiveCreation of collective settlement document for the freight orders

Now collective settlement will be done for these 2 freight orders and the system will group these two freight orders with the reduced rate (15 INR/KG) for the higher weight scale, based on cumulated weight (350+550=900) for that week as shown in below image. During Collective settlement of the two freight Order, the gross weight of the above two freight order is equal to 900KG. As per the rate maintained in the rate table, when the gross weight=> 700KG, the carrier will be charging INR 15/KG.

Below images shows reduced charge amount of the carrier during collective settlement. As shown in the images the total amount has been reduced to 13500 INR from 21500 INR when collective settlement has been carried outCollective Settlement with Cost Reduction

Rate Table Maintenance

System Configuration Steps:

Step 1: Grouping Rule can be defined using the transaction /SCMTMS/TCM_RULES. For the particular case we are grouping freight orders by Equipment Type (Vehicle Type). We can also use other calculation base as well for this caseGrouping Rule for Resolution Base

Optional Configuration:

Along with this Grouping of freight orders could also be done by defining a condition. The condition should be created using the condition type TCM_GROUP. This condition has to be assigned under the t code /SCMTMS/TCM_RULES. The condition will allow us to group the freight orders by using one or more fields.

A sample condition has been created following wayCondition for Grouping

Step 2: Assign the grouping rule that you have created to the relevant charge type of your calculation sheet as shown below and assign the calculation resolution based as per needGrouping Rule and Calculation Resolution Base in Calculation Sheet

Step 3: Assign your settlement profile to the carrier. To do this use the transaction BP and open your carrier BP and navigate to Carrier role. Click on the purchasing tab and enter your purchasing organization details and assign your settlement profile under Transportation Purchasing Organization Data

Assigning Freight Settlement Profile to Carrier BP

Step 4: Also please note that, the grouping rule works only with calculation at header level and make sure that calculation level of your calculation profile is at header level

Calculation Profile Configuration

Creation of collective settlement and Posting through a background job scheduling:
The collective settlement could be created in two different ways.  One way of creation is from the worklist where as other way of creation is scheduling a background job which can run for a particular time interval

Following are the configuration required in order to schedule a background job for creation of collective settlement document automatically

Create a variant:
Step 1:  Follow the below menu path in order to create the required variant:
SAP Easy Access Screen > Logistics > Transportation Management > Administration > Background Processing > /SCMTMS/SFIR_CREATE – Create Freight Settlement Documents
Make the selection as per the requirement and click on save as variants and give the required naming convention

Creation of Freight Settlement Documents

Variant Creation for /SCMTMS/SFIR_CREATE

Step 2: Run the Transaction SM36 and give the naming convention for the job as per the requirement, click on start conditionBackground Job Schedule

Step 3: Click on Date/Time and enter the details as shown on the screenshot to set up when exactly the background process should start, click on Period Values below to define how often the background job should run and click on save

Background Job Schedule

Step 4: Click on step

Background Job Schedule Next Step

Step 5: Enter the program name as /SCMTMS/SFIR_CREATE_BATCH and use the variant which you created earlier and click on saveBackground Job Schedule

Step 6: Now click on backBackground Job Schedule

Step 7: Now Click on save, so that background job is releasedBackground Job Schedule

Once the job is released, the system will start looking for the freight orders for collective settlement creation as per the data-maintained after the schedule start date/time and the program will keep running for every specific time as mentioned on period values.


Author: Benaka Shetty

Benaka ShettyBenaka, is part of SCMYUGA as an Associate TM Consultant, and has a varied experience across diversified projects along with real-time problem solving, enthusiastic approach. Stay tuned to read more insights from Benaka.

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