Wednesday, September 1, 2010

Stream Line Logistics (SLOG) Pricing - a SAP design approach

Today, logistical efficiency is a big challenge for CPG companies, who deal with huge volumes and reach out their customers in every corner of the country. In the whole supply chain process manufacturing efficiency with bulk production alone doesn't to achieve low costs. Logistical costs are the big concern where these company spend a lot of time and money.

Most CPG companies pay incentives to their customers who orders the goods the way these company would like to, like full truck load orders, half truck load order, order consolidations etc. These strategies help the CPG companies to efficiently transport the goods to customers.

Generally these companies transport the order from producing plants directly to big customer where the orders are always full truck load. For small customers as they can not order a full truck load of goods, the Regional Distribution Center(RDC) will fulfill their orders.

A lot of research has been done by the big CPG companies to design solutions which meets their marketing plans. As we all know most of these companies are running on SAP, there is no direct solution available in SAP. This is a big GAP in standard SAP which leads for a total custom development. However, there could be various models which can be adopted for the needs of these companies, which would drive these efficiencies systemically.



I had a great opportunity to do such design for one of the biggest CPG company in the world where developed models based on the buckets/ brackets/ slabs. Multiple parameters in a sales order can lead to a specific buckets/ brackets/ slabs and that eventually can lead to a discount or up-charge which are proposed to be settled through a month end process in accounts receivables.

Parameters can be source location, customer attributes, material attributes, weight, volume, floor positions, full truck load, half truck load etc. Several formulas should be developed to determine the buckets/ brackets/ slabs for each order and such orders will receive a specific logistical incentive based on their buckets/ brackets/ slabs. Designs should also consider the order consolidations if they are delivered by the CPG company and customer pick up factors also should be provisioned in the formulas.

Various advantages can be achieved like flexibility, transparency, accuracy, system performance, cost etc.

Reach me out if you come across any such design challenges.

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