Ask the SCM Expert: Reduce Shipment Costs by Consolidating Deliveries

  • by Rajen Iyer, Cofounder and CTO, Krypt, Inc.
  • August 1, 2005
Delivery consolidation is a widely useful but largely undocumented procedure. Learn an expert-tested method to set up consolidated shipping for your customers.
Key Concept

I have been struggling with consolidated shipments. SAP seems to do a pretty good job defining the delivery process and how it is configured, but the use of shipments to group deliveries to a single location seems like a well-guarded secret. In R/3, the ability to control delivery splits is somewhat limited. Our customers are asking us to help them reduce shipping costs. We currently use order combination, but due to setup on an order-by-order basis, we can't always get the full consolidation to happen at the delivery level.

—Larry Peterson, ERP Track Lead, WI

I have been struggling with consolidated shipments. SAP seems to do a pretty good job defining the delivery process and how it is configured, but the use of shipments to group deliveries to a single location seems like a well-guarded secret. In R/3, the ability to control delivery splits is somewhat limited. Our customers are asking us to help them reduce shipping costs. We currently use order combination, but due to setup on an order-by-order basis, we can't always get the full consolidation to happen at the delivery level.

—Larry Peterson, ERP Track Lead, WI

Like yours, many companies would like to consolidate their shipments for one or all of the following reasons:
  • Reduction of transportation costs
  • Reduction of transportation cycle time
  • Reduction of manual work
  • Increase in visibility of shipments for tracking/auditing
  • Support for future pre-clearance of shipments

I have implemented this functionality for a few clients and will describe it so that you can make use of it at your company. Since this functionality is not well documented, I'll provide the steps required to implement it. I will walk you through shipping functions from the consolidation point of view and show you how to model them in your system.

I will make use of the Material Management (MM), Shipping/Transportation in Logistics Execution (LE), and Sales & Distribution (SD) modules. You can use it with R/3 version 4.0B and later, and possibly on some older versions, as well as ECC.

Rajen Iyer

Rajen Iyer is the cofounder and CTO at Krypt, Inc. Rajen has written several in-depth, best practice articles, white papers, patents, and best-selling books on SAP Logistics and SAP Global Trade Services, including Effective SAP SD and Implementing SAP BusinessObjects Global Trade Services. He is also an invited speaker at industry conferences.

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