Share Resources by Consolidating Warehouse Operations in a 3PL Model

  • by Ram Angara, IT Director
  • February 28, 2011
Learn how to set up a single warehouse using SAP warehouse management (WM) to run operations for multiple companies/legal entities running SAP and non-SAP ERP systems. Without requiring warehouse worker intervention, this setup fully leverages handling unit management to automatically allow the respective companies to maintain ownership of their inventory. You will also get an understanding about how to design interfaces between SAP WM and non-SAP ERP systems run by one of the companies.
Key Concept
A warehouse using SAP warehouse management (WM) can manage inventory from multiple plants belonging to different company codes and can use shared resources for operations. However, this approach introduces some additional complexity to the execution of WM transactions. By adding handling unit management functionality to the warehouse design, WM transactions become seamless to the plants sharing the warehouse. A handling unit is a logical or physical grouping of materials packed or shipped together. By referencing the handling unit number instead of the individual items within it, logistics processes can be simplified.

Typically companies outsource their logistics functions to third-party logistics (3PL) providers to reduce the operational cost of running these processes in-house. 3PLs run the logistics operations for multiple companies or customers in a consolidated fashion, thus reducing the operational cost. They also provide the ability to scale up quickly should the volume of operations increase. If you consider and evaluate all the influencing factors, it is a win-win for both the 3PL provider and the company using these services.

However, there may be situations in which it is cheaper for a company to execute the 3PL model in-house. Depending on the maturity level of the in-house warehouse organization, this in-house 3PL model may even provide revenue generation opportunities, transforming the warehouse into a profit center.

The main business challenge is for the warehouse to have the ability to run best practices based on consistent and standard processes while meeting the unique needs of the company and customers. Such ability consolidates inbound and outbound shipments, uses shared resources, and provides overall performance metrics. The basic building block for such ability is a robust warehouse management system (WMS) that can seamlessly run operations for multiple companies in a single warehouse.

Ram Angara

Ram Angara is an IT director responsible for enterprise level business systems at a large CPG company. He has more than 20 years of experience in the areas of business and information systems, including 12 years of hands-on SAP functional and technical experience. He has successfully managed and implemented large SAP projects in MM, WM, FI/CO, PP, and BI, including multiple SAP upgrades. Prior to this role, he worked as a consulting manager at BearingPoint in its SAP practice. He has a master’s degree in industrial management, a bachelor’s degree in mechanical engineering, and SAP certification.

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