Chapter 6

Merchandise Distribution Logistics

Merchandise Distribution Logistics

Goods Receipt
How is merchandise monitored before it reaches goods receipt?
The Purchasing component includes an efficient tool for monitoring the progress
of purchase orders – the purchase order history. This is a record of all the activities
following a purchase order, documenting whether goods receipts or invoices have
been posted in the system. When you receive confirmations of delivery dates and
quantities from your vendor, you can store this information in the system in a
shipping notification.
You can make appointments in SAP Retail for the arrival of trucks at the distribu- You can Plan Appointments
tion center. When entering this appointment information in the system, you can for Goods Receipts
display the overall allocation of appointments to each of the doors, enabling you
to distribute the workload evenly over all the doors. You can also perform analy-
ses after goods receipt to compare actual data with planned data. This provides
useful information on the reliability of your vendors.

What options are available for processing goods receipts?

Usually you reference a preceding document such as a purchase order or ship-
ping notification, when posting goods receipts in SAP Retail. The system copies
all the relevant data from this document to the goods receipt document as de-
faults. If the shipping documents you receive from the vendor do not contain the
reference number of the preceding document, the system provides a number of
searches to help you find the right document. For example, you can search on:
q Internal article number
q EAN
q Delivery date

Fig. 6-1: Goods Receipt in One or Two steps

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Goods Receipt can be SAP Retail also supports goods receipt in two steps. You can enter data from a
Posted in Two Steps delivery note as a rough goods receipt so that the most up-to-date information is
available in the system when you physically receive the goods. Then you can post
the actual goods receipt in a second step by referencing the rough goods receipt.

How are goods receipts for apparel processed?

Matrix Format When you receive merchandise for a master style, the styles that you ordered of
for an At-A-Glance the article are copied from the purchase order to the goods receipt document as
defaults. SAP Retail provides a clear and easy-to-use matrix in which you can
Overview of Styles
enter the quantities that are actually received, or you can opt for a list format, if
you prefer. This overview also allows you to edit whole rows or columns at a time.

How do I process an unplanned goods receipt?

Occasionally, you may receive goods for which no preceding document exists in
SAP Retail. When this happens, you can post a goods receipt in one of two ways:
q Without generating a purchase order
You can enter the goods receipt without referencing a preceding document by
using a special movement type. SAP Retail valuates the stock of the merchan-
dise using the current moving-average price. Without a purchase order, how-
ever, you cannot use the Invoice Verification component when the invoice ar-
rives.
q Generating a purchase order
You can configure your system to post an unplanned goods receipt in the same
way as a goods receipt for a purchase order. As no preceding document exists,
SAP Retail automatically generates a purchase order to enable you to use
Invoice Verification later.

Can I link these processes to the Warehouse Management component?

The R/3 Warehouse Management (WM) component can be fully integrated with
goods receipt processing. Goods receipts are posted as normal. The system checks
whether the storage location in question uses WM. If it does, Warehouse Manage-
ment generates a transfer requirement, finds free storage bins, and generates trans-
fer orders for putaway.

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Fig. 6-2: Integration with Warehouse Management

How are goods receipts in a store supported?

SAP Retail provides an interface through which goods receipt data from a store
can be processed. For example, a store can capture goods receipt data using hand-
held readers and then send it electronically to the central R/3 System.
Using this interface provides two main benefits:
q You can use the store’s data to double-check data previously entered. If mer-
chandise is shipped from a distribution center and the goods receipt for the
store is posted at the same time as the goods issue for the distribution center,
you can compare the original goods receipt data with the actual quantities
received in the store and correct them.
q You can send the store’s data to the head office to use when posting the goods
receipt. For example, merchandise that the head office has ordered centrally
from an external supplier is delivered to the store direct. The store’s goods
receipt information is sent to the head office. The goods receipt information is
then posted on the basis of the original purchase order.
You only need to send key data, such as a unique article ID, to SAP Retail. If nec-
essary, the system can supply most of the missing data automatically when you
start processing. If data appears to be incomplete or inconsistent, you can simply
edit it. If the system is unable to post a goods receipt, the SAP Business Workflow
component is triggered and a work item is assigned to the appropriate employee,
complete with a suggested method of processing.

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Cross-Docking
What is cross-docking?
Cross-docking streamlines distribution logistics (in distribution centers) and is
gaining in importance with the growth of Efficient Consumer Response (ECR).
Merchandise is pushed through from goods receipt to goods issue without first
being placed into stock. SAP Retail offers you two ways of implementing this proc-
ess in the system:
SAP Retail Supports q Cross-docking
Cross-Docking and Shipping units are not repacked between being received at the distribution
Flow-Through center and being shipped out again.
q Flow-through
The merchandise is transferred to a special zone for repacking after receipt. It
is then taken directly to goods issue.

Fig. 6-3: Cross-Docking

What are the advantages of cross-docking?

There are a number of benefits to be gained by implementing cross-docking. For
example, the rate of turnaround in the distribution center increases and each ship-
ment passes through much more quickly, which can reduce spoilage if the mer-
chandise is perishable.
Faster Turnaround You can reduce the cost of processing and storing the merchandise. SAP Retail is
and Reduced Costs flexible enough to allow you and your supplier to redistribute your respective
tasks in line with cross-docking. For example, you can have your supplier pre-
pack and ticket your merchandise for you. You can also cross-dock merchandise
using SAP Retail even if you do not use a warehouse management system.

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How can I plan and monitor the flow of merchandise?

You can take two different approaches to cross-docking in SAP Retail – push (head
office decides how much merchandise to allocate to stores and when) and pull
(demand dictates when and how much merchandise is distributed to stores). Push
and pull processes are handled differently in the Retail system. For example:
q Central stock allocation (push) Push and Pull are
You use a central allocation table to plan the distribution of merchandise to Both Possible
stores. Once you have done this, the allocation table automatically generates
documents to procure the merchandise (purchase orders) and to have it deliv-
ered to the stores (purchase orders or deliveries).
q Demand-driven merchandise distribution (pull)
The supply requirements of the stores cause a number of purchase orders to
be generated. These orders are grouped into a single order before being placed
with an external supplier.
In both cases, the system recognizes the link between the documents created to
procure the merchandise and the documents created to supply the stores. It uses
this document relationship at goods receipt to manage merchandise flow in the
distribution center.
When you receive merchandise at the distribution center, SAP Retail automati- Merchandise Automatically
cally recognizes whether the merchandise should be cross-docked. You can define Assigned to Recipient on
whether the quantity delivered should then be divided up between its recipients
Arrival at Distribution Center
manually (by a user) or automatically (by the system). You can choose from a
variety of rules that are provided in the system. Or, you can integrate your own
distribution rules using a specially prepared interface.

What difference does cross-docking make?

Cross-docking requires precision planning to ensure that you issue the goods as
quickly as possible after receiving them. Increasingly, suppliers will deliver floor-
ready merchandise, which you can take straight to goods issue with the minimum
of interference along the way. You can skip the putaway stage and react more
swiftly to the requirements of your customers.

Replenishment
What can Replenishment offer me?
Replenishment is the SAP Retail solution to the problem of keeping your stores or
customers continuously supplied with merchandise. It ensures a speedy reaction
to their requirements and provides you with the means to pare down stock, both
in your distribution center and at the store or customer.
This function also supports the Efficient Consumer Response (ECR) concept of
continuous replenishment.

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What do I gain by using Replenishment?

VMI as a Service Offering If your customers agree to open data interchange, you can offer them the service
of Vendor-Managed Inventory (VMI), which allows you to react directly to their
sales data.
If you yourself are the manufacturer of the merchandise, you can use your cus-
tomers’ requirements to drive your production.

Fig. 6-4: The Chain of Replenishment Data

Retailers can also reap benefits in their own stores by replacing visual stock in-
spections with the replenishment function. The replenishment function is auto-
matic and can replenish merchandise even if inventory is not managed on an ex-
act article basis.
Ideally Suited to Processing The beauty of the replenishment function lies in its simplicity, both when you
Large Volumes of Data enter data and when you have it calculate merchandise requirements. This is an
important feature if you are faced with large volumes of data on a daily basis.

Where does the R/3 System get the information it needs to plan requirements?
Once you have negotiated the details of data interchange with your customer, you
can use the interface which SAP provides to have sales data sent to you through
electronic data interchange (EDI).
SAP Retail processes this data at the point-of-sale interface (inbound) and uses it
as the basis for planning requirements.

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Which replenishment methods are supported?

You can have the system simply replenish the exact quantity of merchandise sold.
By making the relevant settings, you can have the system calculate an optimum
order quantity. This option checks the quantity that is to be replenished and then
adjusts it to reflect logistical requirements, such as a minimum order quantity or
the need to fill a pallet before it is shipped.
You can also define reorder points for your merchandise and have the system Reorder Point Planning
replenish it only when these reorder points are reached.
You can have the system plan ahead to take imminent goods receipts and issues
into account, and you can run a forecast at any time to calculate your customers’
latest target stock levels.
You have a wide range of forecast models to choose from, including a trend model Seasonal Fluctuations
and a model that takes account of seasonal fluctuations.

How does SAP Retail plan replenishments?

The system checks the target stock of an article at the customer or store and deter-
mines whether it needs to be replenished. You can define parameters for each
planning run, including the customers or stores you wish to plan for and the type
of processing (in the background or online). Usually, POS inbound processing
automatically triggers a planning run.

What is the result of the planning run?

SAP Retail automatically generates purchase requisitions, purchase orders, deliv- Documents are Generated
eries, or sales orders to cover the requirements calculated by Replenishment Plan- Automatically
ning. You can define which documents the system generates.

Fig. 6-5: Documents are Generated on the Basis of a Variety of Data

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Missing Data is Supplied SAP Retail only requires key data, such as a unique article ID, to generate the
documents, since the system can supply most of the missing data automatically
(for example, it can find the source of supply or current conditions).

What if the results are not as I expect?

If problems arise during Requirements Planning, (for example, because of a lack
of data) SAP Retail takes the hassle out of solving them. You can display all cur-
rent planning results easily in a special, one-stop overview.
Workflow is Triggered If the system is unable to generate documents, the SAP Business Workflow com-
ponent is triggered and the relevant documents are transferred to a buyer for
processing, complete with a suggested activity (for example, create a purchase
order).

Store Order
What is a store order?
A store order is a request for merchandise placed by a store or customer. The mer-
chandise is pulled by the store, rather than pushed by head office on the basis of
central planning data.
You have a choice of documents that you can create in SAP Retail to procure the
merchandise, including:
q Purchase requisition
q Purchase order
q Delivery
q Sales order

Fig. 6-6: The Flow of Data

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How is a store order generated?

The store’s or customer’s merchandise requirements reach the central R/3 System
by one of three routes:
q Without a connection to the central R/3 System
The store or customer is not connected to the R/3 System in any way. An
employee in the store rings up head office or sends a fax detailing the store’s
requirements, which the head office employee then captures in the R/3 Sys-
tem.
q Using an R/3 System terminal (online)
The store or customer is directly connected to SAP Retail and can enter re-
quests for merchandise directly in the system at an R/3 terminal.
q Using EDI (offline)
SAP Retail provides a special interface that enables stores to send orders to
the R/3 System using EDI. The data received using this interface is automati-
cally converted to R/3 documents.
This interface bridges the gap between SAP Retail and a store retailing sys-
tem. The same interface is used internally by SAP Retail to generate the neces-
sary procurement or delivery documents after a Requirements Planning run.

How does automatic processing help me?

You can configure the system to automatically generate the type of document you
require (for example, a purchase order or a delivery). SAP Retail can often supply
missing data automatically, whether it be the source of supply or a suitable deliv-
ery date (calculated to conform to existing order and delivery patterns).
You can also configure your system to calculate the optimum order quantity eve-
ry time. This ensures that whatever the quantity actually required, the order itself
does not contain half pallets or fall below a predefined minimum order quantity.
You can also have the system automatically send out confirmation of receipt of
the store order, including details of the documents that have been generated and
the progress of the order so far.
If automated processing does not produce the results you expect, maybe because
of incomplete data, you can intervene manually and edit documents. If the sys-
tem is unable to generate documents, it triggers the SAP Business Workflow com-
ponent.

Returns and Empties

What are returns?
There are many reasons for returning merchandise to the vendor. For example,
the merchandise is left over at the end of a season or promotion, or it has been
discontinued in your stores.
SAP Retail differentiates between return deliveries and returns. A return deliv-

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ery is the immediate return of merchandise and can be understood as a simple

reversal of the original delivery to you. It always references a goods receipt docu-
ment or a purchase order.

Fig. 6-7: Returns

Returns generally take place quite some time after the merchandise is received
and are posted without reference to another document. There are a number of
different types of return in SAP Retail, including:
q Return to vendor
Return to vendor is when a store or distribution center returns merchandise to
an external supplier.
q Store return
This is when a store or distribution center returns merchandise to a distribu-
tion center.
q Consumer return
A consumer return is a retail sector transaction and involves consumers re-
turning merchandise to the point of sale (POS), possibly because they want to
exchange one item for another or because they are dissatisfied with the mer-
chandise.
q Customer return
A customer with a master record in SAP Retail returns merchandise that you
have delivered. This is most likely to arise in the wholesale sector.

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How is each of these returns captured in R/3?

You enter returns to vendor and store returns in SAP Retail as purchase order
items that are flagged as returns. This flag distinguishes them from any normal
purchase order items that might be included in the same order.
Consumer returns are registered at the point of sale, transmitted to SAP Retail,
and posted at the POS interface (inbound) as a minus sale. A special returns order
is created for customer returns.

How does the system help with settling invoices?

Vendors to whom you return merchandise credit you with the value of the re-
turned items. You capture this in the system by entering a credit memo (or an
invoice with credit memo items) in the Invoice Verification component.
When customers return merchandise to you, a credit memo is created for them on
the basis of their returns order.

What are the special features of SAP Retail Empties Processing?

With SAP Retail, you can manage empties components as a bill of material (BOM) Document Items are Created
and assign this BOM to a specific unit of the relevant contents. If you enter the Automatically for Empties
contents of such an empty as an item in a purchase order or a sales order, the
system automatically creates corresponding document items for the empties com-
ponents too, saving you time and effort.
You can always see which empties components are not currently being used.
Empties that are currently assigned contents are managed in a separate stock cat-
egory. This gives you a clearer overview of your current empties stock. When you
post inventory differences for a full product, differences are also posted automat-
ically for the corresponding empties components.

Automated Shipping for Efficient Customer Response

Since SAP Retail is a fully integrated system, data flows seamlessly from sales Integration Means
order to picking to packing to shipping and finally posting to the general ledger Speedy Turnaround
and billing. When one stage is completed, the system automatically creates a work
order for the next stage.
Sales orders can contain a specific requested delivery date. If so, the system auto-
matically schedules when you must perform essential shipping tasks in order to
meet a delivery date. Steps do not get missed, and you can always determine
exactly where the customer’s order is in the pipeline. Quick turnaround is critical,
especially during the busy holiday season.

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Fig. 6-8: Continuous Flow of Data from Order to Shipment

Helpful Tools for You can print delivery due lists to see all orders scheduled for processing on a
Capacity Planning certain day, week, or other period of time. You can also limit the list to a certain
customer, carrier, or transportation route.
The SAP Retail Information System includes a rough workload estimate for ship-
ping. Based on customer orders and internal transfers, you can determine how
much weight, volume, and work time is needed to process shipments scheduled
for tomorrow. The system can also group deliveries according to the time at which
they are due for picking. This allows you to create picking waves and helps you
use your shipping personnel in the most efficient manner.

How can I optimize deliveries to customers?

Combining Orders Where possible, the system attempts to combine customer orders into a single
to Reduce Costs shipment to keep shipping costs low. You can analyze costs for different carriers,
different methods of delivery, tariffs, and so on. SAP Retail also supports pack-
and-hold shipments and regular route schedules.
You can specify on an individual basis whether to allow partial shipments to cus-
tomers. If not enough stock is available to fill a customer order, the system ships
the amount that is available and then schedules one or more future deliveries to
complete the order. Because purchase order information is also in the system, it
can determine when additional stock will arrive in inventory so it can schedule
further customer deliveries.

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Can SAP Retail handle route schedules?

Yes. If you have regular scheduled routes (to customers, stores, or other distribu- Automated Route Scheduling
tion centers), you can set these up in SAP Retail one time, and then the system
schedules deliveries for these recipients accordingly. A schedule is usually set up
on a weekly basis, with one or more deliveries on one or more days. For each
point along the route, the system prints the expected date and time of delivery. By
planning groups of deliveries that leave the distribution center at the same time
each week, you can plan picking and shipping waves and thus reduce bottle-
necks.

Fig. 6-9: Planning Regular Route Schedules

How does SAP Retail provide for efficient picking?

SAP supports both picking from fixed bin locations using the Warehouse Man-
agement component and picking from a randomly organized warehouse. With
Warehouse Management, the exact picking location is printed in the picking list.
Data from hand-held scanners or other mobile devices can be routed to SAP Retail
for confirmation.
You can print a separate picking list for each delivery, or a combined picking list, Separate and Combined
which includes items for several deliveries at the same time. This latter method Picking Lists
makes the picker’s job much easier. Instead of returning to the same bin again and
again for the same item on different picking lists, the picker need only visit a bin
once.

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Fig. 6-9: Sample Combined Picking List

Picking Statistics For each picking list, the system can also:
by Employee q Calculate the amount of time it should take a picker to complete the task
(planned time)
q Capture the actual amount of time in which the picker completed the task
(actual time), along with the picker’s ID number
This enables you to determine your most efficient pickers. This data can also be
passed to the Human Resources application component if you use quota-based
pay scales or bonuses.
Replenishing SAP Retail also keeps track of bins that are running low on stock. You can have the
Picking Stock system search for:
q All bins that have insufficient picking stock at the current moment
q All bins that have insufficient picking stock to fill deliveries scheduled for a
timeframe you specify. This report, which you should run at the end of every
day, also creates replenishment requirements so that the bins can be refilled.

What advantages does the packing function provide?

When planning a delivery, you always specify the shipping materials needed (car-
ton, pallet, rolling container, hanging garment rack, and so on). Then you can be
sure that the contents are always packed properly. The system also supports re-
turnable packaging such as reusable pallets.

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SAP Retail also supports shipping units (pack-and-hold shipments), which con- Support for
tain items packed together for a shipment to a specific destination at a later date. Pack and Hold
The system assigns each shipping unit a unique ID so that it can be carefully tracked.
You can assign an additional identifier, such as the customer name. Once packed,
the contents of the shipping unit cannot be changed. However, you can always
search on the ID and have the system display the contents so you can see what is
inside. Goods issue is not posted until the shipment leaves the distribution center.
Since the merchandise inside the shipping unit is already packed for a specific
delivery, it is not considered part of the available stock.

Portable Data Capture (PDC)

How do non-SAP systems communicate with SAP Retail?
SAP Retail can be linked to portable data capture units (for example, barcode read-
ers and hand-held terminals) using a flexible interface provided specifically for
this purpose. The interface also supports the exchange of data with warehouse
control units and fork lift control systems.
The functions provided in the SAP Retail applications support a number of com-
mon business scenarios and the associated processing steps in the SAP system.
The details of how each individual partner system communicates with SAP Retail
and the actual processing logic required in each case are the responsibility of cer-
tified partners.

What functions are available?

There are a number of functions that can be started automatically in SAP Retail Assigning Proper Shipping
when information is received using the interface described above, including: Materials
q Goods receipts entry
q Inventory count data entry
q Packing data entry
q Delivery document transmission to a partner system
q Entry of the quantity of merchandise picked for a delivery document
q Entry of stock movements in Warehouse Management (WM)
With the wide variety of functions available, there are endless possibilities for
combining them into real-life scenarios where PDC systems are integrated into
R/3 processes. You should analyze each potential scenario to check that it is both
possible and feasible.

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