In the dynamic landscape of logistics, precision is not just a goal it’s a necessity. Deloitte has developed a transformative solution in SAP S/4HANA for one of our clients in the chemical industry, enhancing the gap between SAP S/4HANA TM freight data and customer billing documents. This innovative integration ensures that the precise freight cost is seamlessly mapped to the correct mode of transport thus reducing manual effort from pricing analysts and customer service representatives and improving accuracy in freight pricing and profitability. This article explores the intricacies of this innovation, emphasizing how it empowers companies to bill customers with improved accuracy.

Use Case Illustration

Our clients’ Pricing Managers faced a significant challenge intricately tied to the error-prone manual process of updating freight costs on customer invoices. Typically handled by customer service in conjunction with the pricing team, this task involves working with fixed freight amounts from carrier agreements or relying on rough estimates of freight costs when transportation is done in-house. However, these manual inputs often led to inaccuracies, causing not only operational inefficiencies but also impeding the strategic application of competitive freight charges. The delicate balance between maintaining competitiveness and ensuring profitability became increasingly difficult to maintain.

Moreover, the complexity of drop shipments within the company’s own plants imposed significant challenges on Pricing Managers. They were tasked with coordinating communication between different facilities, each with its own set of freight requirements and logistical intricacies. This necessitated ongoing updates to freight costs, which proved cumbersome and time-consuming.

In many cases, Pricing Managers found themselves in the difficult position of having to settle for an average cost, derived either from carrier agreements or internal transportation management systems. However, these averages often failed to accurately reflect the dynamic nature of freight expenses associated with drop shipments. As a result, Pricing Managers were frequently forced to resort to estimating freight values, a practice that proved unsustainable in the long run.

This reliance on estimates not only introduced additional inaccuracies into the invoicing process but also posed a significant challenge to the company’s ability to implement competitive freight charges strategically. Without access to precise and up-to-date freight cost data, Pricing Managers struggled to optimize pricing strategies effectively, ultimately hindering the company’s profitability and competitiveness in the marketplace.

Solving a Crucial Challenge: Billing Accuracy and G/L Mapping

In the complex landscape of logistics billing, achieving accuracy is paramount. However, traditional solutions often fall short in providing the level of transparency and differentiation required for precise invoicing. This challenge becomes even more pronounced in scenarios such as drop shipments, where standard SAP functionalities may not fully capture all relevant freight costs.

Limitations of current solutions

While SAP Transportation Management (TM) solution effectively determines freight values, its integration with SAP S/4HANA Sales Pricing presents limitations. The standard setup typically aggregates all freight costs into a single condition type on the customer invoice. This lack of differentiation by mode of transport and transparency on costs hinders accurate billing and reporting. Also standard S/4HANA does not process a multi-modal scenario where to send goods to a customer requires two or more modes of transportation, the combination of freight on those different stages is not included in the final freight value, system only considers the freight from the first leg of a multi-modal scenario.

Drop shipment complexity

In the context of drop shipments, where goods are directly shipped from a supplier to a customer without passing through the retailer’s inventory, standard SAP functionalities pose additional challenges. The system often fails to capture freight values from the vendor, especially in cases of internal vendors within the client’s own plants. This gap in data integration further complicates billing accuracy and financial reporting.

Key Components of the Innovative Solution

• Freight Value Mapping – Our solution introduces dynamic mapping of freight values from the SAP S/4HANA TM system to the customer billing document. This ensures that the billing accurately reflects the exact freight costs incurred by the company for each shipment including a multi-modal scenario.
• G/L Account Integration – Crucially, the correct G/L account for the mode of transportation is seamlessly integrated. Unlike standard SAP S/4HANA TM, this innovation ensures that financial transactions align precisely with the chosen transportation mode, offering high accuracy in Record-to-Report operations.
• Mode of Transport Mapping – The solution maps the freight condition types to the right mode of transport in the customer billing document. This not only streamlines the billing process but also provides a detailed breakdown, allowing customers to be billed the exact amount spent on freight for their shipments.
• Freight Mark-Up – In order to keep the profit margins we also included a Freight Mark-up design where Pricing Team can define a mark-up percentage.
• Internal Drop Ship scenarios – As part of our solution we could incorporate vendor freight costs into customer invoices a Drop Shipment scenario. The vendor freight in these scenarios are costs in instances of internal shipping within the company, freight costs associated with vendor Drop Shipments are seamlessly updated in the customer invoice. This enhances transparency and ensures that all relevant freight costs are accurately reflected in the billing process.

Benefits of this Innovation

• Billing Accuracy and Transparency - By accurately mapping the freight value, G/L account, and mode of transport, the integration enhances billing accuracy and transparency. This ensures that customers are billed with a more precise freight cost associated with their shipments and improves profitability on the freight charging.
• Record-to-Report Visibility – The integration eases a granular breakdown of freight costs by mode of transport, providing customers with enhanced visibility into transportation expenses. This transparency fosters trust and strengthens customer relationships.
• Efficiency and Error Reduction – Manual interventions and errors in billing processes are significantly reduced. Eliminating the manual need of maintaining price conditions, this automated integration ensures that the exact values and accounts are reflected, minimizing discrepancies and fostering operational efficiency.

Deloitte’s Innovation Leveraging SAP S/4HANA’s Latest Features

This solution showcases Deloitte’s utilization of SAP’s cutting-edge functionalities to enhance and customize our services according to client needs. Through extensive testing across various industries, we’ve refined this integration to specifically address the unique requirements of logistics companies. Our commitment to innovation ensures that clients can maximize the benefits of SAP’s capabilities, tailored to their specific challenges.

Empower Your Billing Processes

Interested in discovering how this groundbreaking innovation can transform your logistic operations, enhance internal processes and improving customer relationships? Reach out to our team of experts at Deloitte to uncover how this collaborative solution can be customized to meet the unique challenges of your logistics operations. Elevate your freight pricing strategies and empower your company to invoice customers accurately for their freight expenses, leading the way towards heightened precision and transparency in logistics billing.