Third party logistics is a term used to define stocking and moving materials on behalf of a customer. The customer can be any kind of parts provider or manufacturer or trader. When such a customer requires service to hold its stock and transfer to a particular location, third party logistics services are provided.
Such a service will hold cost to be incurred to the customer for holding its stock in a certain location and operations cost incurred in storing materials in specific conditions and various other overhead costs such as maintenance of storage types and other monthly service costs like power, communications.
When implementing a third-party logistics solution in S/4HANA more than giving importance to how storage and warehouse movements are done, we need to consider how will the materials be received and how the issue back to customer will be done. And if cost is to be incurred in such a storage area, what cost need to be considered and how will you make your profit while issuing it out. Once this basic question is answered one can think of implementing the warehouse parts in EWM or WM.
In a live scenario, S/4HANA will need a document that will do the receipt, usually a purchase order which will receive the goods into inventory and a document to perform outbound or goods issue which usually can be a sales order, material document or return purchase order.
Making use of these documents for a third-party scenario may need customization in its item category, movement type or requirement type.
Below is a short summary of few methods to achieve the receipt and issue.
- New Materials using new Material Type
- New Org Structure - Plant
- Customer Stock
- Vendor Consignment Stock
- Sales Order Stock
With Materials creating using new material type,
In this case new materials will be created using new material type specific to 3PL stock. This Material type will have quantity update and can have value update depending on customer requirement. Standard Purchase Orders and Return PO will be used for Inbound and Outbound to and from EWM. If you decide to have value update, accounting documents will be created. The accounting documents will not be created if the GL account is a consumption account and the value of PO is zero. In case of the consumption account GL, you will also need a cost object to be assigned, one way is to have a cost center for the 3PL operations against which you can see the P/L values. For the case of value update into plant stock account, the values would go into balance sheet. For more clarity on P/L and balance sheet accounts you can talk to your FI colleagues. But this case brings in additional master data maintenance.
With New Org Structure – Plant,
In this case 3PL materials will be created and Existing materials will be extended to New 3PL plant and storage locations. Standard Purchase Orders and Return PO will be used for Inbound and Outbound to and from EWM. Optionally inbound & outbound can be done w/o reference to PO. The advantage in this option compared to the one above is, material code can remain same for 3PL operation and other plant operations like Production. Rest of the logic would also remain same as the above case.
With Customer Stock,
In this case existing material codes will be used, and new storage location is required for each 3PL operation. Purchase Orders with Item category ‘C’ and Return PO with item category ‘C’ will be used for Inbound and Outbound to and from EWM. In EWM you will need to create a new storage type for placing 3PL materials in warehouse. However, the Special Stock type ‘C’ is not recognized in EWM. In EWM stock would be with unrestricted type while in IM it would show as Customer Stock. Due to this, not all operations in warehouse may be supported with IM integration, since IM would be looking for customer stock during delivery creation with various other movement types. For the basic inbound and outbound, this case will work.
With Vendor Consignment Stock,
In this case, Purchase Orders with Item category ‘K’ and Return PO with item category ‘K’ will be used for Inbound and Outbound to and from EWM. No Additional Master data maintenance required for common materials between 3PL and Production. Stock will be classified as Vendor Consignment Stock in IM and EWM. However, Material document numbers will be used to create return delivery from IM for the outbound delivery process since Return PO with consignment stock is not supported with outbound Delivery in IM(unless you have the IS-Retail business function active). And since delivery documents will be needed for the outbound process from EWM, having a track of the inbound material document numbers to process the outbound is not a very easily usable solution that any customer would easily agree too.
With Third Party Sales Order Stock,
In this case a Sales Order with new order type to initiate Purchasing for inbound processing and for outbound processing to and from EWM will be created. Customer and third party's business partner will be the same BP as customer and vendor respectively. No Additional Master data maintenance required for common materials between 3PL and production. The 3PL sales order will generate the Purchase requisition (schedule line item category can be updated with a unique document type for Purchase Requisition). The PR can be converted to Purchase Order for inbound delivery creation and perform GR from EWM. Once in stock, sales order can be used to create the outbound delivery and perform the GI from EWM. In this case, if you want to receive the material in stock account or consumption account can be determined by the sales order type’s line item category’s requirement type’s requirement class. In the requirement class, the 2 fields Account Assignment Category and Valuation needs to have values ‘E’ and space respectively. With this setting, the PR will be generated with the consumption account mentioned under transaction key GBB in OBYC. You can refer to the note
https://launchpad.support.sap.com/#/notes/2418462 which explains this behavior.
For all the 5 options mentioned, the purchase order can have zero cost (free item checked for each line) or with a value. In the former case, no accounting documents are created if GL account determined is a consumption account (in case of cost object assigned to item). In the latter case, accounting documents are generated upon GR. However, if GL account is a stock account then accounting documents get generated even if item is checked as free item (former case). During the outbound process, no FI posting or billing documents are generated for the order with free item checked in purchase order. These options give us vast possibilities in designing the 3PL process based on each customer requirement.
Having all these options in place, I found the last option with third party sales orders as most usable and tangible to achieve for any given scenario in a 3PL world. However, the other 4 options can also come handy depending on how your customer would want to make use of his operation.
