Is a Digital Goods Receipt Process a Nice Extra or a Necessity in Supply Chain Management?

Is a digital goods receipt process a nice extra or a necessity in supply chain management (SCM)? When it comes to modernizing a receipt of goods process, including the incoming goods inspection and quality control, people talk a lot about digitalization. However, to what degree does digitalization actually have an impact on improving logistics processes and what resources are available? Discover more in this blog post by Alex Jende.

What is Supply Chain Management (SCM)?

Essentially, supply chain management consists of five core elements:

1. suppliers
2. procurement
3. production
4. distribution
5. customers

Goods flow all the way from the suppliers to the customers, while money flows from the customers to the suppliers. Information flows in both directions.

Receipt of goods and the incoming goods inspection are part of procurement, which has its own specific requirements governing the flow of money, goods and information. In this article, we will be focusing on information flow.

Why is a receipt of goods process so important?

A receipt of goods process, also known as goods receipt, essentially involves receiving goods from suppliers, warehousing them and entering them correctly into your ERP/PPS system ready for the next steps in SCM. If errors occur here, this affects all the downstream processes from the wrong items being manufactured at the production stage to suppliers receiving incorrectly calculated invoices. Errors in the goods receipt could lead to stock levels being incorrectly managed in materials and resource planning (MRP), leading to orders being incorrectly dispatched – or not at all. This would involve a lot of time and money to put right, whether canceling wrong orders or sending missed orders as express shipments at additional cost.

It’s therefore in every company’s interest to strive for a high quality incoming goods process  in order to avoid precisely these problems. But how can you achieve this?

A good first step is to analyze your own processes and identify weak spots. One weak point, for example, would be needing to manually process the goods receipt in the absence of a digital process. This can lead to incorrect entries that you may not immediately spot. So, how do you set up a digital receipt of goods process?

The three stages in digitalizing your incoming goods checks process

Digitalizing a receipt of goods process can encompass several stages. We have listed these in the order they are normally introduced, although in theory they could be set up independently of each other.

1. Introducing the receipt of an Advanced Shipping Note (ASN)
2. Creating a standardized label to identify the goods and transferring the packaging information into the ASN
3. Setting up a system to scan incoming goods

Introducing Advanced Shipping Notes (ASN) to a digitalized goods receipt process

Introducing an ASN (variously also known as a shipping notification, shipping advice and delivery alert) means that suppliers now notify the recipient of the goods to be delivered. The recipient receives details in advance of the amount of materials due to be delivered and when they can expect these. When the goods arrive, they check the quantity on the ASN in their goods receipt process.

Establishing standards in the ASN process for digitalizing goods receipt

The great thing about the ASN process is that there have been well-established standards for sending electronic notifications for a long time. The German Association of the Automotive Industry (VDA), for example, introduced VDA4913 back in the 1980s, which they have since  adapted to modern requirements with the introduction of VDA4987. However, there are also established standards outside the automotive sector such as EDIFACT DESADV and ANSI-X12-EDI-856, which regulate the sending of shipping notifications across all industries. These standards therefore already provide a very good foundation and as using ASNs is a very common process, many ERP systems come with an inbuilt interface for processing ASNs.

The ASN ensures that information on the delivery is received promptly at goods receipt and the ASN can be used to transfer the data directly into the ERP, WMS or similar. This streamlines the goods receipt process while also reducing the errors that can occur in manual reconciliation. Quality management at goods receipt ensures that the goods are correctly offset against the ASN. This is achieved by continuing the ASN process, adding packaging data and, ideally, a standard label.

An ASN doesn’t always contain information on the packaging. However, a number of OEMs/car manufacturers,  large retailers, machine and plant engineers and other companies with complex logistics have already gone a step further and require packaging information to be included in the ASN and that goods all contain a standard label or tag.

The advantages of using scanners in a digital goods receipt process

The key to this is unique identification codes – serial numbers – for each individual load or handling unit, which are recorded in the ASN and can also be found on the label. These are also known as handling unit numbers (HUN).

At receipt of goods, the incoming goods contain a label with a handling unit number. This means the goods can be clearly identified and assigned using the information in the ASN. Once the unique identification code on each handling unit has been scanned, the goods are entered into the warehouse management system (WMS) without needing to add further information such as the material number, quantity or supplier. If and when this information is needed, it can be pulled from the ASN by entering the unique identifier.

This leaves only one weak point, which is capturing the handling unit number (HUN).  If this is entered wrongly, the system doesn’t work. However, the beauty of using a scanner is that not only does it make the receipt of goods process less work, it also significantly reduces errors in data entry. The tags on the goods contain the package numbers as plain text and as a barcode or 2D code (e.g. DataMatrix or QR codes). Or, the tag contains a smart label or RFID label . When goods arrive, they simply need to be scanned for the goods to be assigned into the ERP via the integrated scanner.

Is a digitalized goods receipt a necessity or a nice extra?  

The methods detailed above can be used to transform the receipt of goods process from a purely manual process into a fully integrated digital process. However, is this really essential for the success of your company or merely a gimmick? This question is easy to answer: as soon as you start looking at medium-sized companies or bigger, you will see that their document volume quickly justifies implementing a digital goods receipt process. It also, of course, enables professional quality management.

A digital receipt of goods cuts out a considerable amount of the work time inherent in manual data entry. This not only reduces costs, but also puts the company on a solid footing for the future. The solution scales well, as processing larger document volumes doesn’t take significantly more time. A digital receipt of goods incorporating integrated ASNs is therefore a clear “must-have” and crucial for medium-sized companies. And it is decisive for being able to cope with the logistical challenges of both the present and the future. Quite a few automotive manufacturers are already requiring their suppliers to implement a digital incoming goods process, otherwise they will be dropped as trading partners.

How can SEEBURGER help?

The SEEBURGER BIS Platform provides all the capabilities you need to overcome integration challenges such as receiving ASN messages from suppliers, converting and forwarding them to your ERP or inventory management system or preparing your own ASN messages for your customers. The BIS Platform has all the necessary functions you need to implement a digital goods receipt process with ASNs, and can be deployed as a cloud service or on-premises. SEEBURGER also offers a Supplier Portal Service, which is a WebEDI solution that enables your non-EDI suppliers to provide you with ASN messages and goods tags for an optimized goods receipt process.