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For globally operating companies, the use of bonded warehouses is not just a logistical convenience—it’s a strategic necessity. When moving goods from non-EU to EU countries, bonded warehouses offer a unique advantage by deferring import duties until the goods are actually removed from storage. This flexibility allows businesses to manage cash flow more effectively while optimizing their supply chain. However, integrating a bonded warehouse into your SAP ECC or SAP S4/HANA system brings a crucial decision to the forefront: should you set up the bonded warehouse as a separate plant or simply as a storage location?
In this blog, we’ll break down both options, highlighting the pros and cons to help you choose what’s best for your business. Whether your goal is to streamline operations, improve compliance, or boost financial performance, understanding this decision is crucial for getting the most out of your bonded warehouse.
What is a bonded warehouse
A bonded warehouse is a secure facility where goods can be stored without immediately paying import duties. This is particularly advantageous for goods arriving from non-EU countries, like the USA, to EU nations such as Belgium. Goods in a bonded warehouse remain in a special customs status, meaning they haven’t yet undergone full customs clearance. This deferral of taxes and duties until the goods are sold or moved out of the warehouse can significantly improve cash flow and provide greater financial flexibility.
However, operating a bonded warehouse involves more than just having a secure facility. Companies must obtain a specific license from customs authorities, ensuring that the warehouse meets strict regulatory requirements. Bonded warehouses are especially valuable for businesses that handle large volumes of imported goods, seasonal products, or items subject to fluctuating demand. By delaying the payment of import duties, companies can reduce upfront costs, better manage inventory, and more effectively respond to market changes.
Considerations for implementing a bonded warehouse in your SAP ERP System
- Regulatory Compliance: Depending on the location of your bonded warehouse, local regulations may impose specific requirements.
- Reporting Requirements: Assess the need for detailed reporting and inventory control within the bonded warehouse.
- Operational Complexity: The structure of your supply chain and logistics processes can influence the optimal approach to implementing the bonded warehouse in your ERP system.
Difference between Plant and Storage Location
Plant
In SAP, a plant is an organisational unit within Logistics that subdivides an enterprise at the levels of production, procurement, maintenance, and materials planning.
Storage Location
A storage location is an organisational unit that differentiates material stocks within a plant. Inventory management is conducted at the storage location level, based on quantity. Each storage location can have a separate address defined, and for transactions performed by a storage location, SAP will use this address over the plant address.
Pros and Cons of using a Plant
Pros:
- Logistical Processes: A plant allows the use of stock transfer orders to move stock from your bonded warehouse to your main warehouse. This process includes the ability to print all necessary documents for physical transport (e.g., delivery notes) and to include freight costs.
- Control and Reporting: Managing the bonded warehouse as a separate plant enables more effective control over material movements and simplifies reporting due to the need for stock transfer orders.
Cons:
- Material Requirements Planning (MRP): MRP occurs at the plant level, which requires your business team to monitor planning and move goods as necessary.
- Master Data Maintenance: Setting up a bonded warehouse as a plant increases the complexity of master data maintenance, requiring updates to material creation/extension, purchase info records, etc., for the new plant. This can lead to higher maintenance costs.
Pros and Cons of using a Storage Location
Pros:
- Master Data Maintenance: Master data is maintained at the plant level, which means it can be easily applied to a new storage location without additional complexity.
- MRP: MRP is conducted at the plant level, allowing the stock in the storage location to be included if required.
- Integration: Using a storage location facilitates easier integration with existing logistics operations.
Cons:
- Logistical Processes: Capturing freight costs from transfer orders is more challenging at the storage location level.
- Material Management: Managing materials becomes the responsibility of the warehouse team, who must ensure that stock is appropriately used from the storage location.
- Reporting Challenges: Differentiating between bonded and non-bonded stock in reporting can be difficult when using a storage location.
Conclusion
Finally, there is no one-size-fits-all answer when deciding whether to configure your bonded warehouse as a plant or a storage location. The decision depends on which factors are most important to your company. If detailed control and reporting are crucial, setting up the bonded warehouse as a separate plant is advisable. For simpler operations, a storage location may be sufficient.
Do you have further questions about Plant or Storage Location in SAP?
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