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New Age Supplier Collaboration using SNC & PI – An Overview

  In the challenging global scenario, the real competition between companies is not just on the basis of product offered, but it’s more on their supply chain partners and their effectiveness in making the supply chain more agile and responsive to meet customer demands, without losing the organizational growth plans. To get edge over the competitors, it’s implicit that a company focuses on its key capabilities and outsources supporting functions to its suppliers to become cost effective and in turn adhere to best practices through out the operations. Hence in view of this, managing procurement and inventory operations by suppliers is a step forward towards Collaborative Operations in new age approach of Extended Resource Planning. This blog focuses on overview of capabilities of SAP mySCM – SNC product and its technical implementation via SAP PI.  

Need for Collaboration
  The procurement process is a vital activity for any organization and needs a careful execution considering diverse operations and multiple vendors for either same or different raw materials.  As a result of heterogeneous procurement structures across the enterprise, general weaknesses can be identified as follows:
• In spite of identical requirements in terms of the quality and composition of raw materials, different materials are purchased.
• Many suppliers are used for the same raw material.
• Outline agreements with suppliers are not negotiated consistently. These weaknesses have far-reaching consequences on pricing conditions, purchase volumes, monitoring on inventory levels to avoid stock out or pilferage.
• Heavy capital tied-up in inventory unnecessarily.

In an effort to remove above weaknesses, the collaboration between customer and supplier is needed. The product SAP mySCM-SNC (Supplier Network Collaboration) is used for mapping collaborative business processes.

Features of SNC
  Before we can implement the SAP SNC for the collaborative procurement, we need to do the analysis for various suppliers based on the material supplied and below mentioned sub-processes.

The various focus points to consider for above sub processes are
Strategic Purchasing: Focus on making outline agreements based on need for long term relationship or drawing based.

Design and Product-Life Cycle Management: Focus on preparing the framework of collaboration based on production schedule and replenishment cycle.
Procurement Planning: Focus on source determination and way of procurement.
Procurement Processing: Focus on having the system in place to adhere to collaborative procurement framework and planning.
Billing and Dispute Management: Focus on agreed terms for settling the disputes and raising invoices in line with scheduling agreements.

The major processes involved in Supplier Network Collaboration (SNC) are
• Purchase Order Handling
• Dynamic Replenishment
• Scheduling Agreement processing
• Supplier Managed Inventory
• Delivery control Monitor
• Subcontracting
• Work Order
• Supplier Network Inventory
• Kanban

Implementation of SNC via SAP PI/XI
  The mySCM-SNC is implemented in addition to existing SAP R/3 through integration of SAP XI/PI. Below diagram shows the typical system landscape involving SAP SNC, SAP R/3 and SAP XI/PI.  

As seen from above diagram, SAP XI/PI acts as the middleware to connect between SAP R3 and SAP mySCM-SNC. The data communication between SAP R/3 and SAP XI/PI takes place via IDOC, while the communication between SAP XI/PI and mySCM-SNC takes place via HTTP messages.

Pre-requisites for Implementation
SAP R/3  – SAP Plug-In Basis 2006_1_700 (ECC 6.0), SAP Plug-In Basis 2005_1_700 and
     R/3 PI 2004.1 SP 10 (ECC 5.0 and 4.7) 
SAP PI  – SAP PI 7.0, ST-PI 2005_1_700
SAP SNC – SCMSNC 5.1, SAP Plug-In Basis 2006_1_700. (SAP SNC 7.0 is recently introduced) 

  With implementation on mySCM-SNC, the supplier’s network can be interfaced with customer’s system landscape in real time via web interface using SAP PI as middleware, without having to go for large scale integration between customers SAP and its non-SAP system.

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