When delivery papers are needed, a delivery should be created. If none, a green light will turn on near Balance fieldand the SAP system will show you accounting document which will be created. In general terms, subcontracting is the outsourcing ofsomeprocess to an external vendor. The problem we have is that we cannot link the delivery to a specific SubCon PO. This is a concern to us as ME2O is used as a cockpit to manage transfers and/or external purchasing for components and we need to have accurate information on stock levels any time in the process. A planned order in the subcontractor location produces the material in that location and a stock transfer requisition transfers the material from the subcontractor location to the demand location. Editors note: This post has been adapted from a section of the book Sourcing and Procurement with SAP S/4HANA by Justin Ashlock. If, after the goods receipt has been posted, the vendor informs you that a larger or smaller quantity of the components was actually consumed than planned in the purchase order, you must make an adjustment. Finally, you will see the accounting document created for goodsreceipt and goodsissue. Lets start with discussing the steps that are involved in the subcontracting process in SAP. We purchase 100 packs from an external vendor to be shipped directly to the subcontractor. Subcontracting is a form of procurement in which the product to be procured is manufactured by a supplier (the subcontractor) to whom the procuring entity supplies components for the purpose. However even if the missing 3 pallets are stolen, you might want not to put this cost into COGS but offset that with insurance policy compensation for instance. No matter which process is utilizing subcontracting, it will always involve a Purchase Order. SAP MM - Procurement Process. Identifying the process steps of an intercompany sales process. Learn how to integrate SAP S/4HANA with SAP Ariba, SAP Fieldglass, and more. The Latest ERP from SAP. Searching PR creation apps in Apps Finder in FIORI screen. Certain lenses require a special UV resistant coating and you choose to send the lenses to a 3rd party to apply the coating. Mapping procedure of a given scenario in SAP system. Some supplier relationships require you as the purchasing organization to provide the supplier with the components used in their part of the value creation. Invoices will be entered in the system against the purchase order. 3.Create PO with item category as "L" . Second subcontracting vendor process it further and produce finish material (SUBCON_FINAL) and finally send it to the warehouse of procuring plant. Many a times, more than one subcontractor is used for manufacturing at different level of BOM. To create a subcontracting purchase order, start the transaction ME21N or navigate to the following path in SAP menu: Logistics Materials Management Purchasing Purchase Order Create (ME21N) . Steps to perform subcontracting: Create subcontracting Info record (Optional) - T Code - ME11 Implementation of "External Material Processing using Production Orders": Develop a process in SAP to support all efforts related to External Processing using Production Orders as the method for subcontracting. 2.Maintain the BOM for the material. Billing the customer. Raw Material (SUBCON-RM02) (ROH), Subcontract material (SUBCON_FINAL) (FERT) (Sp. user can view the list of the transactions he/she used recently in left side of the home page.using Edit option they can customize i mean arrange the FIORI apps tiles based on their requirement. The system will generate a purchase order number internally. The labor charge is JPY 2,000 per piece. Adding this value will open up the Components button located on the item Material Datatab. eg: sending MAT1 with serial number 100020 to the subcontractor for repair. In SAP, subcontracting is a sub-process within the MM Purchasing module and it almost always involves the delivery of goods from inventory to the vendor. Your email address will not be published. The system will open a window with the list of documents in accounting. Subcontracting with multiple production versions is supported. This enables you to assign information about the batches used and the component quantities in the inbound delivery. Am I right or wrong? Please contact in case of any queries and clarifications. Do you have a question and want it to be answered ASAP? 3.Create PO with item category as "L" . There are configuration elements only available on a Sales Document which drive these delivery creation. These two options are now combined into one driven by MRP areas, but it doesnt require material data on all components and can support full-lot sizing and sourcing functionality. (here material and components are MAT1 only). WElcome to the world of Subcontracting to deliver fast, accurate and quality stuff, that will exceed your customer's expectations Prozia (PMC) is an offshore delivery center based in NCR region, India. You order the end product using a subcontract order. They charged the company for their services rendered. The components are then supplied to the vendor. Copyright | Nice explanation, Can you please explain the scenario of Over and Underconsumption of the Materials in case of Subcontracting with relevant screenshots. Thanks for reading. 2) Keep delivery address to plant as by default. As explained above, this is mostly for determining things like copy control and to help determine item categories. For each transaction requiring subcontracting, you then have to issue a PO and create multiple goods movements and accounting entries internally to support the process. Post Goods receipt for PO & Good Movement App As of SAP S/4HANA on-premise 1909, in the Monitor Subcontracting Documents app, you can also view the end-to-end assembly flow diagram, from first component to final assembly, for items generated by MRP. it is more useful apps. Some components also come from our warehouses. For a premium experience please use an alternative browser. As the worlds leading SAP publisher, SAP PRESS goal is to create resources that will help you accelerate your SAP journey. Very easy to understand now. Is this possible? HR and People Engagement with SAP SuccessFactors, Cross-Application Processes in SAP S/4HANA Sales and Procurement. Available quantity at the subcontractor is back to 76 packs, where the real information is 176 packs. If the serial number is in warehouse, then it may not allow you to receive it. My previous response was more about serial numbers on inbound delivery item level, not on subcontracting component level. 2.Maintain the BOM for the material. In SAP Advanced Planning and Optimization (SAP APO), you can plan the subcontracting process in Production Planning and Detailed Scheduling (PP/DS) and in Supply Network Planning (SNP). 2. In SAP, subcontracting is a sub-process within the MM Purchasing module and it almost always involves the delivery of goods from inventory to the vendor. Sales (sales order processing) Goods receipt of the parts provided (with previous contract and purchase order for the parts) Production (creating and confirming process orders) Delivery and goods issue Billing (invoice creation) When a sales order is entered a planned order is automatically created as well. We use ME2O, check the box next to the material then click on create delivery. That is confirmed by the note 1397948 Subcontracting: Components cannot be provided using IDoc /SPE/IDOC_INPUT_DESADV1. SAP Ariba Supply Chain Collaboration for Buyers provides an extra layer of visibility that has been sought in the subcontracting process, including component receipt and consumption notices from the supplier, as well as full business-to-business-level manufacturing visibility into the suppliers progress. | Procurement should be done in such a way that materials are ordered in correct quantity, with a proper value at the proper time. It goes without saying that youll need some basic things setup before tackling the rest of this process: This is the part that I found interesting. The rates quoted by the vendor for labour charges are mentioned in the purchase order line items. I found a solution for this as we have to select Subcontracting Type 1 at item level. Post it on our FORUM here --> SAP FORUM! The most straightforward way to support subcontracting processes is to use the standard subcontracting approach in the system. System automatically selects movement type 101 O (GR to SC Vendor). Theme: Baskerville 2 by Anders Noren. The SAP PRESS Blog is designed to provide helpful, actionable information on a variety of SAP topics, from SAP ERP to SAP S/4HANA. Now, when the subcontractor returned the materials after performing the workyou need to enter the received finished material back into the SAP system by using the transaction MIGO. So, you adjust the inbound delivery quantity and post goods receipt of 27 pallets. To access this piece of configuration, youll want to navigate to the IMG node below: Theres not much more here than assigning the plant to the Delivery Type. Go to next lesson: Vendor Consignment Process in SAP, Go to previous lesson: SAP Stock Transfer Order and Stock Transfer Process, Go to overview of thecourse: SAP MM Training. I've been blogging about SAP and various other interests since 2013. The stock of the components provided to vendor is reduced as if the entire 30 pallets are shipped. Really its very useful for content. Activating PR & PO Approval Notification. Maintain subcontracting MRP areas for all subcontracting suppliers requiring provision stocks to be planned separately from requirements. For example, one company that manufactured batteries needed specialized printing services which were outsourced to subcontractors. Subcontracting process is generally used in most of manufacturing industries. Finally, you save the subcontracting purchase order. We will do our best to consider your request. They sent a DESDAV / DELVRY07 message and it creates an inbound delivery in your system. Through VL31n tcode, we create the inbound delivery and the new batch for the material. A typical example in manufacturing would be assembly. but here the difference we are using FIORI UI instead of GUI Interface. Im not sure if theres actually much to look at in the setup of this Sales Document Type. Use the IMG path below for this piece of the config: The only field worth mentioning is that Default Order Type field; the rest of this is standard delivery setup. Create/Change/Display Procurement Info record App What is the process to create a RMA for a subcontract purchase order? When the manufacturing process has been completed, the subcontractor delivers the ordered product (incorporating the components provided) to the ordering party. Through Screen shots process is self explanatory. Tracking the materials and valuations, which technically still belong to the buying organization, becomes difficult using the standard process. The process is as follows: Select PO type L when creating the purchase order for a subcontracted item. Thanks for visiting. Subcontracting materials are sent to vendors for processing finished products. Process flow of basic subcontracting process with deliveries 1 - ME21N - Making Subcontracting Purchase Orders In order to create a subcontracting purchase order it is necessary to choose an item type 'Subcontracting': 'L' as highlighted in the screen below. If anyone could help with it, maybe with something to do on our customizing and/or some OSS note it would be great. For example, you can choose to create plants that are technically the suppliers locations and track your inventory as you move it to these locations for finishing. Finally Posting Invoice verification (Supplier Invoice). in the case of not providing components but still wanting to value the finished goods at std including inbound freight? Create/ Change/Display Supplier App We are sending and receiving same material and same serial numbers. Without knowing the error message, it is tough to diagnose the issue. System will allow to receive same serial number after subcontracting. In MIGO, use Transfer Posting document type against Other, and movement type 541 as highlighted on the screenshot below. Also it might be quite hard to spot at the first glance. Help. Please also include accounting-entries screenshots. How to manage serialized material for subcontracting repair? user will convert to PO. Itd be a big help for us, and hopefully its something we can address for you in improvement of ourfree SAP MM tutorials. if yes do you have example idoc. Here i have mentioned Subcontracting vendor creation, subcon info record and BOM creation with respect to FG material. Vendor shall process the item / use the item provided & supply the final item. Subcontracting refers to the process of entering a contractual agreement with an outside person or company to perform a certain amount of work. Our issue is that when creating an inbound delivery on the purchase order to be delivered to the subcontractor, quantity to be delivered "disappears" from the ME2O report. SAP PRESS is the world's leading SAP publisher, with books on ABAP, SAP S/4HANA, SAP CX, intelligent technologies, SAP Business Technology Platform, and more! In ME21N transaction, you need to select a Document Type and provide a Vendor as shown on the below screenshot: In the Item Overview screen, you need to use Item Category L which is used for subcontracting documents. The components that the vendor needs to manufacture the end product are specified in the subcontract order. Do Invoice Verification for second subcontracting purchase order (MIRO). Analytical/ Report related Apps in FIORI. Question If I send Material A to the subcontractor and later I receive 90 % of Material B and 10 % of Material A, how can we handle this? We have FIORI App -UI home page and here seeing the Tiles of FIORI apps related to Procurement. In previous versions of SAP ERP, component materials to be provided to the subcontractor could be planned as a separate stock. Thanks for your reply. Its being processed by subcontracting vendor, convert it to semi-finish material and deliver back. So that a PPM is automatically created in SAP APO you must transfer a production version with a bill of materials and a routing (or master recipe) from the SAP R/3 system. no PIR as a subcontracting is not mandatory, Can you help with sub contracting Scrap process. Thanks and Regards, Sapmm user Find us on Privacy Terms of Use In SAP APO it is not possible to change the dependent demand for subcontracting purchase requisitions. Create Supplier Invoice Apps or Incoming Invoice Apps. PR to PO Conversion/ Create PO/Change PO/Display PO/manage PO/My Purchase order App. Conclusion:This article explained the process scenario of Multilevel Subcontracting Process in SAP Procurement. Alerting is not available for unauthorized users, Right click and copy the link to share this comment. 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