Subcontracting Process in SAP

In the Subcontracting Process, the materials are supplied to a vendor in order to perform a value added service to the material.

The following screenshot explains the process more:

The company gives a subcontracting order to the vendor mentioning the details of the services that he is required to perform. Then the components required to manufacture the final product are supplied to the vendor. Once the vendor, completes his services, he will send the material back to the plant and send an invoice for the services performed.

In the Subcontracting process, the finished material which is to be fabricated by the vendor is supplied with the necessary components in the Purchase Order.

The following characteristics are required:

1. Subcontracting Info Record with a valid price is mandatory for the finished product.

2. Item Category "L" is to be used in the Purchase Order.

3. The components required for the activity are to maintained in the Purchase Order Material Data tab.

Consider the following example to understand the process in a better way:

Material X is to be manufactured by Vendor  using the components Material A and Material B. In order to manufacture Material X - 10 qty, the required quantity of components Material A - 10 qty & Material B - 10 qty are to be supplied to the Vendor. Now, once the Vendor completes the task, he supplies the finished material back to the plant and sends an invoice for the services performed.

STEP 1:

Create the following Material Master Records in MM01:

a. Material X 

b. Material A

c. Material B

STEP 2:

Create a Subcontracting Info Record in ME11, for the Purchasing Organisation and the Plant.

Enter the necessary data to create an info record and save it. 

STEP 3:

a. Create a PO in ME21N using the document type 'NB' and Item category 'L'.

b. Enter the Material X in the Item Data and quantity 100.

c. Go to Item Detail - Material Data Tab and enter the components details in the Components Objects List

d. Enter the components details as shown below:

e. Press Back and save PO.

STEP 4:

Go to MIGO post a Transfer Posting using Movement Type '541'

Similarly add the Material B as well, in the transfer posting document and supply the material to the vendor.

Note: For this transaction there will not be any Accounting Document generated, as the materials supplied to the vendor are still maintained under the category 'Stock Provided to Vendor'

The same goods issue activity can be done from the transaction ME2O. 

The list displays the amount of quantity which needs to be supplied to the vendor and also shows the amount of quantity which is already with the vendor. By clicking the Post Goods Issue icon, the system automatically posts the Goods Issue for the material.

STEP 5:

Post a Goods Receipt in MIGO for the PO using Movement Type '101'.

When the PO is entered in the MIGO screen, the system retrieves the components supplied to the vendor and posts them automatically with a Movement Type '543' by consuming the quantities supplied to the vendor. 

STEP 6:

The PO History will be updated with only the details of the Goods Receipt done against it. 

STEP 7:

Perform the invoice against the PO.


Highlights:
1. In case if vendor requires more quantity for carrying out the services, the additional quantity can be issued same way using MIGO or ME2O.
2. If there is a lesser consumption during the service and the vendor returns the unused material, it can be received back back posting a Transfer Posting using Mvt Type '542'.
3. If there are any By Products generated during the process, it can be updated in the system by adding a line item in the GR '101' when the vendor returns the finished material along with the By Product. This can be done using the Mvt Type '545' in the same document. The material is not transferred from the vendor during this activity for which a transfer posting is to be performed from the vendor's location using Mvt Type '542'.
4. For the case of Bill of Materials (BOM) instead of adding the material in the PO, use BOM in place of it.