Subcontracting In SAP

Below are the steps of subcontracting:

1. For a production material (1001), one raw material (2001) is assigned.
2. Production process of 1001 is having four operations 10, 20, 30 and 40.
3. In this 10, 30, and 40 are internal operations and 20 is external operation (sub-contracting).
4. To address this, we created a dummy material (non-valuated) and named as 1001-20 (Finished
product number + Operation to be performed).
5. This 1001-20 should form part of the component in BOM of 1001. That is BOM of 1001 will
have components as raw material 2001 and this dummy material 1001-20. In routing, assign this
dummy material 1001-20 to operation 20.
6. During BOM creation, you should remove costing relevancy for the item 1001-20.
7. In routing, operation 20 is created with a work center (which is external operation work
center) with exteranl operation control key.
8. In operation details, for external processing, assign the info record of external processing.
9. Info record of external processing has to be created for vendor with relevance to the operation
to be performed externally with vendor. (We are using material group field in the external
processing in routing operation).
10. When create production order with above set up, system will create Purcha Req for external
operation. This has to be converted to purchase order.
11. Now, this dummy material should be kept as 5000 or 6000 in stock using 561. When
Purchase order is raised, required quantity has to be moved to vendor using 541. When we do
goods receipt the stock with vendor shall come down. With this, we can monitor the material
(with dummy material number) stock with vendor (please note we can see only quantity and not
value) .
12. When we do GR for external purch order, we receive only the operation performed. (So,
coversion cost to vendor shall be paid).
13. After ensuring GR is done, order confirmatin of operation 0020 has to be done. (here we
capture the quanttiy and also the valuation of material in production order).
Jidnesh Patil

Subcontracting - Key Points

Special Procurement Process.
Item category: L
Order type: NB
In info record vendor should be maintained as subcontractor.
Vendor (Subcontractor) receives the components used to manufacture a finished product directly
from your company or through third party.
Your company should place a purchase order for the finished product. In this manually you can
enter the required individual components or it can be determined via the explosion of BOM (if
exists).
Stock check at vendor level: ME2O
Company stock check: MMBE
GR for individual components through movement type: 501 or 561 (if with out PO or without
reference).
GI to subcontracting vendor: through movement type 541.
GR from sub contracting vendor: through movement type: 101
Movement type 543 is displayed to cancel the material cost account.
If the subcontracting order has to be generated through materials planning,the special
procurement key has to be set in MRP 2 screen.
SAP MM Tips by : Sundaramoorthi
Email
: ra.sundar@yahoo.com