In this blog, SAP Sourcing and Procurement consultant will be able to learn the concept and mapping procedure of Multilevel Subcontracting Process with Two Subcontractors in SAP system. This purchase order shows up in the ME2O transaction. Create Subcontracting vendor in FIORI. To illustrate with an example, your company manufactures lenses. Tracking the materials and valuations, which technically still belong to the buying organization, becomes difficult using the standard process. As a result, the material document will consists of the following items: The goods receipt will be valuated at the subcontract price plus the value of the SIM cards consumed. Posting an incoming supplier invoice. To receive material against the purchase order, SIM cards and packaging materials need to be issued to the subcontractor. Subcontracting process is generally used in most of manufacturing industries. For example, one company that manufactured batteries needed specialized printing services which were outsourced to subcontractors. Goods receipt items for the packaged SIM cards (end product) supplied by the vendor. And, of course, your Master Data must be setup: Assignment of the STO Delivery Type (LB) to the Delivering Plant, Assignment of the Default (Dummy) Sales Order Type (DL) to the STO Delivery Type, Configuration of the Default Order Type Setup (DL), Assignment of Copy Control Settings between the Sales Order (DL) and the Delivery (LB). Start it and selectDisplay against Material Documentwhile inputting thedocument number as shown below and click Enter. The vendor charges for his or her service. Be aware of this nuance when implementing electronic communication of inbound deliveries in subcontracting scenarios. Please explain detail steps and Tcode. Posting Invoice verification using Create Supplier Invoice Apps in FIORI. Process Flow. One of the workarounds was to decouple subcontracting goods receipt and components consumption with the modification from the note 654613 Batches and goods receipt for inbound delivery for provision of materials for subcontract order. Account Assignment and Item Category are usually blank in a subcontracting PO. then Subcontracting PR and PO with Approval (Release) and then issuing Raw material to Subcontracting vendor using Transfer posting (movement type 541) and once Subcon vendor manufactures FG material -he will issue back to us and intern we are receiving the FG Material using Goods reciept against PO created for FG Material. 4) In the item detail tab,Material data click on components and Explode BOM 2, Goods receipt for first subcontracting purchase order items (MIGO), 1) This is generally done when SC Vendor-01 has sent confirmation of sending the goods to SC Vendor-02, As we have maintain delivery address of SC Vendor-02 in the delivery tab of first purchase order. Get unlimited access to all SAP PRESS books! Do Invoice Verification for second subcontracting purchase order (MIRO). Very easy to understand now. I am a husband and father. The outside person or company in this arrangement is known as a subcontractor. Its being processed by subcontracting vendor, convert it to semi-finish material and deliver back. PR approval App Subsequent goods entry is booked automatically with these entries. We want to receive back MAT1-100020. Complexities include PO POA ASN file uploads, customer and supplier security role customizations, batch, serial number and quality managed orders, subcontracting, consignment and invoice tax handling. The components are then supplied to the vendor. the process is same as the ECC subcontracting Process. This enables you to assign information about the batches used and the component quantities in the inbound delivery. Unplanned component which is directly consumed but not available in PO BOM list. Theme: Baskerville 2 by Anders Noren. The invoice is posted. Creating a sales order for intercompany sales. 1) In the SPRO> MM>Purchasing>set up Subcontractor order>assigning plants to the delivery documet LB 2) I have created a Customer master record in the same sales area as Material and then assigned it to the Vendor Control data (Vice versa also setting done:cCustomer master record control data vendor assigned) It appears that you are limited to only one default Delivery Type per Plant. Can we send Serialized component details as well in DESADV? This blog is independent and NOT affiliated with SAP SE (the company behind SAP ERP system). This differs from classic SAP ERP for subcontracting, in which you could plan either with or without MRP areas. 3.Create PO with item category as "L" . The good receipt and the goods issue will be done simultaneously by the SAP system. Dear Experts, In Subcontracting process if the subcontracting period of 180 days is completed and if material is still with Vendor, how to complete the process. Every organization acquires material or services to complete its business needs. Please contact in case of any queries and clarifications. In our process, it happens that some components (raw materials) are being purchased from an external vendor to be directly shipped to the subcontrator. What do you think? Your usage of this website signifies your agreement with our terms and conditions. Sound off in the comments. Some components also come from our warehouses. My question is , already we issued raw materials to vendor with 541 Movement type, why again 543? There are relatively few logistics-related fields. In this process, components are shared to vendor to get the final product. Through Screen shots process is self explanatory. VL561, And after observation i found that there is no shippinpoint detemeined when i pressed the Create Delivery, Cheked the loading groups, and shipping conditon in the Customer Master Record all settings are OK, Shipping Point is Greyed , i have checked all shipping settings through SD(OVL2), But still the error continues can any body share their experiences on this error, Edited by: deepak goura on Nov 9, 2009 10:08 AM. This can be doneeither manually or through the use ofa BOM. Abhijeet - Thanks for sharing this blog. PR Created and purchase requisition sent to Approval. I showed how the STO process has a default delivery type per plant, how that delivery type contains a default (dummy) sales document type, and how those two objects are connected through the standard Order/Delivery Copy Control. Procurement should be done in such a way that materials are ordered in correct quantity, with a proper value at the proper time. Depending on the case it may be correct or not. Thx. Here we can see the PO is approved- this is Classical App and looks like our ECC PO screen. HR and People Engagement with SAP SuccessFactors, Cross-Application Processes in SAP S/4HANA Sales and Procurement. Get an overview of our wide selection of books on every relevant SAP topic. Without knowing the error message, it is tough to diagnose the issue. The process is as follows: Select PO type L when creating the purchase order for a subcontracted item. SAP MM Procure To Pay Architect (must be good in PP too) Starts 3/13 (or 3/15); duration: 3 + months Location: remote and onsite in Denver, CO - MST hours (local or west coast candidates preferred) This is an unofficial blog about SAP certification, SAP training, and other things related to one of the world's leading ERP system. Subcontracting refers to the process of entering a contractual agreement with an outside person or company to perform a certain amount of work. Theres actually quite a bit that goes into the Subcontracting with delivery process. Explore ABAP, FICO, SAP HANA, and more! If a purchase info record has been maintained, the service charges are defaulted into the purchase order. its plants), or indirectly (using another of its suppliers). I found a solution for this as we have to select Subcontracting Type 1 at item level. Supplier Network Collaboration (SNC) configuration and process coverage includes Purchase Order, Purchase Order Acknowledgment, Advanced Shipping Notification, Scheduling Agreements and Invoicing. View all posts by Michael. If the material is already available in the client own stock, it will be issued from the unrestricted use stock to the vendor. Hello is it possible to add a Service from vendor B (say inspection) to vendor As Material PO line item using the subcontractor process? The process uses what you could call a Dummy Sales Document Type. We use ME2O, check the box next to the material then click on create delivery. If none, a green light will turn on near Balance fieldand the SAP system will show you accounting document which will be created. -SUBCONTRACT-01(HALB) (Sp. Ive been blogging about SAP and various other interests since 2013. . I can not see the images Any idea why or how could I see them? Partial delivery to subcontractor is possible. Itd be a big help for us, and hopefully its something we can address for you in improvement of ourfree SAP MM tutorials. The system proposes the labor charge from the info record for the subcontracting product. Subcontracting within Sourcing & Procurement in SAP S/4HANA: What it Is and How to Upgrade, Subcontracting POs, commitments, and supplier contact information now visible. SAP Training Shop is not currently supported on Internet Explorer. Am I right or wrong? Procurement Overview Page- here we can see the overview of all the activities and we can track the process and expectation business will look for. ME2O after purchasing and before inbound delivery creation. 5.Receive the material against the PO with movement type 101. Subcontracting materials are sent to vendors for processing finished products. Delivery). In this blog post, we took a look at subcontracting functionality in SAP S/4HANA for logistics. Posting Transfer Posting stock from own stock to Sub contractor . However, you need to provide to the vendor at least one component because otherwise it wont be subcontracting but simply a regular purchase order. 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. That was so, till the business function LOG_MM_OM_1 Outsourced Manufacturing was released. Standard Process Flow ME21N - Purchase order creation MIGO_TR - Send components to a subcontractor A subcontracting purchase order is placed by converting the subcontracting requisition into a purchase order. You only have to maintain entries in the material masters if special situations exist for lot sizing, purchase requisitions/orders, and/or third-party order processing. Can you please explain about accounting entries in subcontracting? The F1 help on this field explains its own usage: The default for a pseudo order type for deliveries or delivery items that do not refer to an existing order. Option- 2 User without login to each and every Individual PO -he/she can approve directly form FIORI Home page -Inbox part. Thanks a lot. 2.Maintain the BOM for the material. Upon issuing a subcontracting PO and shipping out the components to the supplier, the buyer doesnt technically receive updates on the production of the order until the final product or subassembly with the components is shipped back from the supplier to the buyer. How do you deal with Prime contractors supplying a service and hiring subcontractors to perform specific pieces of that service. Searching PR creation apps in Apps Finder in FIORI screen. They are summarized below: A material BOM needs to be created before any subcontracting order can be placed. Sir, This tutorial will provide detailed guidance about working with subcontracting in SAP ERP system. Below are the steps involved in this process. Create/ Change/Display Supplier App Total available inventory at the subcontractor is 176 packs, which is correct. 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). Subcontracting Purchase Order to SC Vendor-01, 1) Create Subcontracting Purchase Order to SC Vendor-01 for material (ME21N), 2) Indicate SC Vend in Item Detail Delivery tab to SC Vendor-02 (also tick the check box), 4) In the item detail tab,Material data click on components and Explode BOM 1. Info button. if yes do you have example idoc. 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. Delivery Basics like logistics defaults, pricing for freight, and partner determination have to come from somewhere. Again that is confirmed by the note 1397948 Subcontracting: Components cannot be provided using IDoc /SPE/IDOC_INPUT_DESADV1: If, contrary to the standard design, you want an automatic correlation, this is only possible by making a modification in the class CL_SHP_LECOMP_CONTROL, method IF_EX_SHP_DESADV_IN~PROCESS_SEGMENT. Configuring intercompany sales. Can you explain how to do this process without BOM?? Now, during unloading you realize that 3 pallets are missing. At the time of invoice receipt a liability is created against the vendor. 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. It brought: Subcontracting Components in Inbound Deliveries. What is the process to create a RMA for a subcontract purchase order? Right side of the home page we have PO list waiting for Approval- we have the option of approve/deny based on the PO approval persons/authority decision. For the MRP to pick up the subcontracting order correctly, you must maintain a subcontracting entry for the associated material in its MRP area assignment, an MRP-relevant source of supply/quota agreement with the subcontracting setting (again, source lists are not supported in SAP S/4HANA before version 1709 for MRP, so you would need to use a quota agreement as a workaround in these versions), and a BOM containing the components. This material stock is posted in our plant storage location. It would have been nice if SAP had provided a BAdI enhancement here. The subcontractor converted the raw sims into finished sims well packed and returned finished product back to the company. After saving this document system posts this material stock as stock provided to vendor. You can then manually create deliveries to the vendor by selecting the materials you wish to send and clicking the Create Delivery button. When the manufacturing process has been completed, the subcontractor delivers the ordered product (incorporating the components provided) to the ordering party. Required fields are marked *. System automatically selects movement type 101 O (GR to SC Vendor). You create a delivery for the lenses to be shipped to your vendor. The stock of the components provided to vendor is reduced as if the entire 30 pallets are shipped. When the subcontractor receives the raw SIM cards at his premises, he will inform the client and a goods receipt will be posted with reference to the purchase order increasing the subcontractor stock in the system. This is possible with or without creating a delivery. The consumption of the components is posted. Activating PR & PO Approval Notification. Post Goods Receipt (MIGO) on receipt of the finished product E from the Subcontractor Procurement Overview page Apps. The first line corresponds to the goods receipt of the final product, whereas the second two lines correspond to theissue of components which you provided to the subcontractor earlier. It's a very good blog - thank you! Really its very useful for content. The most straightforward way to support subcontracting processes is to use the standard subcontracting approach in the system. Legal Disclosure | Subcontracting is one of the procurement processes available in MM. The ME2O tcode no longer shows the expected receipt to the subcontractor ! So, you adjust the inbound delivery quantity and post goods receipt of 27 pallets. Create/Change/Display Procurement Info record App Some supplier relationships require you as the purchasing organization to provide the supplier with the components used in their part of the value creation. Keep up-to-date with SAP information and training. Billing the customer. Thanks. Your email address will not be published. When delivery papers are needed, a delivery should be created. Subcontracting components in an inbound delivery via DESADV IDoc Context Subcontracting purchasing with inbound deliveries used to be a paint due to problems with components provided to vendor processing - see the notes: 645119 - Problems for subcontracting using delivery Read More LE (Logistics Execution)MM PurchasingSAP ERPSAP S/4HANA 9 Proc 30). Subcontracting will appear under the general plant stock if there is no MRP area maintained for the supplier. Your email address will not be published. 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. 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. I believe, It will be helpful and will provide sufficient information to the readers. Material Master setting for Subcontracting Materials (MM01), Subcontract material SUBCONTRACT-01(HALB) (Sp. 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. 3.Create PO with item category as "L" . Thanks for reading. So it will automatically explode when we create purchase order. Can we have subcontracting order without BOM/Components. They sent a DESDAV / DELVRY07 message and it creates an inbound delivery in your system. In this scenario as shown in below structure, two raw materials (SUBCON-RM01 & SUBCON-RM01) are provided to first subcontracting vendor (SC Vendor-01). Simple and in an easy language. 2.Maintain the BOM for the material. Then, expertly run your system after go-live with predictive analysis and machine learning. 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. This is where you maintain all the components which need to be sent to the vendor. Mapping procedure of a given scenario in SAP system. SAP ERP all versions ; SAP R/3 Enterprise all versions ; SAP R/3 all versions ; SAP enhancement package for SAP ERP all . SAP MM - Procurement Process. First, well start with. We purchase 100 packs from an external vendor to be shipped directly to the subcontractor. Analytical apps related to PR, PO, GR, IV- 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. Visit SAP Support Portal's SAP Notes and KBA Search. In subcontracting process, raw materials are provided to subcontracting vendor. Also it might be quite hard to spot at the first glance. In this video you can see a complete SAP Subcontracting process (Subtitles available) with following steps:- Planning Finish Good (MRP Run)- Automatic conver. The system will generate a purchase order number internally. Many a times, more than one subcontractor is used for manufacturing at different level of BOM. Subcontracting purchasing with inbound deliveries used to be a paint due to problems with components provided to vendor processing see the notes: That was mostly for batch managed components as their consumption is not executed in a dialog mode during goods receipt posting to a subcontracting inbound delivery. Now, lets display thedocument that we have just created. Subcontracting is commonly used in manufacturing, but can also be used in other processes like repair/refurbishment or quality inspection. 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. The materials that are provided to the subcontractor are managed as stock provided to a vendor. Nice docs. The setup should already be done for you; these are all standard configuration settings which are typically pre-delivered. Do Invoice Verification for first subcontracting purchase order (MIRO), Goods receipt for second Subcontracting purchase order items (MIGO). You order the end product using a subcontract order. Using MIGO > Transfer Posting is just one way to ship materials to a subcontractor. Thanks and Regards, Sapmm user Find us on Privacy Terms of Use However, the integration with an SAP ERP system requires at least SAP ERP 2005 with Enhancement Pack 03. However if they have never been shipped due to a loading problem on the subcontractor side, that is definitely not ok. A subcontracting product is valued with the price of the service plus the cost of the components. 6.MIRO to account for vendor's invoice for the service charge& material used by him. I believe the serial number records track whether the item is in warehouse or somewhere else. (It is already delivered). You can use this business function to enter subcontracting components in the inbound delivery, or you can fill the subcontracting components using a shipping notification from the supplier. Plastic boxes were provided to subcontractorsand they did required printing on these boxes. Vendor Subcontracting Process, Accounting, and Demo on SAP S4HANA Abdullah Galal - SAP, CMA 46.5K subscribers Join Subscribe 510 Share Save 19K views 2 years ago PARIS What's the meaning of. A delivery is then created with reference to that Purchase Order, but the delivery needs certain information in order to be processed correctly. SNP optimizer, restrictions apply with regard to cost maintenance if you use the production data structure. Sales Order) to the destination (i.e. 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. Material document posted and stock is placed in our location. This approach requires more manual effort and accounting acrobatics than is optimal. Finally, click on Post button to post the document. SAP process: 1.Create the finished goods material code. Thanks for the question, Kumar. Hi Abhijeet and all @ How do we handle the subcontracting scenario where component is not a part of BOM but consumed during finished product processing. Create Supplier Invoice Apps or Incoming Invoice Apps. Creating Bill of Material for Subcontracting in FIORI. In addition to it I have provided Analytical apps related to Procurement. Try to test the IDocs with WE19 transaction. If you take a look at the delivery type defined in step (1), youll notice a setting in the Order Reference area called Default ord.ty.. Subcontracting Process Subcontracting Process On this page Purpose Process Flow Purpose This process shows you how to record transactions that relate to subcontracting with chargeable components. Some components also come from our warehouses. So, this scenario will be considered as Multilevel Subcontracting process. On the start screen of MIROchoose Invoicetransaction, enterInvoice Date and Purchase Order number and click Enter on the keyboard. 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. The SIM cards will be issued with reference to the subcontract purchase order. 2. Is there a process to bring components back from the Subcontractor . You can have it without BOM by entering all the components manually. A subcontractor provides a product on pallets and they notify a shipment of a full truck load, of say 30 pallets. 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. Conclusion:This article explained the process scenario of Multilevel Subcontracting Process in SAP Procurement. See the future of sourcing and procurement! Therefore the 27 pallets received will be 10% more expensive than planned. Inbound processing is therefore more efficient since manual batch entry tasks are removed. I am a husband and father. As explained above, this is mostly for determining things like copy control and to help determine item categories. 2) Keep delivery address to plant as by default. Im going to highlight the standard configuration as it exists within a standard S/4 HANA system. The Latest ERP from SAP. I suspect, however, that the issue is that perhaps the status of the serial number is not being updated properly. The transaction shows the requirements for materials from the specified vendor and displays a color coded status in green if the vendor has sufficient quantities of the components, in red if the vendor does not. Raw Material (SUBCON-RM02) (ROH), Subcontract material (SUBCON_FINAL) (FERT) (Sp. Adding this value will open up the Components button located on the item Material Datatab. Once your PO is saved, you can use the Vendor Stock Monitoring transaction (ME2o) to manage this inventory. But SAP does not give here any flexibility. 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. 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