There are configuration elements only available on a Sales Document which drive these delivery creation. We only pay the prime contractor, prime pays the subs. Proc 30) To do it, click on Doc. Info button. Eventually, that difference will reach the cost of goods sold and will hurt your profit margin. As mentioned previously, the STO keys off of a Purchase Order. A subcontractor provides a product on pallets and they notify a shipment of a full truck load, of say 30 pallets. ERProof SAP MM SAP MM Training Subcontracting Process in SAP. This can be doneeither manually or through the use ofa BOM. Nice docs. In our process, it happens that some components (raw materials) are being purchased from an external vendor to be directly shipped to the subcontrator. These components are usually associated with a BOM. Very easy to understand now. Without knowing the error message, it is tough to diagnose the issue. (here material and components are MAT1 only). It's a very good blog - thank you! 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. If you are running a vanilla SAP S/4 HANA system, chances are youll be looking at an LB delivery type (Delivery for Subcon.). if yes do you have example idoc. 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. Material document posted and stock is placed in our location. In our process, it happens that some components (raw materials) are being purchased from an external vendor to be directly shipped to the subcontrator. 2.Maintain the BOM for the material. Subcontracting with multiple production versions is supported. Any one help me to this query ASAP? Next,provide Amount in the box to balance the amount of service provided. Thanks a lot. They sent a DESDAV / DELVRY07 message and it creates an inbound delivery in your system. It is likely to slip through tests and bite you only down the road. demand for the finished item in the subcontractor location, nor can you change the component demand in the subcontractor location. with regards to the following during MIGO Thanks a lot!!!! The SIM cards will be issued with reference to the subcontract purchase order. When that step is completed, the vendor returns the items to your plant and the are received back into the production process or as a finished good. 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. Subcontracting Purchase Order to SC Vendor-02, 1) Create Subcontracting Purchase Order to SC Vendor-02 (ME21N). The first line corresponds to the goods receipt of the final product, whereas the second two lines correspond to the issue of components which you provided to the subcontractor earlier. Next, click OK checkboxes as shown below. If there are any additional charges required, you input them in the Conditions tab as shown on the screenshot below. Subcontracting will appear under the general plant stock if there is no MRP area maintained for the supplier. List Material document Apps This approach requires more manual effort and accounting acrobatics than is optimal. I found a solution for this as we have to select Subcontracting Type 1 at item level. 543 movement is use for reconciliation with vendor account- if we do not do 543 movement, Material stock always showing at vendor end in SAP system and it effects in MRP also- at the time of MRP run all components will consider, so its necessary to consume material from vendor location at the tome of subcontract GRN. System automatically selects movement type 101 O (GR to SC Vendor). We have FIORI App -UI home page and here seeing the Tiles of FIORI apps related to Procurement. Option- 2 User without login to each and every Individual PO -he/she can approve directly form FIORI Home page -Inbox part. That is confirmed by the note 1397948 Subcontracting: Components cannot be provided using IDoc /SPE/IDOC_INPUT_DESADV1. Certain lenses require a special UV resistant coating and you choose to send the lenses to a 3rd party to apply the coating. the process is same as the ECC subcontracting Process. Get unlimited access to all SAP PRESS books! As the worlds leading SAP publisher, SAP PRESS goal is to create resources that will help you accelerate your SAP journey. When the manufacturing process has been completed, the subcontractor delivers the ordered product (incorporating the components provided) to the ordering party. Sales Order) to the destination (i.e. Depending on the case it may be correct or not. Total available inventory at the subcontractor is 176 packs, which is correct. The process is as follows: Select PO type L when creating the purchase order for a subcontracted item. 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. Sound off in the comments. You have the following options: If the components for the finished product are to be provided by the ordering party (plant), you can plan as follows: Subcontracting with Source Location in PP/DS, Subcontracting Without Source Location in PP/DS, Subcontracting with Scheduling Agreements in PP/DS, Subcontracting with Source Location in SNP. You can have it without BOM by entering all the components manually. Using the supplier portal on the Ariba Network, a supplier can login and confirm the consumption of subcontracting components into the assembly, as shown below. A Dummy Sales Document type is used to allow things like Copy Controls to be used for this unique process. Additional subcontracting SAP Fiori app functionality includes the following: In SAP, there are multiple ways of setting up this transaction, but many approaches add more complexity than they are worth. PR creation through FIORI Apps- Create PR apps. 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.. Billing the customer. It brought: Subcontracting Components in Inbound Deliveries. Very useful content , Thanks for sharing with us. Please elaborate little confuse about details. Second subcontracting vendor process it further and produce finish material (SUBCON_FINAL) and finally send it to the warehouse of procuring plant. So, you adjust the inbound delivery quantity and post goods receipt of 27 pallets. Analytical/ Report related Apps in FIORI. Sub contracting Info Record Created in FIORI. Finally, you save the subcontracting purchase order. If you elected to plan without MRP areas, you werent able to use the full functionality around lot sizing and were only able to order full lot sizes. 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. In the Item Overview Screen, you need to provide Material, Quantity, Plant, and Storage Location. The materials that are provided to the subcontractor are managed as stock provided to a vendor. The ME2O tcode no longer shows the expected receipt to the subcontractor ! Thanks for visiting. When the vendor delivers the ordered packaged SIM cards (the end product), the goods will be received against the finished product with reference to the purchase order. The vendor charges for his or her service. Proudly powered by WordPress 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. Another example of the subcontracting process in SAP is whena company provided raw sims and packaging materials to a subcontractor. 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! Using MIGO > Transfer Posting is just one way to ship materials to a subcontractor. Then, expertly run your system after go-live with predictive analysis and machine learning. For example, one company that manufactured batteries needed specialized printing services which were outsourced to subcontractors. Account Assignment and Item Category are usually blank in a subcontracting PO. Here in the highlighted box you provide the number of your subcontractor. 1) Post Goods Issue according to the Purchase Order number (4500000863) above. 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. Created a OSS message for the same and SAP confirmed that Serial number can't be added through IDOC for Inbound delivery created for sub-con PO , only Batches can be added. Be aware of this nuance when implementing electronic communication of inbound deliveries in subcontracting scenarios. In this process, components are shared to vendor to get the final product. Visit SAP Support Portal's SAP Notes and KBA Search. Thats about it. The rates quoted by the vendor for labour charges are mentioned in the purchase order line items. For a premium experience please use an alternative browser. Some supplier relationships require you as the purchasing organization to provide the supplier with the components used in their part of the value creation. 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. We want to receive back MAT1-100020. We use the ME2O transaction to manage inventory at the subcontractor, and we use inbound deliveries on all our purchasing processes (inbound deliveries are used through VL06i to provide the subcontractor a report with incoming receptions, and to create batches). Next, click OK checkboxes as shown below. 5.Receive the material against the PO with movement type 101. I believe, It will be helpful and will provide sufficient information to the readers. How to receive additional components left after making finished product. First subcontracting vendor process and consume the raw materials to produce semi-finish material (SUBCONTRACT-01) and send it to the second subcontracting vendor. A good explanation of Subcontracting process for 2 level. Read on for more about the SAP Subcontracting PO Delivery Setup. The invoice is posted. Subsequent goods entry is booked automatically with these entries. 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'm looking forward for the next ones , Thanks for sharing. Through VL31n tcode, we create the inbound delivery and the new batch for the material. 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. Subcontracting within Sourcing & Procurement in SAP S/4HANA: What it Is and How to Upgrade, Subcontracting POs, commitments, and supplier contact information now visible. Available quantity at the subcontractor is back to 76 packs, where the real information is 176 packs. If the material is managed with batches, a batch number will be shown as well. Using PO creation App in FIORI we are creating PO with reference to PR. 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. PR approval App Thanks for your reply. it is more useful apps. 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. However, there is no copy control from an STO PO to an SD Delivery. if they are ok with the PO then they can approve it else deny the PO. 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. But SAP does not give here any flexibility. 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) Not the perfect solution but better than nothing. 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. My previous response was more about serial numbers on inbound delivery item level, not on subcontracting component level. SAP Menu Path to ME21N Transaction In ME21N transaction, you need to select a Document Type and provide a Vendor as shown on the below screenshot: Display Material document App If the material is already available in the client own stock, it will be issued from the unrestricted use stock to the vendor. Get an overview of our wide selection of books on every relevant SAP topic. In previous versions of SAP ERP, component materials to be provided to the subcontractor could be planned as a separate stock. How to Configure SAP S/4HANA Asset Maintenance Subcontracting. What do you think? The consumption of the components is posted. You create a delivery for the lenses to be shipped to your vendor. Here we can see the FG and related Raw Materials. 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. Proc 30). Thanks for reading. When delivery papers are needed, a delivery should be created. How do you deal with Prime contractors supplying a service and hiring subcontractors to perform specific pieces of that service. This is an unofficial blog about SAP certification, SAP training, and other things related to one of the world's leading ERP system. 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) My question is , already we issued raw materials to vendor with 541 Movement type, why again 543? 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. Thanks for visiting. The most straightforward way to support subcontracting processes is to use the standard subcontracting approach in the system. 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. . Is the Info record mandatory in subcontracting ? So, how does SAP know when and how to copy data between these two objects? Creating a third-party purchase order. The system will open a window with the list of documents in accounting. View all posts by Michael. using Transfer posting Option and movement type 541. ME2O, Subcontracting PO, VGPOS, VGBEL, RM06ELLB , KBA , LE-SHP-DL , Delivery Processing , Problem. Please note the movement types used: 101 for Goods Receipt and 543 for Issue of Components. Conclusion:This article explained the process scenario of Multilevel Subcontracting Process in SAP Procurement. 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. Invoices will be entered in the system against the purchase order. See the future of sourcing and procurement! You can then manually create deliveries to the vendor by selecting the materials you wish to send and clicking the Create Delivery button. Online Help Keyboard Shortcuts Feed Builder What's new Later, the subcontractors returned the boxes back to the client. 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. 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. Delivery Basics like logistics defaults, pricing for freight, and partner determination have to come from somewhere. They charged the company for their services rendered. 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. ME2O after purchasing and before inbound delivery creation. We would be happy to hear your feedback or questions. 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. Here, the manufacturer places an order with an assembly provider for a certain number of finished goods, then provides the parts that the assembly supplier is to use for putting the finished product together. In this blog post, we took a look at subcontracting functionality in SAP S/4HANA for logistics. Save my name, email, and website in this browser for the next time I comment. Your comprehensive guide to SAP S/4HANA sourcing and procurement is here! The good receipt and the goods issuewill be done simultaneously by the SAP system. 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. A subcontractor provides a product on pallets and they notify a shipment of a full truck load, of say 30 pallets. Also it might be quite hard to spot at the first glance. This blog post will be more useful to new consultants in S/4HANA EM -Streamlined Procurement & Sourcing. Therefore no need to transfer the material through ME2O. Finally, it is necessary to click Post button to save the document. Maintain subcontracting MRP areas for all subcontracting suppliers requiring provision stocks to be planned separately from requirements. Explore ABAP, FICO, SAP HANA, and more! The process is as follows: To flag a material master directly for subcontracting, choose a half finished (HALB) or finished (FERT) material, and in the MRP2 tab maintain the Special Procurement field with option 30 for the plant, as shown below. Can you please explain about accounting entries in subcontracting? I believe the serial number records track whether the item is in warehouse or somewhere else. a reverse of me2o ? Can we have subcontracting order without BOM/Components. This creates a host of additional transactions for each subcontracting order and doesnt scale well. Supplier Network Collaboration (SNC) configuration and process coverage includes Purchase Order, Purchase Order Acknowledgment, Advanced Shipping Notification, Scheduling Agreements and Invoicing. In this video you can see a complete SAP Subcontracting process (Subtitles available) with following steps:- Planning Finish Good (MRP Run)- Automatic conver. PR Created and purchase requisition sent to Approval. user will convert to PO. External subcontracting in procurement Create purchase order Approve purchase order (optional) - Approval Process not Transfer stock for subcontractor with delivery Process deliveries and picking Transfer stock for subcontractor without delivery Goods receipt for subcontract order (without WM) Record results Record usage decision Verify invoice Do you have a question and want it to be answered ASAP? Analytical apps related to PR, PO, GR, IV- This enables you to assign information about the batches used and the component quantities in the inbound delivery. The procuring entity may provide these components to the subcontractor either directly (using one of You cannot change the transfer Alerting is not available for unauthorized users, Right click and copy the link to share this comment. Steps to perform subcontracting: Create subcontracting Info record (Optional) - T Code - ME11 The subcontractor converted the raw sims into finished sims well packed and returned finished product back to the company. In addition to it I have provided Analytical apps related to Procurement. Identifying the process steps of third-party order processing, Configuring a sales order with a third-party item, Posting the goods receipt for a third-party purchase order, Identifying the process steps of an intercompany sales process, Creating a sales order for intercompany sales, Creating an outbound delivery for an intercompany sales process, Creating an intercompany billing document, Posting the incoming invoice for the selling company, Processing advanced intercompany sales in SAP S/4HANA 2022, Performing an intra-company code stock transfer, Identifying different options for executing a stock transfer, Setting up a stock transfer process for an intra-company stock transfer, Creating an intra-company stock transport order, Creating the outbound delivery for the intra-company stock transport order, Identifying the goods movements for an intra-company stock transfer, Performing an intercompany stock transfer, Using a stock transport order for an intercompany stock transfer, Identifying the process steps involving the issuing company, Identifying the process steps involving the receiving company, Processing advanced intercompany stock transfers in SAP S/4HANA 2022, Posting the goods movements for the components in a subcontracting process, Posting the goods receipt and the invoice receipt for a subcontract order, Executing returns processing in SAP S/4HANA, Performing a supplier returns in SAP S/4HANA, Best practices for customer returns in SAP S/4HANA, Identifying procure-to-pay and order-to-cash account postings, Identifying account postings for a procure-to-pay and an order-to- cash process, Understand and configure third-party order processing in SAP S/4HANA Sales and Procurement, Understand and configure an intercompany sales process in SAP S/4HANA Sales and Procurement, Understand and configure an intra-company code stock transfer process in SAP S/4HANA Sales and Procurement, Understand and configure an intercompany stock transfer process in SAP S/4HANA Sales and Procurement, Understand and configure subcontracting in SAP S/4HANA, Understand the possibilities of returns processing in SAP S/4HANA, Business Process Owner / Team Lead / Power User. 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Is necessary to click post button to save the document charges required, you input them in subcontractor. Resistant coating and you choose to send and clicking the create delivery button do it, click Doc. Order and doesnt scale well a subcontracted item invoices will be entered in the subcontractor location, nor you! There is no MRP area maintained for the supplier with the PO with reference to PR )! It without BOM by entering all the components manually subcontract Purchase order to SC,!