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 is likely to slip through tests and bite you only down the road. Also it might be quite hard to spot at the first glance. This is done when SC Vendor-02 sent finished product to our warehouse. Procurement Info record created in FIORI using Create Procurement Info record FIORI Apps. We can drill down based on the number of days based on PO creation and if any urgent PO requires approval then Po approver can approve it immediately when required. At the time of invoice receipt a liability is created against the vendor. The most straightforward way to support subcontracting processes is to use the standard subcontracting approach in the system. Create/Change/Display Procurement Info record App To receive material against the purchase order, SIM cards and packaging materials need to be issued to the subcontractor. The process of buying materials and obtaining services from vendors or dealers is called procurement. Delivery of components to subcontracting vendor (ME2O) Subcontracting with multiple production versions is supported. The procuring entity may provide these components to the subcontractor either directly (using one of 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. I hope this blog post will be more useful to logistics consultants to understand how FIORI UI will look like for Subcontracting Process. Executing an intercompany sales process. You create a delivery for the lenses to be shipped to your vendor. The SIM cards supplier will be instructed to deliver the raw material at the subcontractors premises. 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. See the future of sourcing and procurement! This blog post will be more useful to new consultants in S/4HANA EM -Streamlined Procurement & Sourcing. Have you had to do much with your default SAP STO Delivery Setup configuration? When delivery papers are needed, a delivery should be created. As the worlds leading SAP publisher, SAP PRESS goal is to create resources that will help you accelerate your SAP journey. Do you need to create a recipe for sub-contracting process? Online Help Keyboard Shortcuts Feed Builder What's new 2) Keep delivery address to plant as by default. 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) . Again, that is not necessarily bad, depending on your accounting policies and the specific case. . 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: (It is already delivered). using GR for Purchase order with Movement type 101. The system will open a window with the list of documents in accounting. Click on Simulate button which will notify you of any errors. 6.MIRO to account for vendor's invoice for the service charge& material used by him. Create/Change/Display Bill of material (BOM) App Your email address will not be published. For example, assume you create a subcontract order for the assembly of 10 engines. The components are posted to the stock of materials provided to the vendor. 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 Learn how to integrate SAP S/4HANA with SAP Ariba, SAP Fieldglass, and more. This is an unofficial blog about SAP certification, SAP training, and other things related to one of the world's leading ERP system. 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. The SAP PRESS Blog is designed to provide helpful, actionable information on a variety of SAP topics, from SAP ERP to SAP S/4HANA. At the time of receipt, the raw materials for each order item will be determined and the system will create a goods issue accounting entry item for each raw material. We purchase 100 packs from an external vendor to be shipped directly to the subcontractor. 3) Enter Net Price (Processing cost) 4) In the item detail tab,Material data click on components and Explode BOM 2 Goods receipt for first subcontracting purchase order items (MIGO) Next,click on Check button to check whether the document is OK. How to edit personnel no. with regards to the following during MIGO 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. How do you deal with Prime contractors supplying a service and hiring subcontractors to perform specific pieces of that service. Ive been blogging about SAP and various other interests since 2013. Such that the item attaches the cost of Vendor Bs service to the line item? 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. Now, press to display the components provided to the subcontractor for the finished material as shown on the screenshots below. 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. Later, the subcontractors returned the boxes back to the client. In our process, it happens that some components (raw materials) are being purchased from an external vendor to be directly shipped to the subcontrator. Thank you, helped a lot. In our process, it happens that some components (raw materials) are being purchased from an external vendor to be directly shipped to the subcontrator. The good receipt and the goods issue will be done simultaneously by the SAP system. The bill of materials (BOM) is a formally structured list of the components that make up a product. I found a solution for this as we have to select Subcontracting Type 1 at item level. 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. A good explanation of Subcontracting process for 2 level. Please let me know in the comments. The vendor performs its service and delivers the ordered material (the end product). Some supplier relationships require you as the purchasing organization to provide the supplier with the components used in their part of the value creation. Procurement should be done in such a way that materials are ordered in correct quantity, with a proper value at the proper time. 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). Unfortunately they did not. 4.Issue material to vendor with movement type 541 5.Receive the material against the PO with movement type 101. Also how to reverse the Cenvat Credit.And how cmplete/reconcile the challan. Subcontracting refers to the process of entering a contractual agreement with an outside person or company to perform a certain amount of work. You order the end product using a subcontract order. Hit enter to search. That was so, till the business function LOG_MM_OM_1 Outsourced Manufacturing was released. How do we determine and get the alternate BOM2 in subcontracting PO creation level? Have any questions or comments? Did you learn something new? How I need to set up the process and BOM? Alerting is not available for unauthorized users, Right click and copy the link to share this comment, Approve purchase order (optional) Approval Process not, Transfer stock for subcontractor with delivery, Transfer stock for subcontractor without delivery, Goods receipt for subcontract order (without WM). A subcontractor provides a product on pallets and they notify a shipment of a full truck load, of say 30 pallets. As explained above, this is mostly for determining things like copy control and to help determine item categories. Subsequently, the IDoc inbound scenario DESADV / DELVRY07 was enhanced to support subcontracting components in inbound deliveries communicated electronically the note 1397948 Subcontracting: Components cannot be provided using IDoc /SPE/IDOC_INPUT_DESADV1, The problem with the above solution is that subcontracting components quantities transferred with DESADV / DELVRY07 message get fixed in the inbound delivery. The provision is a transfer posting from the unrestricted use stock to the stock of material provided to a vendor. A subcontracting purchase order is placed by converting the subcontracting requisition into a purchase order. Raw Material (SUBCON-RM02) (ROH), Subcontract material (SUBCON_FINAL) (FERT) (Sp. Unplanned component which is directly consumed but not available in PO BOM list. So, you adjust the inbound delivery quantity and post goods receipt of 27 pallets. These components are usually associated with a BOM. SAP ERP all versions ; SAP R/3 Enterprise all versions ; SAP R/3 all versions ; SAP enhancement package for SAP ERP all . | Make a request for us to schedule training around what works for you? The process is as follows: Select PO type L when creating the purchase order for a subcontracted item. Therefore no need to transfer the material through ME2O. 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. Thx. Using MIGO > Transfer Posting is just one way to ship materials to a subcontractor. This material stock is posted in our plant storage location. Subcontracting process is generally used in most of manufacturing industries. PO Approval App. PR Created and purchase requisition sent to Approval. This is my first blog on SCN and I want to share my knowledge on Multilevel Subcontracting Process. Keep up-to-date with SAP information and training. The PPM consists of components and operations. 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. Mapping procedure of a given scenario in SAP system. Double click on Accounting Document. it is more useful apps. 2.Maintain the BOM for the material. We only pay the prime contractor, prime pays the subs. Thanks and Regards, Sapmm user Find us on Privacy Terms of Use In addition to it I have provided Analytical apps related to Procurement. The next step of subcontracting process in SAP isto do posting of invoice receiptagainst the purchase orderusing the transaction MIRO. 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 purchase order shows up in the ME2O transaction. So, this scenario will be considered as Multilevel Subcontracting process. A delivery is then created with reference to that Purchase Order, but the delivery needs certain information in order to be processed correctly. Can any one explain me the step by step procedures of Subcontracting Out Bound Delivery, I have created the purchase order with the finished and the components, the components has to be to be moved to the subcontractor with outbound delvivery, following are the settings i have maintained, 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), 3) i am using only ME2O(NOT ZERO) Transaction for the Outbound delviery, 4)when i am pressing the create delivery in the ME2o report, Essential transfer parameters are missing in record: 000001:Message no. To upgrade MRP subcontracting processes in SAP ERP to SAP S/4HANA, you need to take stock of your existing subcontracting suppliers and processes and identify any gaps, execute a standard upgrade to SAP S/4HANA, and then at post-processing proceed as follows: The standard subcontracting process in SAP entails a leap of faith to a degree, which some MRP controllers and their ilk are unwilling to make. 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. So, how does SAP know when and how to copy data between these two objects? Is there a process to bring components back from the Subcontractor . Tracking the materials and valuations, which technically still belong to the buying organization, becomes difficult using the standard process. 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! You cannot change the transfer Goods issue items for the SIM cards (components). They are summarized below: A material BOM needs to be created before any subcontracting order can be placed. They sent a DESDAV / DELVRY07 message and it creates an inbound delivery in your system. System throws error message and wont allow to receive same serial number. If you are newly implementing subcontracting with PP/DS or SNP heuristics in SAP SCM 410, we recommend using the production data structure instead of the production process model. 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. Through Screen shots process is self explanatory. user will convert to PO. Procurement Overview page Apps. The vendor will be billed only for items delivered. Therefore the 27 pallets received will be 10% more expensive than planned. Sir, I wanted to highlight this process because it is cross-functional and is a bit different than other SD processes. Analytical/ Report related Apps in FIORI. They charged the company for their services rendered. Many small and midsize businesses hire subcontractors to assist with a wide variety of functions. Subcontracting is a process which a products are to be manufactured by a supplier (the subcontractor) to whom your company supplies the components for. Configuring intercompany sales. Delivery Basics like logistics defaults, pricing for freight, and partner determination have to come from somewhere. 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.. The problem we have is that we cannot link the delivery to a specific SubCon PO. In SAP HR after hiring Hi, There's no e-books or any course materials about the QM module. We would love to hear your feedback in the comments section below. Another example of the subcontracting process in SAP is whena company provided raw sims and packaging materials to a subcontractor. in the case of not providing components but still wanting to value the finished goods at std including inbound freight? The labor charge is JPY 2,000 per piece. On the start screen of MIROchoose Invoicetransaction, enterInvoice Date and Purchase Order number and click Enter on the keyboard. Next, click OK checkboxes as shown below. Against each subcontracted item the system copies the material components that are to be provided to the vendor from the bill of material (BOM). However, the integration with an SAP ERP system requires at least SAP ERP 2005 with Enhancement Pack 03. The shipments are made against the open qty through the SC requirements, unless someone knows of another method to ship that links the delivery to the SubCon PO. Some components also come from our warehouses. Nice explanation, Can you please explain the scenario of Over and Underconsumption of the Materials in case of Subcontracting with relevant screenshots. Really its very useful for content. 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. We will do our best to consider your request. Thanks a lot. Without knowing the error message, it is tough to diagnose the issue. ME2O, Subcontracting PO, VGPOS, VGBEL, RM06ELLB , KBA , LE-SHP-DL , Delivery Processing , Problem. 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. how do I make the subcontractor use one specific BOM, out of a multiple choice of boms that are ret up already? So it will automatically explode when we create purchase order. 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. Is the Info record mandatory in subcontracting ? Please contact in case of any queries and clarifications. This approach requires more manual effort and accounting acrobatics than is optimal. Is this possible? There are relatively few logistics-related fields. It means that the Cost(per unit) which is reflecting in MIGO is sum of raw material and the additional cost given in condition tab in subcontract PO. the issue of components which we provided to the Subcontractor is triggered to 543 Movement type Hi, This is possible with or without creating a delivery. Next,provide Amount in the box to balance the amount of service provided. 2. This blog is independent and NOT affiliated with SAP SE (the company behind SAP ERP system). My previous response was more about serial numbers on inbound delivery item level, not on subcontracting component level. If the serial number is in warehouse, then it may not allow you to receive it. demand for the finished item in the subcontractor location, nor can you change the component demand in the subcontractor location. If the material is already available in the client own stock, it will be issued from the unrestricted use stock to the vendor. Nice docs. You create a subcontract order, following the standard procedure. 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. We want to receive back MAT1-100020. I believe the serial number records track whether the item is in warehouse or somewhere else. if they are ok with the PO then they can approve it else deny the PO. 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. Also, you need to provide Material, Quantity, Delivery Date, Plant, and Price. -SUBCONTRACT-01(HALB) (Sp. 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