Every process begins with master data
To produce a T-shirt, the following material masters are created at T-Shirt GmbH:
- Smiley T-shirt
- Fabric
- Yarn
The core competence of T-Shirt GmbH lies in the sewing of T-shirts; the required components are bought in. Due to the lack of know-how, the flocking of the T-shirts is carried out by an external service provider, hereinafter referred to as an external processor.
To ensure that T-Shirt GmbH knows which components are used to manufacture a T-shirt, it links them to a bill of materials.
The required production process is recorded in a work plan. The elements bill of materials and work plan are then merged into a production version.
The required manufacturing process is recorded in a routing. The BOM and routing elements are then combined in a manufacturing version.
A valid source of supply for the “Flocking” service and the external processor must exist for automatic supply source determination. This requires the external processor to be created as a business partner and a source of supply in the form of a framework agreement or a purchasing info record.
A customer order gets the ball rolling
T-Shirt GmbH receives a customer order for 100 smiley T-shirts. As there are not enough in stock, they have to be re-produced. The required quantity of 100 pieces is covered by a planned order for 100 pieces.
The planned order is an internal document that requests production planning to produce 100 smiley T-shirts. Material requirements planning, also known as MRP, takes place at several MRP levels so that the requirements are propagated to all BOM levels.
The required quantity depends on the input quantity stored in the bill of materials. For 100 smiley T-shirts, 110 meters of fabric and 400 meters of yarn are required. The component usage quantity per finished T-shirt is 1.10 meters of fabric and 4 meters of yarn. All this information can be traced in the planned order and is automatically calculated in the MRP.
When the planned order is converted into a production order, production of the 100 smiley T-shirts is initiated. At the same time, the system automatically creates a purchase requisition for the externally processed operation. The production order is a binding element within T-Shirt GmbH production. The purchase requisition, also known as a BANF, is an internal document that prompts the purchasing department to order the flocking of the T-shirts from the external processor.
The purchase order of the service contains only one text item
As soon as the process steps prior to external processing have been completed, the T-shirts are ordered to be flocked. For this purpose, the purchase requisition is converted into a purchase order. The order item is a text order, as only a service is procured here. The WIP part leaves T-Shirt GmbH production and is transported to the outgoing goods zone, from where it is sent to the external processor.
Now it's the external processor's turn
Now the external processor can fulfill his order from T-Shirt GmbH and flock the T-shirts with the smiley patches. After the external processor has flocked all 100 T-shirts, he returns them to T-Shirt GmbH. He invoices T-Shirt GmbH for the service.
The 100 smiley T-shirts are received and checked at T-Shirt GmbH. The goods receipt is posted in relation to the purchase order, which is assigned to the production order. A material document and an accounting document are created. The invoice receipt is also recorded in relation to the purchase order.
Parallel to the booking of the goods receipt, the status in the production order is updated during the external processing step so that the dispatcher can see at any time whether the goods are back in the company and available for further processing.
After the booking of the goods receipt, the flocked T-shirt flows back into production in accordance with the production order and is further processed there. After completion of the last process step, the production order for the production of 100 smiley T-shirts is confirmed. When the production order is completed, the stock of smiley T-shirts increases by 100 pieces and the stock at component level is reduced by 110 meters of fabric and 400 meters of yarn.
For SAP best practices, please visit SAP's solution page: External Processing (BJK).
Good to know: External processing vs. subcontracting. The most important functions
With the help of SAP External Processing, companies can map individual production steps that they outsource to external service providers transparently and clearly in the system.
