What is subcontracting?
Subcontracting is a process in which parts of production are outsourced to an external service provider. The external service provider receives all the components required for production from the client and only provides the service of further processing. So if your factory produces components for a model car convertible but is unable to assemble them due to a lack of machinery or know-how, the subcontractor comes into play.
If you produce your convertible in different colors, it is highly advisable to send the subcontractor the doors in the color that matches the body. Most companies use the object batch for this. If you also want to produce a special edition for the real convertible fans, the use of serial numbers is the best way to differentiate between them for the subcontractor. Whether a simple scenario or subcontracting with batches or serial numbers - today's SAP Extended Warehouse Management maps all these scenarios with standard tools. As they differ from each other in terms of complexity and process flow, we consider all three scenarios separately. Please note that we assume an embedded EWM for all scenarios.
Standard scenario
Let's assume you only produce convertibles in the standard color red and therefore require neither batches nor serial numbers. In this case, we are talking about a simple scenario with the following procedure: You order subcontracting from the external service provider, for which you create a subcontracting order. The components for the convertible are provided and delivered to the external service provider. When the goods issue is posted for the components provided on a subcontract basis, the components leave your warehouse and return in the form of a finished convertible that the subcontractor has assembled for you. The goods receipt is posted for the incoming delivery. The convertible is then in your inventory and can be sold to the customer. This process forms the basis for every subcontracting scenario.
What sounds so simple requires a few specific settings in the system. The following data is required so that the subcontracting process is set in motion and the document flow goes in the right direction:
- Creation of the business partner with corresponding roles supplier/vendor/customer & customer and the assignment to the purchasing organization and company code
- The article must have the procurement type F (external procurement) and the special procurement key 30 (stands for subcontracting) in the material master. In addition, the storage locations "Received on Dock" and "Available for Sales" must be assigned to both the finished part and the components provided.
- The components such as doors and tires must be in the correct ratio to the end product convertible: In SAP, this relationship is regulated by the material BOM.
- In the purchasing info record, the link between the subcontractor part and the vendor must be maintained with the type "Subcontracting", indicator "Auto BQF" (automatic source determination).
- To ensure that the parts list is exploded correctly, it is essential to create a production version. This is also assigned in the material master to the subcontractor part in the material master and in the subcontractor info record.
Subcontracting with batches
If your product - i.e. the convertible model car - is produced in different colors, you should map the different colors as batches.
The subcontracting of products with batches is somewhat more complex than in the first scenario: while the general process and document types remain the same, the respective batch must be specified in two places in the document flow. The batch is specified when the components are provided - in the subcontracting cockpit - and when the subcontractor processes the inbound delivery.
In order to map the subcontracting process with batches, additional settings are required in the material master: The material must be marked as relevant for batch management, both in the sales and purchasing view.
Subcontracting with serial numbers
The scenario is even more complex with the use of serial numbers. To stay with our model car, you provide each example of the high-quality and unique Limited Edition Batmobile with a serial number. Before the components are provided with the corresponding serial number, a subcontracting order is required at the IM storage location. After the subsequent provision of the components with the serial numbers and delivery with the outgoing goods, the components arrive at the subcontractor who assembles the Batmobile. Delivered as a finished model car, the goods receipt is posted without inbound delivery and the serial numbers are recorded. After the transfer to the EWM storage location, the Batmobile is in stock and can be delivered to the end customer.
Additional settings for this scenario are serial number profiles in the material master on both the ERP and EWM sides: on the sales view in the ERP material master and in the "WM Execution" tab in the EWM material master.
Summary
Subcontracting is a multi-layered process that offers companies flexibility in production and makes it possible to manufacture high-quality products even without specific equipment or expertise. Whether it is a simple scenario with no additional requirements, the manufacture of products in different batches or the production of special editions with serial numbers - SAP EWM offers the necessary functionality to support these processes efficiently. However, successful implementation requires specific settings and close attention to material, supplier and document configurations. With the right setup, SAP EWM enables transparent and efficient handling of subcontracting, allowing companies to optimize their production processes and increase their competitiveness.
SAP EWM can be used to map various subcontracting scenarios. Please contact us if you have any further questions.
