Subcontracting is a process in which the external service provider receives all components from the client and processes them in one or more steps. Particularly in connection with the introduction of S/4HANA, users are largely always faced with the same questions: What is important for payroll processing? What master data is required for process handling? What transaction data is generated during the process? What does the process look like in detail? Does SAP provide best practices for this? In the following, we would like to clarify this and describe the process using an example.
Every process begins with master data
To produce a T-shirt, the following material masters are created at T-Shirt GmbH:
- Smiley T-shirt
- T-shirt
- Fabric
- Yarn
- Smiley sticker
The core competence of T-Shirt GmbH lies in the sewing of T-shirts; the components required for this are bought in. Due to the lack of know-how, the flocking of T-shirts is carried out by an external service provider, hereinafter referred to as a subcontractor.
To ensure that T-Shirt GmbH knows which components are required to produce a T-shirt, it links them to a bill of materials.
As components are sent to the subcontractor and demands are planned at component level, these material masters also need to be linked to a bill of materials.
For material requirements planning, it is necessary to create a production version for each bill of materials. A valid source of supply for the smiley T-shirt and the subcontractor must exist for automatic supply source determination. This requires the subcontractor to be configured as a business partner and a source of supply to be created in the form of an outline agreement or purchasing info record.
1. A customer order gets the ball rolling
T-Shirt GmbH receives a customer order for 100 smiley T-shirts. As the stock is insufficient, an order has to be placed with the subcontractor. The required quantity of 100 pieces is covered by a subcontracting order request for 100 pieces. The purchase requisition, also known as BANF, is an internal document that requests the purchasing department to procure 100 smiley T-shirts from the subcontractor. As material requirements planning (MRP) takes place at two MRP levels in subcontracting, the requirement is propagated down to component level.
The quantity required depends on the quantity stored in the bill of materials. For 100 smiley T-shirts, 100 sewn T-shirts and 100 smiley patches are required. The quantity of components used per finished T-shirt is 1 piece. All this information can be traced in the purchase requisition and is automatically calculated in the MRP.
With the conversion of the purchase requisition into a purchase order, the finishing of the 100 T-shirts is ordered. The purchase order is a binding element from T-Shirt GmbH towards the subcontractor, with the request to flock 100 T-shirts, each with a smiley, and to return them on a specified date.
2. All components are sent to the subcontractor
In order for the subcontractor to fulfill his order, the 100 T-shirts and 100 smiley patches must be packed by T-Shirt GmbH and sent to the subcontractor. The subcontracting cockpit is a suitable application for this, providing the user with an overview of the subcontractor's demand and stock levels while simultaneously initiating the shipment of the components.
The provision can be carried out as a pure goods movement posting or in the form of an outbound delivery. The latter makes it possible to initiate and handle the logistics processes with system support and to create delivery documents. In terms of stock, the 100 T-shirts and 100 smiley patches are managed at plant level in a special stock for the subcontractor. Legally, these materials still belong to T-Shirt GmbH, they are simply physically on site at the subcontractor.
3. The subcontractor's turn
At this point, the subcontractor can fulfill his order from T-Shirt GmbH and flock the T-shirts with the smiley patches. After the subcontractor has flocked all 100 T-shirts, he sends them back 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 and invoice receipt are posted in relation to the purchase order. When the goods receipt is posted for the 100 smiley T-shirts, the 100 T-shirts and 100 smiley patches from the subcontractor's special stock are directly transferred to consumption. A material document and an accounting document are created.
Process flow at a glance
The entire procurement process can be traced at any time via the process flow:
Good to know: EXTERNAL PROCESSING VS. SUBCONTRACTING. THE MOST IMPORTANT FUNCTIONS
SAP Subcontracting allows companies to map individual production steps that they outsource to external service providers transparently and clearly in the system.
