Subcontracting is understood to be a process in which the external service provider receives all components from the client, which it processes in one or more work steps. Particularly in connection with the implementation of S/4HANA, the user is always confronted with the same questions: What is important in subcontracting? Which master data is required for process handling? What transaction data is generated in the run? 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 is the sewing of T-shirts, the necessary 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 a subcontractor.
In order for T-Shirt GmbH to know which components are used to manufacture a T-shirt, it links them to a bill of materials.
Since subcontracting involves sending components to the subcontractor and planning requirements at the component level, these material masters must also be linked to a bill of material.
For material requirements planning, it is necessary to create a production version for each bill of material. For automatic source determination, a valid source of supply must exist for the smiley T-shirt and the subcontractor. This requires that the subcontractor is created as a business partner and that a source of supply is 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 of 100 smiley t-shirts. As there are not enough in stock, these have to be ordered from the subcontractor. The requirement quantity of 100 pieces is covered with a subcontracting purchase requisition in the amount of 100 pieces. The purchase requisition is an internal document that requests Purchasing to procure 100 smiley T-shirts from the subcontractor. Since material requirements planning, also called MRP, takes place at two MRP levels in subcontracting, the requirement is inherited down to the component level.
The quantity required depends on the input quantity stored in the bill of materials. For 100 smiley T-shirts, 100 sewn T-shirts and 100 smiley patches are required. The required quantity of the component per finished T-shirt is 1 piece. All this information can be tracked 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 shipped to the subcontractor. The subcontracting cockpit is a suitable application for this, providing an overview of the requirements and stock situation at the subcontractor's premises and simultaneously triggering the dispatch 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 inventory, the 100 T-shirts and 100 smiley patches are managed at plant level in a special stock for the subcontractor. Legally, these materials continue to belong to T-Shirt GmbH; they are merely physically on site at the subcontractor.
3. The subcontractor's turn
Now the subcontractor can fulfill his order from T-Shirt GmbH and flocks the T-shirts with the smiley patches. After the subcontractor has flocked all 100 T-shirts, he returns them to T-Shirt GmbH. The service is invoiced to T-Shirt GmbH.
At T-Shirt GmbH, the 100 smiley T-shirts are received and checked. The goods receipt and invoice receipt are posted in relation to the order. During the goods receipt posting for the 100 smiley T-shirts, the 100 T-shirts and 100 smiley patches from the subcontractor's special stock are posted directly to consumption in parallel. 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.
