Professional Documents
Culture Documents
Applies to:
This article is applicable to SAP SD & MM modules of SAP for version SAP 4.7 till ERP 6.0
Summary
This article describes a process called Direct Subcontracting. The process is similar to a third party
scenario, but the difference is that here instead of a vendor; a subcontractor ships the final product to
customer.
Author:
Prakash H. Ayer
Author Bio
I am Prakash H. Ayer and I have total 7+ years experience in total out of which 5+ years as
a SAP Logistics Consultant. I have worked on SAP MM, SD, PP, PS & WM modules and
have been involved in implementation, configuration and setup of the same. I am based out
of the Netherlands but have worked for major clients in Europe. My areas of expertise
include purchasing, inventory and warehouse management, SAP upgrade, SAP instance
consolidation, SOX control testing. I have a reasonable good knowledge of sales,
distribution, planning and projects.
Table of Contents
Overview ............................................................................................................................................................. 3
Functionality ........................................................................................................................................................ 3
Implementation ................................................................................................................................................... 5
Demo Details ...................................................................................................................................................... 8
Material Master Changes ................................................................................................................................ 8
Sales Order Creation ...................................................................................................................................... 9
Convert Purchase Requisition (PR) to Purchase Order (PO) ......................................................................... 9
Releasing the Purchase Order (PO) ............................................................................................................. 13
Check that Purchase Order Reference is Printed on PO Form .................................................................... 14
Send the Components to Subcontractor ....................................................................................................... 14
Process the Shipping Notification to Create an Inbound Delivery ................................................................ 15
Perform Goods Receipt (GR) with Inbound Delivery .................................................................................... 18
Complete Sales Order Billing ........................................................................................................................ 21
Conclusion ........................................................................................................................................................ 22
Disclaimer and Liability Notice .......................................................................................................................... 23
Overview
This document describes a process called Direct Subcontracting. The process is similar to a third party
scenario, but the difference is that here instead of a vendor; a subcontractor ships the final product to
customer.
Functionality
Our client was using customer consignment scenario, where the ownership of the good lies with my client till
the time customer withdraws the goods. But, my client has gone for new set of agreement with the customer.
And the customer has agreed to take the ownership of the material within say for example between 1 and 90
days of receipt of product. This means, technically based on the product receipt, sales billing can be
generated. The new process is between a consignment and direct subcontracting process. So there was
necessity to phase out the consignment process.
The phase out of consignment process also triggered a new set of process improvement initiative.
The high level requirement for the new functionality is as follows:
1. The sales process should trigger a subcontracting purchase order
2. Based on the subcontracting purchase order it should be possible to send components with serial
numbers
3. When the subcontractor ships the final product to the customer he will send a shipping notification;
with this notification an inbound delivery should be created
4. When this inbound delivery is used to perform the goods receipts, then the subcontracting
components should automatically get back-flushed.
5. The sales order billing should only be possible when the statistical goods receipt is done for the
purchase order.
Customer Order
Creation of
purchase
requisition
(PR) by SAP
Transfer of PR to
purchase order (PO)
subcontracting
Warehouse
Warehouse
Outbound
Outbound
Employee
Employee
SAP
SAP
Start
Buyer/
Buyer/
Purchaser
Purchaser
Customer
Customer
Service
Service
Employee
Employee
End
Create an outbound
delivery to send
subcontract
components
Send components to
subcontractor
Vendor
Stock
Subcontractor
Subcontractor
Assembly
Shipment to clients
customer
Shipping Notification
to client
Buyer/
Buyer/
Purchaser
Purchaser
Create inbound
delivery
Warehouse
Warehouse
Inbound
Inbound
Employee
Employee
Backflushing of components
Perform Goods
Receipt
Implementation
This asset is built on SAP 4.7 version, but it is scalable across to the latest version ERP 6.0.
We need to have following changes to SAP.
Changes on Sales and Distribution Customizing:
1. Create a new item category group
2. Create a new item category
3. Assign the new item category to the item category group
4. Create a new schedule category with Item category 3 and account assignment X
5. Assign the item category to the new schedule line category
6. Maintain the copy control settings for the new item category
Step for item category definition and assignment
1. Create a new item category group ZTSU
Configuration path: IMG Sales and Distribution Sales Sales Documents Sales
Document Item Define Item Category Group
3. Assign the new item category ZTSU to the item category group ZTSU
Configuration path: IMG Sales and Distribution Sales Sales Documents Sales Document
Item Assign Item Categories
4. Create a new schedule category as ZD with Item category 3 and account assignment X
Configuration path: IMG Sales and Distribution Sales Sales Documents
Schedule Lines Define Schedule Line Categories
6. Maintain the copy control settings for the new item category
Transaction: VTFA
This derived purchase order number should be printed below the text customer reference on PO form as
shown below:
Demo Details
The detailed demo is included in user manual for this process. This demo also contains the test case
confirming that the asset is tested and working as expected.
The user manual steps are given below:
Material Master Changes
To ensure that the item category ZTSU (Direct Subcontract) is picked up automatically on sales order
creation, it is necessary to have item category group as ZTSU on Sales org 2 view in material master.
After the sales order is saved check the costing is done automatically. So, when you go into the changes
mode of sales order the document should be completed.
Convert Purchase Requisition (PR) to Purchase Order (PO)
If the sales order is created without any critical field or credit block, then it will automatically create a
purchase requisition.
Convert this purchase requisition into purchase order with transaction code: ME57 or
You see below screen. Place your cursor on while line with text 1
assignment.
NB
The system will take you to purchase order creation screen. Here select the purchase requisition and click on
button Adopt as shown below.
As soon as button Adopt is clicked all the PR details are copied to PO.
Check the storage location (Consignment use) is used while creating the PO.
If there are no errors the PO would be saved, you get following message.
On the output select the line item and click on button outbound delivery
Then for this outbound delivery you can complete picking and goods issue. There is no change to this
process. Hence, further details are not given here.
Process the Shipping Notification to Create an Inbound Delivery
When the subcontractor completes his work and he will ship the goods to customer. The shipping notification
will also be send to client via Fax or e-mail.
Based on this shipping notification you can create an inbound delivery from transaction code VL31N or
SAP Path: Logistics Materials Management Purchasing Purchase Order Inbound Delivery
Create. Give vendor and purchase order details. You can take PO details from step 5.
Note: If you are not able to create inbound delivery check following:
1. Before creating an inbound delivery the PO should be released.
2. Check if the PO line item has confirmation control key as shipping notifications.
As soon as you give putaway quantity and press enter, the overall putaway status is changed from A For
putaway to C - Compl. put away.
Now, you can save the inbound delivery. You get the inbound delivery number.
On the output select the line item and press Post goods receipt
Note: If you get error: VL659 (Error when creating document flow for delivery &), then check if the subcontractor has
enough stock for the component material.
Click on the material document number. You see that the back flushing of the component is done with
movement type 543.
Conclusion
As we have seen, this is almost completely a standard SAP process, without many changes. It can bring
considerable efficiency and productivity improvement in consignment and subcontracting areas. It has
benefits like reduced lead time for deliveries to customer, and fastens the billing process.
It has good cost saving benefits and can help simplify the overall process.