SUBCONTRACTING PROCESS:

4) Invoice for
the service.

1) To produce
material, Z, we
need materials x
and y.

Z = X + Y.

X and Y can be
raw or semi-
finished 2)Components
3)Goods
materials. X and Y are
receipt of
sent to the SC
mat -Z
vendor.
SAP MM Business Process – Subcontracting continued.

In this process, company provides components to the subcontractor and receives the processed
materials (i.e., finished material) from the subcontractor.

Due to lack of infrastructure or lack of skilled technicians or lack of time, company usually goes with
subcontracting process.

1) Create a subcontracting PO for the material X.

2) Provide components C and D w.r.t. subcontracting PO. No accounting document created.
3) Stock is moved from own stock and components shown in subcontracting stock.
4) Goods receipt for the material X. Accounting document is created.
5) Invoice settlement for the service done.
IMPORT PROCUREMENT:

SAY New
York.

BILL OF LADING

A document issued by a carrier, or its agent, to the shipper as a contract of carriage of goods. It is also a
receipt for cargo accepted for transportation, and must be presented for taking delivery at the
destination.

Among other items of information, a bill of lading contains (1) consignor's and consignee's name, (2)
names of the ports of departure and destination, (3) name of the vessel, (4) dates of departure and
arrival, (5) itemized list of goods being transported with number of packages and kind of packaging, (6)
marks and numbers on the packages, (7) weight and/or volume of the cargo, (8) freight rate and
amount.

It serves as a proof of ownership (title) of the cargo, and may be issued either in a negotiable or non-
negotiable form. In negotiable form, it is commonly used in letter of credit transactions, and may be
bought, sold, or traded; or used as security for borrowing money. A bill of lading is required in all claims
for compensation for any damage, delay, or loss; and for the resolution of disputes regarding ownership
of the cargo. The rights, responsibilities, and liabilities of the carrier and the shipper under a bill of lading
(often printed on its back) are governed generally either by the older Hague rules, or by the more recent
Hague-Visby rules.

BILL OF ENTRY

A declaration by an importer or exporter of the exact nature, precise quantity and value of goods that
have landed or are being shipped out. Prepared by a qualified customs clerk or broker, it is examined by
customs authorities for its accuracy and conformity with the tariff and regulations. See also customs
entry.
Letter of credit:

http://www.letterofcredit.biz/how-does-an-import-letter-of-credit-work.html

Export procurement:

http://www.yourarticlelibrary.com/export-management/export-import-procedures-with-flow-
chart/77187/

THIRD PARTY PROCUREMENT

In this processes, material procured from vendor for our sales customer purpose and procured material
will be delivered directly from vendor to customer to minimize transportation cost and time, .etc..
6) logical
GR done
OUTLINE AGREEMENT

Two types – 1) Contract Agreement and 2) Scheduline Agreement.

Contract Agreements.

Making of long range agreements with vendors with predefined terms and conditions within a time
frame is known as contract.

Say for 100 qty

Say for 10 qty

Purchase order is called

contract release order

Contracts are two types - value contracts and quantity contracts.

Contract release orders are produced until value or quantity is elapsed.

Scheduling Agreement:

Making of long range agreements with vendors with predefined terms and conditions, with predefined
delivery schedules over a period of time.

Forecast delivery schedule (FRC)

Provides the vendor with information over the longer term about which quantities of a material are to
be delivered on which date. Delivery dates are usually specified as calendar months or weeks.

JIT delivery schedule (JIT)

Provides the vendor with information about which quantities of a material are to be delivered at which
point in time in the near future. Exact delivery dates (calendar days) or even delivery times are usually
specified.

Difference between contract and scheduling agreements.

Main difference between contract and schedule line agreement is in contract, contract release order
(PO w.r.t. contract) whereas in schedule line agreement, the delivery schedule is there in place of
contract release order.