Sub Contracting Cycle

(1) You have a material that can be procured externally, and you have maintained
BOM with components. Any waste generated and received during subcontracting process
can be maintained as component with negative quantity.

(2) You create a subcontracting PO (PO with Item Category L). You can also maintain
Purchase Info Record for Subcontract category for material and subcontractor.

(3) You make a transfer posting to issue components for SC PO. Material is sent to
subcontractor. As material remains under your ownership, system does not make any
value entry. But quantity is shown as "Material Provided to Vendor"

(4) You receive finished material against SC-PO. You also specify components
consumed in manufacturing of finished goods. Additionally, if you have negative
components in BOM, now you'll also receive subcontracting by-products. There are
three events, so three accounting entries are generated:

DR FG Stock/ SC By-Product Stock

CR Change in Stock (FG/ SC By-Product )
(for finished goods received)

DR Subcontracting Charges
CR GR/IR Clg
(for moneys payable to Subcontractor)

DR Consumption (Components)
CR Change in Stock (FG/ SC By-Product ) 0
(material provided to Vendor is now charged to expense)

(5) You do the IV for SC Invoice, and the process is complete.

Process of Subcontract in MM

Sub-contract business process:

You want to buy material from the supplier (processed material/ assembled item) ,
but for some reason (quality of certain item / price ) you will give some component
to vendor .
Vendor shall process the item / use the item provided & supply the final item.

SAP process:
1.Create the finished goods material code.
2.Maintain the BOM for the material.
3.Create PO with item category as "L" .
4.Issue material to vendor with movement type 541
5.Receive the material against the PO with movement type 101.
6.MIRO to account for vendor's invoice for the service charge& material used by
him.

Note:: At the Time of GR 543 Mvt is up dated for Raw Material.

Can anybody tell me how a process has to be given to subcontracting?

Suppose, I have 3 operations 1)weaving 2)dyeing 3)cutting & packing
if no 2 process (i.e Dyeing) has to be given to subcontracting, what process should
i follow ?

The following process to be followed for subcontracting.

1. Item code(material master) to be created at the stage of before dyeing.
2. Item code(material master) to be created after Dyeing as subcontracted item.
(F30)
3. Bill of material to be created for the material(2) calling for material(1)
4. Info record and source list to be created for material(2) with the corresponding
vendor
5. PO to be released for material (2)
6.Along with PO the material(1) to be issued to vendor
7.On receipt of material when GR is made the stock with vendor will get updated.

How to Create a Subcontract Order?

To create a subcontract order, proceed as follows:

Enter the material you want to order and the item category for subcontracting (L)
in the order item.

Press ENTER to display the screen for component processing.

Enter the components that the vendor requires to manufacture the product.

Please note:
u2013 You do not need to enter the date required for the components. This date is
proposed by the system when you press ENTER.

It is calculated as follows:
Delivery date of the item - Planned delivery time

u2013 If you do not want the quantity of the components to be changed if the order
quantity of the end product is altered, set the indicator Fixed quantity (column
F).

u2013 You can determine whether the components are available on the date required
by selecting Edit -> Availability check.

If you entered a bill of material as the material in the subcontract order, the
components are created automatically.

If you want to determine the components in the bill of material at a later date
(for example, if the bill of material is subsequently changed), choose Item ->
Component -> New BOM explosion. The existing components are deleted and
redetermined in the bill of material.

Save the purchase order.

1. Raw materials are sent to the subcontractor for processing into finish goods
through subcontracting challan and in that no excise duty is debit to the excise
and this challan includes only approximate value of goods.
2. The subcontractor needs to send back the material within 180 days of receiving
the material into subcontractor premises, in case if he fails to send the material
within 180 days then the company needs to debit the CENVAT duty, the process as -

If the allotted number of days elapses and the subcontractor has not returned some
or any of the materials in the challan (status: Posted or Assigned), you must
reverse the excise duty that you have credited to your CENVAT account. The scrap
has to be returned by the subcontractor. If it is not returned, the excise duty for
the scrap has to be reversed.

This function sets the status to Reversed. From here, you have two options:

u2022 If you do note expect the subcontractor to return the materials, you can
complete it.

Complete
1.From the SAP Easy Access screen, choose Logistics u2192 Procurement u2192
Subcontracting u2192 Subcontracting Challans u2192 Complete/Reverse/Recredit.
2. Enter the challan number and year.
3. Choose .
4. Select Complete challan.
5. Save the challan.
u2022 If you do expect the subcontractor to return at least some of the materials,
you can leave it as it is for the time being. Then, when the materials arrive, you
can recredit the excise duty to the account .
Recredit
If a subcontractor returns materials after the return date, you can recredit the
excise duty credit that you have reversed.

Recrediting the CENVAT Account

1. From the SAP Easy Access screen, choose Logistics u2192 Procurement u2192
Subcontracting u2192
Subcontracting Challans u2192 Complete/Reverse/Recredit.
2. Enter the challan number and year.
3. Choose .
4. Select either of the following options:
u2212 Take recredit for receipts
This leaves the challan open for further goods receipts.
u2212 Take recredit if any and complete challan
This completes the challan and writes off finally any CENVAT credit that you might
have been able to claim.
5. Save the challan.