Subcontracting in SAP MM
• Subcontracting process in sap mm is a kind of special procurement where your
company orders material from external vendor and provides components to
the said vendor for production.
• For example, if your company requires a product X , then for the production of
the said product i.e X, company provide two raw materials R1 and R2
respectively to external vendor.
• After production or rework your vendor will supply required material i.e X
Some interesting details about subcontracting process
• Purchase order for finished product raised which includes components to be
provided for the subcontractor. You can add these components manually or
through Bill of Material.
• Components provided gets added in the stock as material provided to Vendor. You
can check stock position vide transaction code MMBE.
• Subcontractor (Vendor) supplies finished product . After this enter Goods Receipt
for these products and consume components gets clear from stock.
• In case of over or under consumption of the components provided to vendor,
subsequent adjustment entry has to be made.
• For providing material to Vendor available stock types are unrestricted use and
quality inspection i.e. we can supply material to the vendor from these stocks only.
• A material can be provided to the vendor through Transfer Posting from
unrestricted use stock to the stock of material provided to the vendor with a
movement type 541 O.
• When vendor supplies ordered material you can post Goods Receipt (T code
MIGO). You can change component quantities manually if vendor informs about
any excess or under consumption.
• In case of such case, we have to post Subsequent Adjustment to correct the
consumed components.
Subcontracting Process Flow
(Special Stock Type : L)
Step 1 - Create BOM for End product X (CS01)
Step 2 - Create Inforecord for End product X (ME11)
Step 3 - Create Purchase Requisition for END Product X (10pc) (ME51N)
Document Type :NB; Item Category : L ; by providing components i.e. C (10 pc ) and D (10 pc ) to
subcontractor ; In Material Tab click Component button
Step 4 - Create Purchase Order wrt Purchase Requisition (ME21N)
Material Z 10pc ; Rs. 1000/pc in subcontracting process
Step 5- Transfer Posting (ME2O/ MB1B - 541) to Subcontractor
Provide Components (C & D ) from plant (Stock Transfer) Check Subcontracting stock in ME2O ;
Step 6 - Post Goods Receipt wrt Purchase Order (MIGO). 101
With reference to PO for material Z 10pc
Step 7 - Invoice Verification (MIRO)
Material Z 10pc Rs. 1000/pc
Step 1 - Create BOM for End product X (CS01)
X
Finished
Product
Received 10
Z (3)
units of Z from
Semi Finished
Subcontractor
C D
Raw Material Raw Material
Provide input of Subcontract
10 units of C & D
to subcontractor
Display BOM (CS03)
Assembly Cost
40
Subcontracting
Charges
+ 20
Step 2 - Create Inforecord for End product X
(ME11)
Step 3 - Create Purchase Requisition for End
Product Z (10pc) (ME51N)
Item Category L
Explode BOM
Components
Step 4 - Create Purchase Order wrt Purchase
Requisition (ME21N)
Add initial Stock for Raw Materials (MB1C)
• Material C – Add 10
Units
• Material D- Add 10
Units
• Movement Type : 561
Report – Subcontracting Stock Monitoring for Vendor Before Transfer
Posting(ME2O)
Step 5- Transfer Posting (MB1B / ME2O) to Subcontractor
Movement Type : 541
No Accounting Document is Generated
Report – Subcontracting Stock Monitoring for Vendor After Transfer
Posting(ME2O / MMBE)
Display Warehouse Stock of Material (MB52)
Step 6 - Post Goods Receipt wrt Purchase Order
(MIGO). 101
• In Line item row click “tree” button then it will display the consumed
component details in the end product. Select Component line item and in
“ where tab observe the automatic movement type “ 543” “O
(417001- FRL) Purchased Services /External Services A/ C… Dr 20
To (191100- WRX) GR/IR A/c 20
(400020- BSV) Raw Material Consumed A/ C… Dr 10
To (300000- BSX) Inventory A/c 10
(790000- BSX) Work in Progress A/ C… Dr 40
To (893010- GBB-VKA) Cost of Goods Sold A/c 40
Report – Subcontracting Stock Monitoring for Vendor After Transfer
Posting(ME2O / MMBE)
Step 8- Invoice Verification (MIRO)
• Note Accounting Entry:
Step 8- Vendor Payment (F-53)
Step 9-Subsequent Adjustment
• After GR, if vendor informs any under or over consumption of components
then the same details will be entered as “ Subsequent Adjustment”.
– MIGO or MB04
– MIGO
– Subsequent adjustment
– PO Number
– No Movement Type (System will take automatically)
– For end product subsequent adjustment movement type is “121” is picked
automatically
– Enter under consumption Qty 2 (Component line item)
– Movement type “544” O
– Post
– Now in MMBE this under consumption quantity “2” PC shows at subcontractor
premises
– Note: Transfer Qty to own plant “MB1B” 542 movement type
Case Study
• Material Z## has to be procured through subcontracting from a
subcontractor, for which we need to supply components of
material Z## (C## and D##) to the subcontractor.
• We have stock of Material D## in our Storage Location, but no
stock of Material C##.
• So Material C ## has to be procured from a vendor and should be
directly sent to our subcontractor. Where as Material D## will be
sent from our premises.
• After supplying the goods for subcontracting, complete the
subcontracting process cycle.
• Also make payment to the Vendor for procurement of Material
C## and complete the simple procurement cycle.
– Hint : While creating Purchase order for Material C ## , check indicator
SC Vendor (CMMDA-LBLKZ) and enter subcontractor Vendor ID in
Vendor field(CMMDA-EMLIF) in Delivery Address tab.
