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Subcontracting Process

The subcontracting process involves providing raw materials to a subcontractor who processes them into semi-finished or finished goods, which are then returned to the company. Key steps include creating materials, vendors, purchase orders, and managing goods receipts, with specific transaction codes for each step. Accounting entries are calculated based on the number of child materials involved in the process.

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6 views8 pages

Subcontracting Process

The subcontracting process involves providing raw materials to a subcontractor who processes them into semi-finished or finished goods, which are then returned to the company. Key steps include creating materials, vendors, purchase orders, and managing goods receipts, with specific transaction codes for each step. Accounting entries are calculated based on the number of child materials involved in the process.

Uploaded by

vitthalmech8687
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© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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SUBCONTRACTING PROCESS

In subcontracting process we provide raw material to subcontractor vendor, he processes the


material and he returns back to our company as a semi finished or finished material. We are paying
charges to subcontractor vendor

Example: We have one starter motor manufacturing company who manufactures the starter
motors company provides the raw materials like starter housing, armature, bushes, solenoid and
pinion bendex to subcontractor vendor. Subcontracting vendor processes and assembles the all
components and finally returns the Starter motor to our company

Types of subcontracting processes

1. Standard

2. Subcontracting with scrap

3. Subcontracting with subcontractor vendor

4. Subcontracting with under consumption & over consumption

Prerequisites for subcontracting process

 Create Both Finished material & Raw material in our master data
 Stock should available for raw materials
 Create a Sub contracting vendor
 Maintain subcontracting PIR
 Create Bill of material (BOM) for finished material
 Use item category L in sub contracting

6360959192 [Link] support@[Link]

Linked In | Ameersuhil Dafedar

(SAP MM Associate)
Steps Involved in subcontracting process

1. Create materials raw materials and finished materials T code: MM01


Ex: Finished material starter motor,
Raw materials  starter housing, armature, bushes, solenoid and pinion bendex.
2. Create Sub contracting vendor T code: XK01
3. Create sub contracting PIR T code : ME11
4. Create Bill of material ( BOM) T code: CS01
5. Create Purchase Order (PO) with item category L T code: ME21N
6. Post goods issue T code : ME2O
7. Goods receipt for finished material T code : MIGO

1. Create Material T code: MM01

Material Material number Material type


Starter motor 9999650 Parent
Starter housing 60080693 Child
Armature 60080694 Child
Bushes 60080695 Child
Solenoid 60080697 Child
Pinion bendex 60080698 Child
2. Create Sub contracting vendor T code: XK01

Vendor 2310000510

3. Create sub contracting PIR T code: ME11

Purchasing info record 6000000228 MK01 L MK01 created

6360959192 [Link] support@[Link]

Linked In | Ameersuhil Dafedar

(SAP MM Associate)
4. Create Bill of material (BOM) T code: CS01

BOM allowing us to create a list of the raw materials and components and their quantities required
to produce a final product or assembly.

Creating BOM for material 9999650

5. Create Purchase Order (PO) with item category L T code: ME21N

6360959192 [Link] support@[Link]

Linked In | Ameersuhil Dafedar

(SAP MM Associate)
Explode BOM

Standard PO created under the number 4500024998

6. Post goods issue T code: ME2O

6360959192 [Link] support@[Link]

Linked In | Ameersuhil Dafedar

(SAP MM Associate)
In ME2O select all materials and post the Goods

Movement type while posting goods to vendor is 541

7. Goods receipt for finished material T code: MIGO

Material document 9200000244 posted

Movement types in Sub contracting while doing Goods receipt (GR)

101 Parent material (Finished)

543 Child materials (Raw)

6360959192 [Link] support@[Link]

Linked In | Ameersuhil Dafedar

(SAP MM Associate)
Accounting Entries in Subcontracting Process

During GR

Accounting entries in subcontracting always calculated in formula  4+2X

X  No of child materials

4 accounting entries for finished material

BSX Inventory account

WRX GR/IR clearing account

BSV Change in sub contracting stock

FRL Sub contracting charges

(In subcontracting FRL always comes as service charges paying to vendor)

2 accounting entries For Raw materials

BSX  Inventory account

GBB Consumption account

6360959192 [Link] support@[Link]

Linked In | Ameersuhil Dafedar

(SAP MM Associate)
During Invoice verification

Document no. 6000000581 created

6360959192 [Link] support@[Link]

Linked In | Ameersuhil Dafedar

(SAP MM Associate)
© Copyright TagSkills. The copyright in this
work is vested in TagSkills. Please note and
abide by copyright laws. This presentation is for
educational purposes only, all logos, photos, and
information, etc used in this Presentation is the
property of TagSkills. SAP is a registered
trademark of SAP AG in Germany and many
other countries. We are NOT
ASSOCIATED with SAP.

6360959192 [Link] support@[Link]

Linked In | Ameersuhil Dafedar

(SAP MM Associate)

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