What is Subcontracting in SAP MM ?
1. What is Subcontracting in SAP MM?
Subcontracting is a procurement process in SAP MM where
a company provides raw materials/components to a
subcontractor (vendor) to manufacture a semi-finished or
IL
finished product. The vendor processes these materials
H
and delivers the final product.
SA AR
𝗞𝗲𝘆 𝗕𝗲𝗻𝗲𝗳𝗶𝘁𝘀 𝗼𝗳 𝗦𝘂𝗯𝗰𝗼𝗻𝘁𝗿𝗮𝗰𝘁𝗶𝗻𝗴 𝗶𝗻 𝗦/𝟰𝗛𝗔𝗡𝗔
✔️ Streamlined procurement & production process
W
✔️ Accurate inventory tracking at the vendor’s location
BE
✔️ Improved cost control and compliance
B
PA
2. Subcontracting Process Flow in SAP S/4HANA
Step 1: Create a Subcontracting Info Record (Optional)
T-Code: ME11
Maintain the price for the finished product provided by
the subcontractor.
Step 2: Create a Subcontracting BOM (Bill of Materials)
T-Code: CS01
Define the components that will be sent to the
subcontractor.
Like , Comment & Follow SAHIL PABBEWAR
sahil27pab@[Link] I +91-8408051323 I [Link]
Career Progression in SAP
Step 3: Create a Subcontracting Purchase Order (PO)
T-Code: ME21N
Key Points:
1. Document type: NB (Standard PO)
IL
2. Item Category: L (Subcontracting)
H
3. In the Material Data tab, the final product
A
(manufactured by the vendor) is entered.
S AR
4. In the Components tab, add the raw
materials/components required for manufacturing.
E W
Step 4: Transfer Components to Subcontractor
B
B
T-Code: MB1B / MIGO
A
Movement Type: 541 (Transfer posting to subcontractor
P
stock)
Stock Type: Special Stock O (Subcontracting stock at
vendor)
Step 5: Check Subcontracting Stock
T-Code: MMBE/MBLB
This displays stock available at the subcontractor.
Like , Comment & Follow SAHIL PABBEWAR
sahil27pab@[Link] I +91-8408051323 I [Link]
Career Progression in SAP
Step 6: Receive Finished Goods from Subcontractor
T-Code: MIGO
Movement Type: 101 (Goods Receipt for the finished
IL
product)
H
System Behavior:
A
1. The finished product is received in company stock.
S R
2. The components issued earlier (541) are automatically
A
consumed with 543 movement.
E W
Step 7: Post Invoice from Vendor
B
T-Code: MIRO
B
Match the invoice with the purchase order and post it
A
for payment processing.
P
Step 8: Process Payment to Subcontractor
T-Code: F-53
Make the payment to the subcontractor.
Like , Comment & Follow SAHIL PABBEWAR
sahil27pab@[Link] I +91-8408051323 I [Link]
List of T-Codes Used in Subcontracting
Movement Type Description Usage
Transfer components to
541 Raw materials sent to vendor
subcontractor stock
L
Return of components from Unused materials returned
I
542
subcontractor to company
H
Components consumed when
A
Automatic consumption of
543 receiving finished goods
S R
components
(101)
A
Reversal of 543 (Component If goods receipt (101) is
544
W
Consumption) reversed
BE
Goods receipt of finished goods Final product received from
101
from subcontractor vendor
A B
If received product is
P
102 Reversal of 101 incorrect or needs to be
returned
Return of finished product to Defective or incorrect goods
121
subcontractor sent back
Goods issue to subcontractor Direct consumption for
221
(cost center) subcontracting
501 Receipt without purchase order Used in exceptional cases
Transfer posting to subcontractor
511 Alternative stock transfer
without PO
Like , Comment & Follow SAHIL PABBEWAR
sahil27pab@[Link] I +91-8408051323 I [Link]
List of T-Codes Used in Subcontracting
T-Code Description Usage
Maintain price details for
ME11 Create Info Record
subcontracting vendor
Create purchase order with item
ME21N Create Subcontracting PO
category "L"
IL
ME22N Change Subcontracting PO Modify an existing subcontracting PO
H
ME23N Display Subcontracting PO View details of a subcontracting PO
SA R
ME2O Monitor Subcontracting Stocks Check stock provided to subcontractor
A
Issue raw materials to subcontractor
MB1B Transfer Posting
(541 movement)
W
Perform all material movements (541,
E
MIGO Goods Movement
543, 101, etc.)
B
MIRO Invoice Verification Process invoice from subcontractor
A B
F-53 Vendor Payment Make payment to subcontractor
P
MMBE Stock Overview Check subcontracting stock at vendor
Track material movements related to
MB51 Material Document List
subcontracting
Define component materials for
CS01 Create BOM (Bill of Materials)
subcontracting
View the bill of materials for a
CS03 Display BOM
finished product
Calculate subcontracting cost
CK11N Cost Estimate
estimation
Confirm subcontracting-related
CO11N Confirm Production Order
production orders
Like , Comment & Follow SAHIL PABBEWAR
sahil27pab@[Link] I +91-8408051323 I [Link]
Key Points in Subcontracting
Key Points
1. Material Provision to Vendor
Company supplies raw materials/components to a
subcontractor for processing.
L
Managed as Special Stock "O" (Subcontracting Stock).
H I
2. Subcontracting Purchase Order (PO)
A
Created with Item Category "L" (Subcontracting) in ME21N.
S R
Lists finished goods and required components.
A
3. Stock Tracking & Movement Types
W
541: Transfer raw materials to vendor.
E
543: Auto consumption of components upon receipt of finished
BB
goods (101).
A
4. Invoice Processing & Payment
P
Vendor charges only for service (not materials).
Invoice verification via MIRO, payment via F-53.
5. Monitoring & Returns
Track subcontracting stock using ME2O, MMBE.
Handle returns of components (542) or finished goods (121).
This summarizes the key functionalities of subcontracting in
SAP MM.
Like , Comment & Follow SAHIL PABBEWAR
sahil27pab@[Link] I +91-8408051323 I [Link]