Subcontracting In SAP in PP

Below are the steps of subcontracting:

1. For a production material (1001), one raw material (2001) is assigned.

2. Production process of 1001 is having four operations 10, 20, 30 and 40.

3. In this 10, 30, and 40 are internal operations and 20 is external operation (sub-contracting).

4. To address this, we created a dummy material (non-valuated) and named as 1001-20 (Finished product number + Operation to be performed).

5. This 1001-20 should form part of the component in BOM of 1001. That is BOM of 1001 will have components as raw material 2001 and this dummy material 1001-20. In routing, assign this dummy material 1001-20 to operation 20.

6. During BOM creation, you should remove costing relevancy for the item 1001-20.

7. In routing, operation 20 is created with a work center (which is external operation work center) with exteranl operation control key.

8. In operation details, for external processing, assign the info record of external processing.

9. Info record of external processing has to be created for vendor with relevance to the operation to be performed externally with vendor. (We are using material group field in the external processing in routing operation).

10. When create production order with above set up, system will create Purcha Req for external operation. This has to be converted to purchase order.

11. Now, this dummy material should be kept as 5000 or 6000 in stock using 561. When Purchase order is raised, required quantity has to be moved to vendor using 541. When we do goods receipt the stock with vendor shall come down. With this, we can monitor the material (with dummy material number) stock with vendor (please note we can see only quantity and not value) .

12. When we do GR for external purch order, we receive only the operation performed. (So, coversion cost to vendor shall be paid).

13. After ensuring GR is done, order confirmatin of operation 0020 has to be done. (here we capture the quanttiy and also the valuation of material in production order).