Performing the Process of Subcontracting

Special Procurement Process of Subcontracting – Overview

During subcontracting, your company orders material from an external supplier. Unlike a normal external procurement process, your company makes the components for the production of the materials partially or completely available to the supplier (subcontractor).

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Subcontracting in Inventory Management

Inventory management supports the following functions within subcontracting:

• Special stock type “Stock of Material Provided to Supplier”
• Provision of components
• Goods receipt for finished product with consumption of components
• Subsequent adjustment in the case of excess or under-consumption of components
• Transfer postings (material to material, stock to stock, and plant to plant)

For the stock of material provided to suppliers, the available stock types are unrestricted-use stock and stock in quality inspection. The quantities consumed by the subcontractor can be withdrawn only from the unrestricted-use stock. A physical inventory is to be carried out for the stock of material provided to the supplier.

To analyze the stocks of material provided, you can use various stock evaluations, for example:

• Display Stock Overview app and corresponding transaction Stock Overview (MMBE):In the stock overview, at plant level, the total of all stocks of material provided for this material in this plant is displayed. With a double-click on this special stock line you see a detailed overview of the stock of material provided per subcontractor.To start the transaction from the SAP Easy Access menu, choose Logistics→Materials Management→Inventory Management→Environment→Stock→Stock Overview (MMBE). 
• Stocks at Subcontractor app and corresponding transaction Stocks at Subcontractor (MBLB):With this function, you can display stocks provided for several materials and several subcontractors (supplier) at the same time.To start the transaction from the SAP Easy Access menu, choose Logistics→Materials Management→Inventory Management→Environment→Stock→Stock with Subcontractor (MBLB). 
• Stock – Multiple Material app:In the app, to select only stocks of material provided, select the predefined view Stock Value for Subcontracting Stock (O). In this view, the filter for the special stock type is already preset with O (Subcontracting Stock).
• Display Subcontracting Stocks by Supplier app and corresponding transaction Subcontracting Cockpit (ME2ON):To start the transaction from the SAP Easy Access menu, choose Logistics→Materials Management→Purchasing→Purchase Order→Reporting→Subcontracting Cockpit (ME2ON). 

From the point of view of inventory management, the posting of a provision of components corresponds to a transfer posting from unrestricted-use stock to the stock of material provided to vendor. This transfer posting can be carried out using the one-step procedure (MvT 541), or the two-step procedure (MvT 30A and 30C).

There are different options available for posting the provision of components.

1. In Inventory Management, you can post a provision of components using transaction MIGO and the corresponding SAP Fiori App Post Goods Movement. You can refer to the subcontracting item (SC item) of the purchase order when entering this transfer posting. The components and their quantities are then proposed from the SC item. You can change the proposed quantities of the materials to be provided.Provision of components with reference to a purchase order is not updated in the purchase order history because the stock of the material provided is not purchase-order based.
2. In transaction MIGO and the corresponding SAP Fiori App Post Goods Movement, you can also provide components without reference to a purchase order. To do this, you enter another transfer posting and specify the required materials and quantities as well as the subcontractor manually.
3. In Purchasing, you can use the Subcontracting Cockpit (transaction ME2ON) or the corresponding app Display Subcontracting Stocks by Supplier to post a goods issue for the components. As the selection criteria, you enter, for example, the supplier, the component to be provided, or the material to be produced. A list containing the requirements and stocks of the components, and the pegged requirements is then displayed. To post a provision for a component, select the relevant line and choose Edit→Post goods issue.

1. In addition, in SAP S/4HANA there is the Subcontracting Cockpit Fiori app. Its functions are similar to those of transaction ME2ON. The SAP Fiori app provides you with an overview of open and completed purchasing documents (purchase orders and scheduling agreements). As filter criteria, you are offered subcontractor (supplier), component, assembly (material to be produced), plant and shipping status, among others. You can execute the following functions for the selected subcontracting documents and the associated components:
   • Post goods issue on purchasing document item level.
   • Create the delivery document for the component delivery.
   • Calculate the stock balance at component, plant, and supplier level. If you click on the calculated stock balance for a component, you get a detailed overview of the stock and requirements situation of the component.
2. If you have to procure a component from a second supplier, you can have it delivered directly to the subcontractor. To do this, you must specify the following in the delivery address of the purchase order item:
   • the supplier number of the subcontractor
   • the Subcontractor supplier (SC Supp) indicator
   When your subcontractor informs you that the component has arrived, you enter the goods receipt for the component purchase order. At this goods receipt, the component is posted directly to the stock of material provided which is assigned to the subcontractor. You cannot do without this goods receipt posting, since it is the only way to update the stock of material provided and thus also your own, usually valuated stock.This direct delivery of a component is taken into account in transaction ME2ON during selection if you set the With external receipts from purchase orders/purchase requisitions indicators. In the Subcontracting Cockpit Fiori app, the direct delivery is also taken into account when calculating the stock balance for a component.

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Subcontracting: Transfer Postings of the Stock of Material Provided

The following transfer postings are allowed for the stock of material provided to supplier special stock:

• Plant to plant in the one-step procedure (movement type 301)
• Material to material (movement type 309)
• Stock in quality inspection to unrestricted-use stock (movement type 321)

To execute these transfer postings for the stock of material provided to supplier, you must specify the special stock indicator O; otherwise, the transfer postings do not differ from normal transfer postings.

Subcontracting: Subsequent Adjustment

If the subcontractor reports excess or under-consumption of subcontracting components after the delivery of the finished product, you must post a subsequent adjustment to correct the component consumption.

The following functions are available for posting a subsequent adjustment:

• Transaction MIGO or the corresponding Post Goods Movements app
• Post Subsequent Adjustment Fiori app, since SAP S/4HANA 2021

Enter a subsequent adjustment using transaction MIGO:

In the list of business transactions, choose Subsequent Adjustment. As a reference document, the system automatically enters Purchase Order. After you have specified the purchase order item, you can enter the difference quantity for each component. If a component has excess consumption, you only need to enter the additional quantity consumed. If less was consumed by a component than was posted at goods receipt, you also set the Underconsumption / Short Receipt indicator. This increases the stock provided of this component by the difference quantity (the consumption is reversed).

Enter a subsequent adjustment using Post Subsequent Adjustment app:

On the initial screen, enter the document number of the purchasing document for which you want to enter a subsequent adjustment. To enter the overconsumption or underconsumption of a component, open the item details. In the Components section, in the Goods Movement field, select whether there is Overconsumption or Underconsumption for the individual component and enter the quantity to be posted. For components for which no subsequent adjustment needs to be posted, leave the default No Posting for the goods movement unchanged. Finally, choose Apply for the component data and post the subsequent adjustment.

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