Direct Subcontracting 4k192u

Direct Subcontracting Process (SAP SD & MM)

Applies to: This article is applicable to SAP SD & MM modules of SAP for version SAP 4.7 till ERP 6.0

Summary This article describes a process called ‘Direct Subcontracting’. The process is similar to a third party scenario, but the difference is that here instead of a vendor; a subcontractor ships the final product to customer. Author:

Prakash H. Ayer

Company: Infosys Technologies India Ltd. Created on: 22 September 2009

Author Bio I am Prakash H. Ayer and I have total 7+ years experience in total out of which 5+ years as a SAP Logistics Consultant. I have worked on SAP MM, SD, PP, PS & WM modules and have been involved in implementation, configuration and setup of the same. I am based out of the Netherlands but have worked for major clients in Europe. My areas of expertise include purchasing, inventory and warehouse management, SAP upgrade, SAP instance consolidation, SOX control testing. I have a reasonable good knowledge of sales, distribution, planning and projects.

SAP COMMUNITY NETWORK © 2009 SAP AG

SDN - sdn.sap.com | BPX - bpx.sap.com | BOC - boc.sap.com 1


Table of Contents Overview ............................................................................................................................................................. 3 Functionality ........................................................................................................................................................ 3 Implementation ................................................................................................................................................... 5 Demo Details ...................................................................................................................................................... 8 Material Master Changes ................................................................................................................................ 8 Sales Order Creation ...................................................................................................................................... 9 Convert Purchase Requisition (PR) to Purchase Order (PO) ......................................................................... 9 Releasing the Purchase Order (PO) ............................................................................................................. 13 Check that Purchase Order Reference is Printed on PO Form .................................................................... 14 Send the Components to Subcontractor ....................................................................................................... 14 Process the Shipping Notification to Create an Inbound Delivery ................................................................ 15 Perform Goods Receipt (GR) with Inbound Delivery .................................................................................... 18 Complete Sales Order Billing ........................................................................................................................ 21 Conclusion ........................................................................................................................................................ 22 Disclaimer and Liability Notice .......................................................................................................................... 23




Overview This document describes a process called ‘Direct Subcontracting’. The process is similar to a third party scenario, but the difference is that here instead of a vendor; a subcontractor ships the final product to customer.

Functionality Our client was using customer consignment scenario, where the ownership of the good lies with my client till the time customer withdraws the goods. But, my client has gone for new set of agreement with the customer. And the customer has agreed to take the ownership of the material within say for example between 1 and 90 days of receipt of product. This means, technically based on the product receipt, sales billing can be generated. The new process is between a consignment and direct subcontracting process. So there was necessity to phase out the consignment process. The phase out of consignment process also triggered a new set of process improvement initiative. The high level requirement for the new functionality is as follows: 1. The sales process should trigger a subcontracting purchase order 2. Based on the subcontracting purchase order it should be possible to send components with serial numbers 3. When the subcontractor ships the final product to the customer he will send a shipping notification; with this notification an inbound delivery should be created 4. When this inbound delivery is used to perform the goods receipts, then the subcontracting components should automatically get back-flushed. 5. The sales order billing should only be possible when the statistical goods receipt is done for the purchase order.




The flow chart of this functionality is included here.

Customer Order

Create sales order for subcontracting with item category direct subcon

Creation of purchase requisition (PR) by SAP

Transfer of PR to purchase order (PO) subcontracting

Warehouse Warehouse Outbound Outbound Employee Employee

SAP SAP

Start

Buyer/ Buyer/ Purchaser Purchaser

Customer Customer Service Service Employee Employee

Direct Subcontracting Process

Sales order billing

End

Create an outbound delivery to send subcontract components

Send components to subcontractor

Vendor Stock

Subcontractor Subcontractor

Assembly

Shipment to client’s customer

Shipping Notification to client

Buyer/ Buyer/ Purchaser Purchaser

Create inbound delivery

Warehouse Warehouse Inbound Inbound Employee Employee

Backflushing of components

Perform Goods Receipt




Implementation This asset is built on SAP 4.7 version, but it is scalable across to the latest version ERP 6.0. We need to have following changes to SAP. Changes on Sales and Distribution Customizing: 1. Create a new item category group 2. Create a new item category 3. Assign the new item category to the item category group 4. Create a new schedule category with Item category 3 and assignment X 5. Assign the item category to the new schedule line category 6. Maintain the copy control settings for the new item category Step for item category definition and assignment 1. Create a new item category group ZTSU Configuration path: IMG→ Sales and Distribution→ Sales→ Sales Documents →Sales Document Item →Define Item Category Group

2. Create a new item category ZTSU Configuration path: IMG→ Sales and Distribution→ Sales→ Sales Documents →Sales Document Item →Define Item Categories




3. Assign the new item category ZTSU to the item category group ZTSU Configuration path: IMG→ Sales and Distribution→ Sales→ Sales Documents →Sales Document Item →Assign Item Categories

4. Create a new schedule category as ZD with Item category 3 and assignment X Configuration path: IMG→ Sales and Distribution→ Sales→ Sales Documents →Schedule Lines →Define Schedule Line Categories

5. Assign the item category to the new schedule line category ZD Configuration path: IMG→ Sales and Distribution→ Sales→ Sales Documents →Schedule Lines →Assign Schedule Line Categories




6. Maintain the copy control settings for the new item category Transaction: VTFA

Changes on Material Management: Configuration changes on Materials Management: For automatic determination of item category in inbound delivery for the delivery type, item category group, usage (purchase order) and item category (ZTSU), default item category – ELN (Shipping Notification) will be assigned. This would be done at customizing path: Logistics Execution  Shipping  Deliveries  Maintain item category determination in deliveries. We have to maintain the configuration to allow the combination of usage of item category – Subcontracting and Assignment Category (Sales Order without GR – X). The customizing path is: Materials Management  Purchasing  Assignment  Define combinations of Item Categories/ Assignment Categories. Changes to purchase order form: There would be one change on existing PO form. As in this process vendor is directly delivering it to the customer, Vendor would need reference of the customer PO number for delivery. This information can be extracted from PO reference field from sales order. The below logic should only get triggered for the purchasing process: Sales order with no GR and Subcontracting ( Assignment Category X and Item category 3 – Subcontracting) The customer reference number can be taken with help of tables: Assignment in Purchasing Document (EKKN) and Sales Document: Business Data (VBKD). With help of the given PO from table ‘ Assignment in Purchasing Document’ you can get the sales order number. With this sales order you can go to table ‘Sales Document: Business Data’, and get the purchase order number.




This derived purchase order number should be printed below the text customer reference on PO form as shown below:

Demo Details The detailed demo is included in manual for this process. This demo also contains the test case confirming that the asset is tested and working as expected. The manual steps are given below: Material Master Changes To ensure that the item category ZTSU (Direct Subcontract) is picked up automatically on sales order creation, it is necessary to have item category group as ZTSU on Sales org 2 view in material master.




Sales Order Creation Create sales order with transaction code: VA01 or SAP path: Logistics  Sales and Distribution  Sales  Order  Create Item category ZTSU should be picked automatically on sales order creation.

After the sales order is saved check the costing is done automatically. So, when you go into the changes mode of sales order the document should be completed. Convert Purchase Requisition (PR) to Purchase Order (PO) If the sales order is created without any critical field or credit block, then it will automatically create a purchase requisition. Convert this purchase requisition into purchase order with transaction code: ME57 or




SAP Path: Logistics  Materials Management  Purchasing  Purchase Requisition  Follow-On Functions  Assign and Process. Give sales order number in below screen, tick on Assigned purchase requisitions and click Execute.




Select the output line item. Click on button Assignments.

You see below screen. Place your cursor on while line with text ‘1 assignment.

NB

1’ and Click on button Process

You get a pop-up, click on continue button as shown below




The system will take you to purchase order creation screen. Here select the purchase requisition and click on button Adopt as shown below.

As soon as button Adopt is clicked all the PR details are copied to PO.

Check the storage location (Consignment use) is used while creating the PO.

If there are no errors the PO would be saved, you get following message.




Releasing the Purchase Order (PO) Get the PO released.




Check that Purchase Order Reference is Printed on PO Form Check that the PO form has the correct Delivery Address and Client Purchase Order Reference.

Send the Components to Subcontractor Now, you can send the components to subcontractor with transaction code ME2O.




On the output select the line item and click on button outbound delivery

Then for this outbound delivery you can complete picking and goods issue. There is no change to this process. Hence, further details are not given here. Process the Shipping Notification to Create an Inbound Delivery When the subcontractor completes his work and he will ship the goods to customer. The shipping notification will also be send to client via Fax or e-mail.




Based on this shipping notification you can create an inbound delivery from transaction code VL31N or SAP Path: Logistics  Materials Management  Purchasing  Purchase Order  Inbound Delivery  Create. Give vendor and purchase order details. You can take PO details from step 5.

Note: If you are not able to create inbound delivery check following: 1. Before creating an inbound delivery the PO should be released. 2. Check if the PO line item has confirmation control key as shipping notifications.

When you click Continue, you get following screen




Now, go to tab: Stock placement and give Putaway Quantity

As soon as you give putaway quantity and press enter, the overall putaway status is changed from A – For putaway to C - Compl. put away.

Now, you can save the inbound delivery. You get the inbound delivery number.




Perform Goods Receipt (GR) with Inbound Delivery As such this step could be performed via a background job, but for clarity this process is also covered here. You can perform the goods receipt with inbound delivery from transaction code VL06IG or SAP Path: Logistics  Logistics Execution  Inbound Process  Goods Receipt for Inbound Delivery  Post Goods Receipt  Collective Processing Via Inbound Delivery Monitor Give the Inbound delivery number or the PO number in below screen

On the output select the line item and press Post goods receipt




You get following pop-up, click Continue.

The material document is created as seen below.

Note: If you get error: VL659 (Error when creating document flow for delivery &), then check if the subcontractor has enough stock for the component material.




Go to the PO and see the GR document.

Click on the material document number. You see that the back flushing of the component is done with movement type 543.




Complete Sales Order Billing Now, as the statically delivery is done for the purchase order, sales order can be billed to customer. Create the billing document with VF01 or from SAP path: SAP path: Logistics  Sales and Distribution  Sales  Order  Change

You see following screen on VF01

When you save the billing document is generated.




See the sales order document flow:

With this step the process is complete.

Conclusion As we have seen, this is almost completely a standard SAP process, without many changes. It can bring considerable efficiency and productivity improvement in consignment and subcontracting areas. It has benefits like reduced lead time for deliveries to customer, and fastens the billing process. It has good cost saving benefits and can help simplify the overall process.




Disclaimer and Liability Notice This document may discuss sample coding or other information that does not include SAP official interfaces and therefore is not ed by SAP. Changes made based on this information are not ed and can be overwritten during an upgrade. SAP will not be held liable for any damages caused by using or misusing the information, code or methods suggested in this document, and anyone using these methods does so at his/her own risk. SAP offers no guarantees and assumes no responsibility or liability of any type with respect to the content of this technical article or code sample, including any liability resulting from incompatibility between the content within this document and the materials and services offered by SAP. You agree that you will not hold, or seek to hold, SAP responsible or liable with respect to the content of this document.



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