Subcontracting Process in SAP MM: A Comprehensive Guide

Subcontracting in SAP MM Whether you’re a seasoned SAP user or just starting out, understanding the ins and outs of subcontracting can significantly enhance your procurement efficiency. In this comprehensive guide, we’ll delve into the key aspects of subcontracting within SAP MM, offering insights, best practices, and practical tips to help you navigate this complex process with ease.

Understanding Subcontracting in SAP MM

Before we dive into the specifics, let’s first establish a clear understanding of what subcontracting entails within the SAP Material Management (MM) module. Subcontracting involves outsourcing certain aspects of production or assembly to external vendors while maintaining control and oversight over the process. This could include activities such as sending raw materials to a subcontractor for further processing or assembly into finished goods.

Key Components of the SAP MM Subcontracting Process

1. Prerequisite

Before initiating Subcontracting process in SAP MM the prerequisite is material master setup, vendor master data maintenance, and configuration of subcontracting-specific procurement settings. Verify accurate bill of materials (BOM) configuration and availability of necessary components to facilitate smooth subcontracting operations.

2.ME11 Purchasing Info Records

ME11 Transaction used In this process pricing condition specify for subcontracting service or material provided by vendor. These services include unit prices, currency, and surcharges, to ensure transparency and accuracy in financial transaction.

3. ME21N Creation of Subcontracting Purchase Order (PO)

The process typically begins with the creation of a subcontracting purchase order (PO) within SAP MM. This PO specifies the materials to be provided to the subcontractor, along with any relevant terms and conditions.

4. MIGO Goods Issue to Subcontractor

Once the PO is created, the next step involves issuing the necessary materials to the subcontractor. This is done through a goods issue transaction in SAP MM, where the materials are transferred from the warehouse to the subcontractor’s location. While this processing 541 movement happen.

5. Monitoring Progress

Throughout the subcontracting process, it’s crucial to monitor the progress closely to ensure timely completion and adherence to quality standards. SAP MM provides various tools and reports for tracking the status of subcontracting orders and managing any deviations or issues that may arise.

6. MIGO Goods Receipt from Subcontractor

Once the subcontracted work is completed, the subcontractor delivers the finished goods back to your organization. A goods receipt transaction is then performed in SAP MM to acknowledge the receipt of these goods into your inventory.  101 Movement type done at this time and in the background, 543 movement happen.

7. MIRO Invoice processing

In this process invoice processed and vendor payment done. During the MIRO transaction, this receipt is referenced to verify that the invoiced items align with the goods or services received, ensuring proper payment processing and accounting reconciliation.

Best Practices for Subcontracting in SAP MM

To optimize your subcontracting process in SAP MM, consider implementing the following best practices:

Clear Communication: Maintain open and transparent communication with your subcontractors to ensure mutual understanding of expectations and requirements.

Streamlined Documentation: Keep all relevant documentation, such as purchase orders and delivery schedules, well-organized and up-to-date within SAP MM for easy reference.

Regular Monitoring: Monitor subcontracting orders and inventory levels regularly to identify any issues or bottlenecks early on and take proactive measures to address them.

Quality Control: Implement robust quality control measures to ensure that the subcontracted work meets your organization’s quality standards and specifications.

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To know more about SAP transactions, see our post  :  https://youtu.be/qe7-rDAicho?si=pH15qy8kyGh0fyGW