Subcontracting in SAP

Subcontracting is a procurement activity in which vendor works on material provided by buyer and return it after working on it. SAP has option to cater this transaction.

It is different from services as it involves delivering material to Vendor first. In order to give complete business picture and information of event, we must keep the record of material given to vendor. This is also important for material valuations.

For example, you want vendor to bend pipes that are currently at your premises. Another example could be, vendor will replace old stock that has become obsolete with new stock on paying additional cost.

In order to make Purchase Requisition/Order for Subcontracting follow these steps in addition to other information.

a) Chose item Category L (subcontracting)

b) Enter Material that will be delivered by vendor as finished product.

c) In Material tab of item details, a new button will appear “Component”. Click on this button in order to enter material that will be provided by the buyer. It can also be given by BOM (bill of material) if that is maintained in Material Master. Quantities and storage location from where this material be issued can be entered

d) After entering other necessary details Save the transaction Document