Subcontracting Process in SAP MM

SAP Materials Management (MM) is an important functional module in SAP enterprise resource planning (ERP) software that covers all the processes needed in purchasing different kinds of goods and services as well as in maintaining invoice verification and inventory process. SAP MM also features special procurement types and different types of special stocks including subcontracting, consignment, returnable transport packaging, pipeline, third party, and stock transfer. Subcontracting process in SAP MM involves the supplying of materials to the vendor to have a value added service for such materials.

In this subcontracting process, a company generally provides a subcontracting order to the vendor containing the information about the information that he needs to perform. Unlike the typical procurement process, all the essential components needed for creating the final or semi-finished product are provided to the vendor. The consumption of such components is then recorded upon receiving the value-added finished product.

Exploring the Subcontracting Process

Manufacturing companies often resort to subcontracting due to limited in-house production capacity of their production processes. Subcontracting, which is being referred as product outsourcing, serves as a useful way for reducing the production load in various industries. Generally there are several steps that should be followed when subcontracting in SAP MM. It is imperative that the processes involved have been understood to prevent any issues that will affect the production of the ordered product and its scheduled time of delivery. These processes include:

Subcontracting process can promote productivity improvement in subcontracting areas. It can help companies in enhancing the billing process and in decreasing the lead time for deliveries.