Subcontracting with Chargeable Components 

Use

The Subcontracting (Shitauke) Act regulates activities relating to subcontracting, the process whereby one company pays another to manufacture or assemble a product for it. The Subcontracting with Chargeable Components solution allows you to record all transactions with subcontractors so that they meet the requirements arising from the act.

Features

The main difference between the generic Subcontracting solution and this solution is as follows. In this solution, when you provide a subcontractor with the components they require to assemble a product, you invoice the subcontractor for the components. In return, once the subcontractor has assembled the product and delivered it, it invoices you for the components that it has consumed in the assembly of the product. The components are thus known as “chargeable components.” In the generic Subcontracting solution, neither party makes any charge for any components.

The system offers you two ways (or “offset methods”) of handling the invoices. Under one of these methods, consumption-based offsetting, the invoices merely serve as documentary evidence of the sale of the components and are not paid. You simply use them to keep track of which components the subcontractor has consumed.

Under the other method, percentage-based offsetting, you deduct the invoices from the subcontractor from a certain percentage of the invoices that you have sent it, and the subcontractor pays the difference.

Another consequence of the Subcontracting Act is that you are required to keep records of all transactions with subcontractors and file reports relating to these.

Activities

Customizing

If you want to use the Subcontracting with Chargeable Components solution, make the settings in Customizing for Materials Management (MM), by choosing Inventory Management and Physical Inventory ® Subcontracting with Chargeable Components.

Master Data

Maintain the master records for your subcontractors as described in Maintenance of Subcontractor Master Data, and maintain your material master data as described in Maintenance of Material Master Data.

Day-to-Day Activities

Record the transactions with your subcontractors as described under Subcontracting Process.

Periodic Processing

You can prepare the statutory reports using the various reports provided.