Subcontracting with Source Location in PP/DS

Purpose

Subcontracting involves the procurement of a product from a supplier (the subcontractor) to whom the procuring entity provides components for the purpose.

Example Example

A screw manufacturer makes screws in his own plant. However, the screws are packed by an external service provider – a subcontractor. The screws are sent to the latter, who duly packs them and returns the packed screws to the screw manufacturer.

End of the example.

In planning with a source location, an in-house production order is generated for the supplier (source location) who acts as a subcontractor. The requirements and stocks of subcontracting components are MRP-relevant in the source location and can be planned individually for each vendor.

You can make use of this scenario if you work with several subcontractors or if you allow both in-house manufacture and procurement on a subcontracting basis for a product.

This graphic is explained in the accompanying text.

Prerequisites

The system plans in the source location if a location-specific product master record exists for the ordered product (for example, packed screws).

Caution Caution

If the master record for the ordered product is created retrospectively, stock inconsistencies may arise. A report is available to correct this error. Further information is available in SAP Note 544161.

End of the caution.

Data in the SAP R/3 System

The following data must have been created in the SAP R/3 system and transmitted to the SAP APO system via APO CIF (SAP APO Core Interface):

The end product
A production version must be defined in the material master record (MRP 4).
The components to be provided to manufacture the end product
A routing or a master recipe for the end product
In SAP APO, a production process model (PPM) is needed at the subcontractor location. The PPM consists of components and operations.

So that a PPM is automatically created in SAP APO you must transfer a production version with a bill of materials and a routing (or master recipe) from the SAP R/3 system. Alternatively, you can maintain the PPM directly in SAP APO.
The supplier who manufactures the end product as subcontractor
A purchasing info record of the category subcontracting that documents the subcontractor as the source of supply of the end product
The production version defined in the material master record must be specified in the info record. From the production version, the system recognizes the vendor location in which the PPM must be created in SAP APO.

Integration Model

The integration model of the SAP APO Core Interface with which you wish to transfer your data from the SAP R/3 system to the SAP APO system must contain all the above-mentioned data. Note also that the R/3 routing or the R/3 master recipe must be transferred as the subcontractor PPM in order for it to be created in the vendor location in SAP APO.

For more information, see Integration of Master and Transaction Data.

Data in SAP APO System

The following data must exist in the SAP APO system:

External procurement relationships and transportation lanes
From the purchasing info record the SAP APO system automatically generates an external procurement relationship of the category subcontracting and a transportation lane from subcontractor (source location) to plant (destination location) for the finished product.
This transportation lane is assigned to the external procurement relationship for the end product.
See: Transportation Lane and Automatic Creation of Transportation Lanes
Transportation lanes from plant to subcontractor
You must manually create a transportation lane for each subcontracting component you wish to send from the plant (source location) to the subcontractor (destination location).
Location of type Subcontractor
This location is only required, if the subcontractor processes the same product for multiple plants. In this case, you must manually create a location of the type subcontractor for each plant-vendor combination.
Production process model
When you transfer a routing or a master recipe from SAP R/3, the SAP APO system generates a production process model (PPM) from it. Alternatively, you can create a PPM for the end product directly in the subcontractor location in SAP APO.
See also: Production Process Model
Product master in the subcontractor location
You must create the end product and all components in the subcontractor location and assign them to model 000. Choose (Assign Model). In the window that appears select the model and choose (Assign Objects to Model).

Note
If a product master does not exist for the ordered product, the system plans without a source location.

You can use the Customer Exit APOCF012 (EXIT_/SAPAPO/SAPLCIF_PPM_001). You can automatically create the product masters when the subcontractor PPM is transferred and you can automatically assign models. For more information and for example coding, see SAP Note 483358.

End of the note.

See also: Product

Process

Creation of purchase requisition
You carry out automatic or interactive planning for your product requirement. Depending on the planning type, either the system determines a vendor as an allowed source of supply, or you choose a source manually.
After the subcontractor source of supply has been chosen, the SAP APO system carries out the following activities:
- It generates an external procurement order of the category subcontracting. The order contains the subcontractor as the source of supply.
- The system determines a valid PPM in the subcontractor location and uses it to generate an in-house-production order for the ordered product in the subcontractor location.
- If you have specified automatic planning, the system plans the subcontracting components for the in-house production order in the subcontractor location on the basis of the PPM and carries out a source determination process there. If a transportation lane from the plant to the subcontractor exists, the system creates stock transfer reservations. These are transferred to SAP R/3.
After the CIF transfer, the purchase requisition for the end product is created in the SAP R/3 system with the subcontractor as the source of supply. It contains the item category subcontracting and the components of the subcontracting planned order.
See also: Source Determination in PP/DS
Conversion of purchase requisition for end product
You convert the requisition of the category subcontracting for the end product into a purchase order. In interactive planning you can carry out the conversion directly from the SAP APO system if you set the conversion indicator there. Alternatively, you make the conversion in the SAP R/3 system. Through the conversion, the requisition is deleted in SAP APO and the PO created.
Sending the subcontracting components to the vendor
Transfer posting of the subcontracting components takes place according to the R/3 subcontracting process.
Using the function SC Stock Monitoring for Vendor, you can create either a transfer posting or a delivery for the necessary subcontracting components. Because this delivery is not MRP-relevant, it does not appear in SAP APO.
The transfer posting increases the stock of material provided to the vendor and reduces the stock in the plant. The stock changes are transferred to SAP APO.
For more information about the R/3 subcontracting process, see the component Materials Management (MM) under Subcontracting.
Posting the goods receipt for the end product
You post the goods receipt for the end product in the SAP R/3 system. In the SAP APO system, the PO quantity is reduced by the quantity of the goods receipt. The system increases the unrestricted-use stock for the end product. At the same time the goods receipt is posted, the goods issue for the subcontracting components provided to the subcontractor is posted. The “stock of material provided to the vendor” is reduced accordingly.