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This article is applicable to SAP SD & MM modules of SAP for version SAP 4.7 till ERP 6.0
Summary
This article describes a process called ‘Direct Subcontracting’. The process is similar to a third party scenario, but the difference is that here instead of a vendor; a subcontractor ships the final product to customer.
Author: Prakash H. Ayer
Company: Infosys Technologies India Ltd.
Created on: 22 September 2009
Author Bio
I am Prakash H. Ayer and I have total 7+ years experience in total out of which 5+ years as a SAP Logistics Consultant. I have worked on SAP MM, SD, PP, PS & WM modules and have been involved in implementation, configuration and setup of the same. I am based out of the Netherlands but have worked for major clients in Europe. My areas of expertise include purchasing, inventory and warehouse management, SAP upgrade, SAP instance consolidation, SOX control testing. I have a reasonable good knowledge of sales,
distribution, planning and projects.
Direct Subcontracting Process (SAP SD & MM)
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Material Master Changes ................................................................................................................................ 8
Sales Order Creation ...................................................................................................................................... 9
Convert Purchase Requisition (PR) to Purchase Order (PO) ......................................................................... 9
Releasing the Purchase Order (PO) ............................................................................................................. 13
Check that Purchase Order Reference is Printed on PO Form .................................................................... 14
Send the Components to Subcontractor ....................................................................................................... 14
Process the Shipping Notification to Create an Inbound Delivery ................................................................ 15
Perform Goods Receipt (GR) with Inbound Delivery .................................................................................... 18
Complete Sales Order Billing ........................................................................................................................ 21
This document describes a process called ‘Direct Subcontracting’. The process is similar to a third party scenario, but the difference is that here instead of a vendor; a subcontractor ships the final product to customer.
Functionality
Our client was using customer consignment scenario, where the ownership of the good lies with my client till the time customer withdraws the goods. But, my client has gone for new set of agreement with the customer. And the customer has agreed to take the ownership of the material within say for example between 1 and 90 days of receipt of product. This means, technically based on the product receipt, sales billing can be generated. The new process is between a consignment and direct subcontracting process. So there was necessity to phase out the consignment process.
The phase out of consignment process also triggered a new set of process improvement initiative.
The high level requirement for the new functionality is as follows:
1. The sales process should trigger a subcontracting purchase order
2. Based on the subcontracting purchase order it should be possible to send components with serial numbers
3. When the subcontractor ships the final product to the customer he will send a shipping notification; with this notification an inbound delivery should be created
4. When this inbound delivery is used to perform the goods receipts, then the subcontracting components should automatically get back-flushed.
5. The sales order billing should only be possible when the statistical goods receipt is done for the purchase order.
Direct Subcontracting Process (SAP SD & MM)
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6. Maintain the copy control settings for the new item category
Transaction: VTFA
Changes on Material Management:
Configuration changes on Materials Management:
For automatic determination of item category in inbound delivery for the delivery type, item category group, usage (purchase order) and item category (ZTSU), default item category – ELN (Shipping Notification) will be assigned.
This would be done at customizing path: Logistics Execution Shipping Deliveries Maintain item category determination in deliveries.
We have to maintain the configuration to allow the combination of usage of item category – Subcontracting and Account Assignment Category (Sales Order without GR – X).
The customizing path is: Materials Management Purchasing Account Assignment Define combinations of Item Categories/ Account Assignment Categories.
Changes to purchase order form:
There would be one change on existing PO form. As in this process vendor is directly delivering it to the customer, Vendor would need reference of the customer PO number for delivery. This information can be extracted from PO reference field from sales order.
The below logic should only get triggered for the purchasing process: Sales order with no GR and Subcontracting (Account Assignment Category X and Item category 3 – Subcontracting)
The customer reference number can be taken with help of tables: Account Assignment in Purchasing Document (EKKN) and Sales Document: Business Data (VBKD). With help of the given PO from table ‘Account Assignment in Purchasing Document’ you can get the sales order number. With this sales order you can go to table ‘Sales Document: Business Data’, and get the purchase order number.
Direct Subcontracting Process (SAP SD & MM)
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This derived purchase order number should be printed below the text customer reference on PO form as shown below:
Demo Details
The detailed demo is included in user manual for this process. This demo also contains the test case confirming that the asset is tested and working as expected.
The user manual steps are given below:
Material Master Changes
To ensure that the item category ZTSU (Direct Subcontract) is picked up automatically on sales order creation, it is necessary to have item category group as ZTSU on Sales org 2 view in material master.
Direct Subcontracting Process (SAP SD & MM)
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SAP path: Logistics Sales and Distribution Sales Order Create
Item category ZTSU should be picked automatically on sales order creation.
After the sales order is saved check the costing is done automatically. So, when you go into the changes mode of sales order the document should be completed.
Convert Purchase Requisition (PR) to Purchase Order (PO)
If the sales order is created without any critical field or credit block, then it will automatically create a purchase requisition.
Convert this purchase requisition into purchase order with transaction code: ME57 or
Direct Subcontracting Process (SAP SD & MM)
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SAP Path: Logistics Materials Management Purchasing Purchase Requisition Follow-On Functions Assign and Process. Give sales order number in below screen, tick on Assigned purchase requisitions and click Execute.
Direct Subcontracting Process (SAP SD & MM)
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On the output select the line item and click on button outbound delivery
Then for this outbound delivery you can complete picking and goods issue. There is no change to this process. Hence, further details are not given here.
Process the Shipping Notification to Create an Inbound Delivery
When the subcontractor completes his work and he will ship the goods to customer. The shipping notification will also be send to client via Fax or e-mail.
Direct Subcontracting Process (SAP SD & MM)
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Based on this shipping notification you can create an inbound delivery from transaction code VL31N or
SAP Path: Logistics Materials Management Purchasing Purchase Order Inbound Delivery Create. Give vendor and purchase order details. You can take PO details from step 5.
Note: If you are not able to create inbound delivery check following: 1. Before creating an inbound delivery the PO should be released. 2. Check if the PO line item has confirmation control key as shipping notifications.
When you click Continue, you get following screen
Direct Subcontracting Process (SAP SD & MM)
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As such this step could be performed via a background job, but for clarity this process is also covered here.
You can perform the goods receipt with inbound delivery from transaction code VL06IG or
SAP Path: Logistics Logistics Execution Inbound Process Goods Receipt for Inbound Delivery Post Goods Receipt Collective Processing Via Inbound Delivery Monitor
Give the Inbound delivery number or the PO number in below screen
On the output select the line item and press Post goods receipt
Direct Subcontracting Process (SAP SD & MM)
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Note: If you get error: VL659 (Error when creating document flow for delivery &), then check if the subcontractor has enough stock for the component material.
Direct Subcontracting Process (SAP SD & MM)
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As we have seen, this is almost completely a standard SAP process, without many changes. It can bring considerable efficiency and productivity improvement in consignment and subcontracting areas. It has benefits like reduced lead time for deliveries to customer, and fastens the billing process.
It has good cost saving benefits and can help simplify the overall process.
Direct Subcontracting Process (SAP SD & MM)
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