Posted by: ahmedashfaque | August 18, 2014

What is SAP – subcontracting cycle


In my last post, we had seen how request for quotation works in SAP. In today’s post we will see how subcontracting works in SAP.

In many industries, manufacturer does not make all components required to manufacture the completely finished product. Instead, they subcontract many manufacturing activities to subcontractors who make these components and ship to the manufacturer. The manufacturer then assemble these parts to make the finished product. In industries like electronic goods, computers, automobiles etc. subcontracting to make many assembly parts is a common practice.

The raw material needed to make the parts is supplied to the vendors by the manufacturer. After finishing the assembly, the vendor ships it to the manufacturer. The manufacturer receives. The vendor sends invoices for the work performed. The manufacturer pays the vendor after verifying the invoice.

This is the standard configuration in SAP. Some variations on this standard scenario can happen. For example, the raw material to be supplied to the vendor may come from another vendor. So there can be an arrangement with both the vendors by the manufacturer so that the needed materials are supplied in this way. In yet another variation the finished assembly made by the vendor can be supplied to another vendor who will work on it to make another product.

All of these kinds of variations can easily handled in SAP.

In my next post, we will see how consignment is taken care of in SAP.

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  1. […] my previous post we had seen how subcontracting process works in SAP. In this post we will see how consignment […]


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