Avoid Inventory Discrepancies: Document Your Subcontracting Material Shipments

  • by Vishwas Karandikar, Systems Project Manager, Applied Materials, Inc.
  • December 1, 2006
Find out how you can enhance the R/3 and mySAP ERP Central Component subcontracting process to document the transfer of materials involved in subcontracting orders. This process allows you to link the provision of subcontracting components to a specific subcontracting order so you always know how much of your product the subcontracting vendor has on hand and how much it needs to fulfill your subcontracting orders.
Key Concept
In subcontracting, a type of procurement, the subcontract vendor, or subcontractor, creates a product for you using materials that your company provides to it. These materials can come either from you directly or from one of your suppliers. After the subcontract vendor finishes the product, it delivers it to you and you pay the subcontract vendor for its services.
SAP’s standard subcontracting process only links a subcontracting order and the material provision to the subcontracting vendor via the requirement quantity and date.

I developed a two-part process to enhance the standard R/3 and mySAP ERP Central Component (ECC) subcontracting process. My process links the issue of components to each subcontracting order so you can track how many items a subcontractor receives with each order. (For more information about the standard process, refer to the sidebar, “Review Standard Subcontracting.”

The custom development in part 1 simplifies the delivery route determination process and creates the delivery and post goods issue (PGI) document with the correct purchase order (PO) reference. In part 2, you complete a follow-up process that allows you to generate the documents required to ship a part to a subcontractor with the PO reference listed on the delivery documents.

Vishwas Karandikar

Vishwas Karandikar, CPIM, CSCP, PMP, is a systems project manager at Applied Materials, Inc. He has more than eight years of solution design and project management experience focused on supply chain planning. He has led multiple implementations of SAP R/3 logistics modules and designed interfaces with external systems.

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