Implement the Appropriate Contract Manufacturing Solution

  • by Gaetano Altavilla, Senior SAP Practice Manager
  • November 7, 2012
Decide the appropriate solution for contract manufacturing in an SAP system based on your business needs. Learn about the possible options available across the main logistics modules. Gain details about the main master data and transactional data needed to implement the manual and subcontracting solutions.
Key Concept

Contract manufacturing (CM) is the process by which a company plans and purchases services to produce finished materials or intermediates at a production facility not owned by the company. A contract manufacturer is the actual production facility that manufactures or stores bulk or finished goods for the company. Subcontracting is a process similar to CM, which is used to purchase services to produce finished materials or intermediates of raw materials. More stringent requirements exist for using this process, including capacity planning and inventory visibility. If the company does not own any of the materials used in the CM facility, then the manufacturer is a normal vendor for the company.

Often it is difficult to decide the type of solution a company should implement to cover contract manufacturing (CM) business cases. I outline two CM solutions, manual and subcontracting, and then go into detail about the master and transactional data required to implement each. In a second article, “Implement a Full Contract Manufacturing Solution in SAP,” I describe a third option, which is to use the full CM suite.

Gaetano Altavilla

Dr. Gaetano Altavilla is a senior SAP practice manager. His focus is on pre-sales, delivery of SAP application solutions for large international corporations, and SAP knowledge management in Europe, the Middle East, and Africa (EMEA).

In his 18 years of SAP application experience working for many multinational companies, such as Procter & Gamble and Hewlett-Packard, he has covered a wide range of ERP logistic areas, focusing on the MM, WM, SD, LES, PP, PP-PI, PLM (QM, PM, PS) modules, as welll as CRM (TFM), SRM (EBP), SCM (SAP APO), and MES (ME) components.

Dr. Altavilla holds a degree with first-class honors in mathematics from the University of Naples and is certified in many SAP modules: SAP Logistics Bootcamp, SAP MM, SD, LE (SHP/WM/LE), PP, PLM (PM, QM, PS), SRM, CRM, SCM (APO), SCM (TM), FI, CO, and Solution Manager. He also has experience in ABAP/4 and application link enabling (ALE) and IDocs. He has participated in numerous industry conferences, such as the SAP Skills Conference in Walldorf at SAP SE.

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