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.
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.