Improve Your Shipping Operations with R/3's Subcontracting Purchase Order

  • by Rajen Iyer, Cofounder and CTO, Krypt, Inc.
  • June 1, 2005
SAPexperts'SCM
Subcontracting purchase orders (POs) can provide a major relief for those struggling to adapt standard POs in R/3 for work outsourced to vendors or subcontractors. Subcontracting POs allow a two-way flow of materials to and from the vendor. Little information, however, is readily available on how to use this indispensable tool. Learn how to put it to work as you walk through a real-life example.
Key Concept
Regular purchase orders (POs) are used to order materials or services from a supplier or vendor. To provide materials or components, a subcontracting PO is used. The vendor performs a service or adds value to your process, while providing its own finished product. The subcontracting PO enables an outbound process in addition to the receiving process involved in regular POs.
Companies use the subcontracting purchase order (PO) when they offload internal work to a vendor or subcontractor. Examples of such services are repairs and regular manufacturing activity performed by the vendor. The company supplies the materials and components so that the vendor can perform the services.

Unlike a regular PO, a subcontracting PO involves sending material or items to the vendor and receiving them back after the contracted service is performed. This calls not only for a tracking mechanism for the material, but for a process to perform the shipping functionality as well.

Rajen Iyer

Rajen Iyer is the cofounder and CTO at Krypt, Inc. Rajen has written several in-depth, best practice articles, white papers, patents, and best-selling books on SAP Logistics and SAP Global Trade Services, including Effective SAP SD and Implementing SAP BusinessObjects Global Trade Services. He is also an invited speaker at industry conferences.

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