SAP Subcontracting Process: Handling Multiple Vendors Efficiently

[Leelamohan]

In today’s complex manufacturing landscape, businesses often rely on multiple subcontractors to produce goods efficiently. SAP’s multi-level subcontracting process simplifies this by allowing seamless material flow between vendors without unnecessary stock movements.

Business Scenario Process:

1. Create a PO for Subcontract Vendor 1 (31000) with Subcontract Vendor 2 (11002) as the delivery address.

2. Issue components to Vendor 1 via ME2O (Movement Type 541 O) – stock is assigned as "Stock provided to vendor."
3. After Vendor 1 confirms production, post GR – components are consumed (543 O), and semi-finished goods move to Vendor 2 (101 O).
4. Create a PO for Vendor 2 (no component issue needed, as stock is already with them).
5. Post GR – semi-finished goods are consumed (543 O), and the final product is received in stock (101).

This process eliminates redundant stock handling, ensuring smooth production across multiple vendors. 

Step 1: Maintain Special Procurement for Finished and Semi-Finished materials

Step 2: Create a BOM for the final & semi-finished product (Transaction: CS01)

BOM for finished material HF9000987

BOM for semi-finished material HR1000005

Step 3: Create Purchase Order (Transaction: ME21N)

Supplier as subcontracting vendor 1

Explode the BOM components in the Material Data tab under Item details.

Maintain the subcontractor vendor 2 address under the delivery address tab

Step 4: Issue the components to the vendor from the subcontract cockpit (Transaction: ME2O)

Select the item and click on Post Goods Issue

Mention the storage location, Batch, and click create document.

No accounting entries will be generated in this step.

Step 5: Check the stock (Transaction: MMBE/MB52)

Goods will be moved from unrestricted to Stock provided to the subcontracting vendor 1

Step 6: Post Goods Receipt upon confirmation received from the 1st subcontractor sending goods to the 2nd subcontractor

Since the SC supplier checked in the PO, the semi-finished product was automatically posted with movement type 101 O. 

Components will be consumed with 543 O movement, accounting entries will be generated.

Step 7: Check the Stock(Transaction: MMBE/MB52)

Step 8: Post Incoming Invoice (Transaction: MIRO)

In PO, the semifinished product net price is maintained as 100 SAR for 1 EA.

Total Price: 200 SAR, including 5% Tax: 204 SAR.

Step 9: Create a subcontract PO for Finished Product from Subcontracting vendor 2 (Transaction: ME21N)

Supplier will be subcontractor 2 11002

Click on Components and check for the BOM.

Finished Product BOM

Maintain the delivery address to the plant where you will receive the finished product under the delivery address tab in Item details

Step 10: Post Goods Receipt (Transaction: MIGO)

 Subcontracting vendor 2 sent the finished product to our location.

Finished product will be posted with movement type 101, components (semifinished product will be consumed with 543 O movement type)

Step 11: Check the Stock for finished product (Transaction: MMBE/MB52)

2 EA posted to location 1005 with 101 movement.

Refer blog below for the Assembly subcontracting process.

Assembly Subcontracting Process in Production Planning - SAP S/4 HANA

Regards,

Leelamohan Mannem