Difference between external processing & subcontracting?

[kalyana_chakravarthy2]

Dear Guru's,

Can anyone explain me the difference between external processing & subcontracting with example?

Thanks in advance

Regards

Kalyan

[Former Member · Accepted solution]

Hi Kalyan,

I don't think so there is any difference between External Processing and Subcontracting. What I understand is External Processing is a kind of Subcontracting wherein the in-process component sent out of the Manufacturing facility for certain operations or some time External vendor comes and performs certain operation inside Manufacturing facility in certain specified area. This is operation subcontracting in my view. In this case the control key of the operation should have indicator External Processing as '+'. In std. SAP PP02 control key is available for such situation.

There is one more kind of subcontracting through MM module. In this case Subcontracting Bill of Material is maintained and exploded at the time of Purchase order create. These components is supplied to Vendor and then Assembly is received from PO GR.

Regards,

Shoyeb