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]

Hi,

In External Processing, the stocks movement will not be visible. You cannot create document to Issue material to the vendor and document to receive the materials. This process will be used (mostly) to cost the services provided by the vendors inside the plant. Ex: One of your processes requires cutting and painting and this will be done by a different vendor and you need to pay them, and the vendor will work in your plant itself, then you can use this external processing scenario.

But in Subcontracting, you can have a BOM and in the PO the BOM will be exploded and material will be sent out for processing, you can keep track of stocks. You can also print GI document to move the materials out of your plant.

Thanks,

JK

[kalyana_chakravarthy2]

Dear Karthi,

As you have mentioned that vendor will do the required activities in our company premises & we have pay to the vendor, how is the payment done & where will you mention the cost for this activity. Can you please explain the steps?

In Subcontracting, we mention the service charges in the PO. In external processing, where do you maintaint the cost?

Thanks in advance

Regards

Kalyan