As an SAP MM consultant working since early ECC 6.0 days, I have been part of implementations involving subcontracting procurement in multiple industries namely garment industry, consumer goods, life sciences, manufacturing industry et al. But when I came across the subcontracting collaboration of SAP Business Network for Supply Chain [henceforth called BN4SC], I was intrigued to find out what additional features / value adds are done by BN4SC over and above the classical subcontracting collaboration which I have seen since early days of my career. As I implemented subcontracting collaboration for one of my global CPG clients, I realized the business benefits of subcontracting collaboration in a networked environment. This blog outlines my learnings on the business problems which subcontracting collaboration in BN4SC solves.
Let's start with the basic definition of subcontracting process and SAP Business Network.
Subcontracting is a process in which:
- The buyer places a purchase order for finished goods with the supplier.
- The buyer supplies some or all of the components required to manufacture the finished goods.
- The supplier produces the finished goods and charges for the conversion service and/or the cost of any components provided by them.
SAP Business Network connects people, processes, and systems across multiple enterprises to digitalise transactions and creates transparent, resilient, and sustainable supply chains.
When subcontracting procurement occurs solely within ECC or S/4HANA, the processes of purchase order management and inventory management, as well as the related accounting entries, are flawlessly executed. However, without B2B connectivity between the supplier's and buyer's ERP systems, certain critical business activities necessitate the exchange of emails, Excel files, etc. They are as follows -
- Confirmation of component receipt by the supplier
- Alignment of component inventory between the buyer and supplier
The offline transfer of information necessitates extra follow-up, as well as a commitment of time and effort from both the buyer and supplier, to achieve a unified view of transactional data or component inventory levels.
Utilizing the subcontracting collaboration feature of BN4SC allows both activities to be conducted online, ensuring real-time information exchange and data transparency between the buyer and supplier. The following are the details:
- Confirmation of component receipt by the supplier
- The buyer initiates the component issue by creating a delivery through t-code ME2ON / Fiori App Subcontracting Cockpit. The associated movement type is 30A.
- When components are issued against this delivery, they are posted in subcontracting stock in transit.
- In parallel, a component ship notice is created in the SBN informing the supplier about the component shipment.
- When the supplier receives the components physically, he / she posts the goods receipt against the component ship notice.
- This component receipt gets reflected in buyer’s S/4HANA system via movement type 30C. This moves the component from subcontracting stock in transit to the subcontracting stock.
In summary, the component remains listed as in transit in the buyer's S/4 HANA system until the supplier confirms its receipt. It is only after the supplier posts the receipt of the component that it is reflected in the supplier's inventory. This process maintains transactional integrity in the stock transfer of components, ensuring that both the buyer and supplier have a consistent count of the components received.
- Alignment of component inventory between buyer and supplier
- The buyer keeps on sending the components as he keeps on issuing the Purchase Orders. Also, the supplier keeps on consuming the component as he produces the finished goods.
- Although the consumption of the components is posted in the buyer’s S/4HANA system, periodic inventory reconciliation between buyer’s S/4AHANA system and supplier’s system is needed to ensure inventory transparency.
- For buyers using BN4SC, this periodic reconciliation is done automatically using a standard program ARBCIG_PRODUCT_ACTIVITY. This program can also be accessed via t-code ARBCIG_SUBCON
- Usually, a batch job is scheduled at a defined frequency which will send the snapshot of subcontracting stock to SBN. This will align the subcontracting stock in buyer’s S/4HANA system and the component inventory in SBN
In summary, the ARBCIG_PRODUCT_ACTIVITY program enables both suppliers and buyers to view an identical snapshot of component inventory in a near real time manner. This leads to enhanced collaboration, greater data transparency, and more efficient inventory management between the parties.
In addition to the above mentioned use cases, the usual benefits of PO Collaboration i.e. exchange of POs, Order Confirmation, Ship Notice, Label printing by supplier etc. and quality collaboration also enriches the overall experience of subcontracting process when done with suppliers in SBN.
To conclude, the incremental benefits of using BN4SC helps eliminates the need for offline communication /reconciliation/ follow ups etc., freeing up resources for both buyers and suppliers so that they can focus on strategic initiatives and help in business growth.
SAP Business Network for Procurement and SAP Business Network for Supply Chain, SAP Business Network Supply Chain Collaboration
