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Multilevel Subcontracting Process (Subcontracting Process with 2 Subcontractors) 

Sub-contracting Process: Subcontracting process in sap mm is a kind of special procurement where your company orders material from external vendor and provides components to the said vendor for production. 

  • In this document I want to share my knowledge on Multilevel Subcontracting Process. In this document, SAP Sourcing and Procurement consultant will be able to learn the concept and mapping procedure of Multilevel Subcontracting Process with two Subcontractors in SAP system. 

  • The subcontracting process is generally used in most of manufacturing industries. In the subcontracting process, raw materials are provided to subcontracting vendor. It’s being processed by subcontracting vendor, convert it to semi-finish material and deliver back. 

  • Many a times, more than one subcontractor is used for manufacturing at different levels of BOM. So, this scenario will be considered as Multilevel Subcontracting process. 


Here I am creating the  

  • Raw Materials (6000203, 6000204) 

  • Semi-Finished Material (8000021) 

  • Finished Material (13000081) 

We can do this in two ways: 

1st Scenario: 

  • Maintain the Stock Type 30 (Sub-contracting Process) in MRP2 view of the Material Master for the Semi-Finished and Finished Material. 

For the Semi-Finished Material: 

For the Finished Material: 

  • For this Purchasing Info Record is optional. 

2nd Scenario: 

  • Create the Material Master and create the Purchasing Info Record with Info Category (“Subcontracting”) 

  • Here I am using two suppliers  

  • 90006 – Semifinished Material 

  • 90007 – Finished Material 

Create BOM: (CS01) 

For Semi-Finished Material: 

For Finished Material: 

In S/4 HANA, The Production Version is Mandatory to Explode the BOM in PR & PO. 

  • In S/4 Hana it is mandatory to maintain Production Version to trigger the components.  

  • If we cannot maintain the production version the system throws an error. 

  • No Suitable components for this Item. 

We can maintain Production Version in two Ways:  

  • In Transaction Code C223 (For this we can maintain Routing and Workcenter) 

  • In Transaction Code SE38 (Enter Program CS_BOM_PRODVER_MIGRATION and click on the Execute button) 

For Semi-Finished Material:

All Production Versions Approved 

For Finished Material: 

All Production Versions Approved 

Create Purchasing Info Record: (ME11) 

For Semi-Finished Material:

Purchasing info record 5300000202 9000 L 9001 created. 

 For Finished Material:

Purchasing info record 5300000203 9000 L 9001 created. 

Create the purchase order: (ME21N) 

  • Create the Purchase Order with Supplier (90006) for the material. 

  • Indicate Suppler tab in Item Details of Delivery Address tab Enter the supplier number (also tick the check box) 

  •  Enter Net Price (Processing cost) 

Standard PO created under the number 4500000898.

In Next Step, Deliver the components to the subcontract Vendor 

We can do it in Many ways: 

  • In ME2O itself we can deliver the component to Subcontract Vendor  

  • In MIGO Transfer Posting –> PO (Movement Type 541)  

  • If we are doing in ECC in MB1B (Transfer Posting –> PO Movement Type 541) 

Sub-Contracting Stock Monitoring: 

Enter the Suppler, Plant and click on the Execute button. 

Select the line item and click on the Post Goods Issue. 

Goods Movement:(MIGO) 

Goods Receipts –> Purchase order 

The Material is moving into another SC Vendor Premises. 

Material document 171 posted 

The Accounting Entries are: 

  • After saving this document the system posts this material stock as stock provided to vendor.  

  • Therefore, there is no need to transfer the material through ME2O. (It is already delivered).  

Check the stock in Stock Overview in MMBE. 

For Raw Material: 

The 100 Quantity is consumed. 

For Semi-Finished Material: 

The 100 Quantity is Provider to vendor to convert it into Finished Product. 

Now create Purchase order (For Finished Product): (ME21N) 

Standard PO created under the number 4500000899 

Goods Movement: (MIGO) 

Goods Receipt –> Purchase orders 

Material document 172 posted. 

The Accounting Entries are: 

Now check the stock in Stock Overview: (MMBE) 

For Finished Material: 


 Next, we can do invoice verification in MIRO 

Invoice –> Purchase Order 

We can do invoice Verification w.r.t second created PO (I.e., Final Product created PO.) 

Document no. 44 created

The Accounting Entries are: 



Normally the main benefit of using Subcontracting is Increasing of productivity. Rather than bogging your employees down with simple but mundane tasks, you can outsource these projects to a third party.
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