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In third-party subcontracting process the delivery of the goods required by the customer is not done by sales organization where customer orders. Instead, the request of the goods is forwarded to an external vendor who sends the material directly to the customer.
Here is what happens in third-party subcontracting process:
1. Customer orders goods and a sales order is created in a sale organization.
2. Subcontracting Purchase requisition is created automatically when sales order is saved.
3. Purchase order is created at the vendor in the MM purchasing application (manually or automatically)
4. If the vendor does the outbound delivery to the customer, the goods receipt can be posted in SAP.
5. Invoice receipt is created (invoice from vendor)
6. Invoice to customer is created (order-based invoice)

Third-party subcontracting process is triggered when the sales order with third-party item is created. Depending on settings done in customization third-party subcontracting item categories can be automatically determined by the system (automatic third-party subcontracting processing) or they can be changed from standard item to third-party subcontracting item category in sales order (manual third-party subcontracting processing).


Sales order type used for third-party – OR (standard order)

Define Item Category Groups for third-party subcontracting

Schedule line category for third-party – DS

Item category for third-party subcontracting– TADS
Let’s look deeper into the settings in the system done for automatic and standard third-party process:


Create PO Automatic indicator is not marked in TADS.


Item category group can be found in material master, Sales: Sales org.2 view.

To flag a material master directly for subcontracting, choose a half finished (HALB) or finished (FERT) material, and in the MRP2 tab maintain the Special Procurement field with option 30 for the plant, as shown below.



Item category TADS will be determined automatically for standard order (OR) and item category group BADS (third-party subcontracting item).


Data: Order type = NB, Item Category = L and Acct.AssgntCat = X is the data for Purchase requisition.


If it is filled like above the purchasing requisition will be created automatically as standard purchasing requisition (NB), with item category S and acc.assign cat X.

The mapping of item category (from 3 to L) can be found in IMG: MM->Purchasing->Define External Representation of item categories. The definition of account assignment category can be found in IMG: MM->Purchasing->Account assignment->Maintain acc.***. Categories




After saving sales order with item category TAS the purchase requisition is automatically created. In order to see the document go to: Environment -> Status overview and expand data for item, then expand data for purchase requisition as well:



Double click on the requisition number and you will be taken to the purchase requisition document.

The other way is to go to schedule line where you can find the purchase requisition number.

If third-party item has more than one schedule line with confirmed quantity > 0, then new item in purchase requisition is created for each schedule line.

It is wise to have the vendor determined in source of supply at this stage of the process (i.e. source list)



The purchase requisition needs to be converted into purchase order in MM (t-code me21n or me58). The purchase order document type is NB (standard order), item category L, that must be assigned to account. Thus account assignment category needs to be given. In this example it is X (automatically taken during conversion from purchase requisition, as it was defined in item category DS).


The definition of acct assignment category can be found in IMG: MM->Purchasing->Account assignment->Maintain acc.***. categories:


The mapping of item categories: IMG: MM->Purchasing->Define External Representation of item categories:



As it was written before – the purchase requisition is created automatically when sales order is saved. It is possible to automatize the next step, the creation of purchase order, as well.







The goods receipt posting (t-code migo) would have the following effects:
• The warehouse stock is not updated



• The goods receipt is posted directly to consumption and the consumption quantity is updated

• The order value is posted to a GR/IR clearing account for invoice verification purposes


• The goods receipt can be traced in the purchase order history

The goods receipt posting should happen when the vendor reports that outbound delivery was executed or customer confirms that delivery arrives.
Since no flow of goods occurs in the enterprise, the goods receipt posting results in updates on value basis.
The invoice verification with reference to purchase order needs to be created when invoice from vendor arrives to enterprise (t-code miro). The value and, if goods receipt was done earlier, the quantity are proposed by the system. When the incoming invoice is posted following are updated:

• Purchase order history

• G/L accounts

• The vendor account in subledger accounting, as well as the liabilities account (general ledger)


Once invoice receipt has been entered, the customer can be billed as well (t-code vf04). Since an outbound delivery doesn’t exist for the third-party the invoicing will be order based. In the item category TADS definition, the billing relevance indicator is set to F by default.

That means relevant for order-related billing document: status according to invoice receipt quantity. That is, the system allows invoicing the order only when vendor’s invoice has been processed in invoice verification.
The customer invoice is created for the quantity specified in the vendor invoice. The setting in the copy control for the third-party item category from sales document to billing document specifies that the quantity from the invoice receipt is transferred to the billing document instead of the order quantity (billing quantity indicator in copy control is F)




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