Understanding Subcontracting in SAP MM

What Is Subcontracting In Sap Mm

Subcontracting in SAP MM is a crucial process that involves outsourcing certain activities or tasks to external vendors. It allows companies to delegate specific functions, such as manufacturing or assembly, to specialized suppliers. This article will provide an overview of subcontracting in SAP MM and explore its significance in streamlining procurement processes and optimizing supply chain management.

Comparison: Production Data Structure (PDS) vs. Production Process Model (PPM)

When using the production data structure in SNP optimizer, there are limitations to cost maintenance that need to be considered.

Understanding Subcontracting in SAP MM

Subcontracting involving multiple production versions is possible, but it is necessary to have at least SAP ERP 2005 with Enhancement Pack 03 for seamless integration with an SAP ERP system.


Modifying the reliant requirement for subcontracting purchase requisitions is not feasible in SAP APO.

Subcontracting in SAP APO is modeled with the help of two orders. A planned order in the subcontractor location produces the material in that location and a stock transfer requisition transfers the material from the subcontractor location to the demand location. You cannot change the transfer

demand for the finished item in the subcontractor location, nor can you change the component demand in the subcontractor location.

What is subcontracting referred to as?

Subcontracting in SAP MM involves the process of engaging external entities, such as companies or individuals, to carry out certain aspects of a contract or project. Typically, organizations opt for subcontracting when they are unable to handle specific tasks internally.

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The movement type for subcontracting in SAP MM

Subcontracting in SAP MM refers to the process of issuing materials to a subcontractor for further processing or assembly. This is done using movement type 541, which can be executed through transaction codes MB1B and MIGO in the SAP system.

The second option is to issue materials without reference to a purchase order. This means that no specific purchase order exists for the subcontracting work being carried out. Instead, materials are issued based on other factors such as production requirements or ad-hoc requests.

Understanding ERP subcontracting

However beneficial it may be, successful implementation of subcontracting requires careful planning and monitoring. Organizations must thoroughly evaluate potential subcontractors based on their capabilities, track record, financial stability, reputation in the market before entering into any agreements. Regular performance evaluations should also be conducted during the course of collaboration to ensure adherence to agreed-upon standards and timely delivery.

Subcontracting in manufacturing: An Explanation

What is subcontracting manufacturing? Subcontracting manufacturing, also known as contract manufacturing or private manufacturing, refers to the practice of hiring an external company to handle some or all aspects of your production process. This external company is called a subcontractor.

In simple terms, when a business decides to subcontract its manufacturing operations, it means that they are outsourcing the production tasks to another company. This can involve various activities such as assembling products, sourcing materials and components, and even packaging finished goods. The subcontractor takes on these responsibilities on behalf of the original business.

1. Subcontracting manufacturing involves outsourcing part or all of your production process to an external company.

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3. Benefits include cost savings, increased flexibility, reduced infrastructure investment, and better focus on core competencies.

What is an example of subcontracting?

One instance of subcontracting involves a building contractor who hires a subcontractor to handle the electrical wiring aspect of a construction project. In this scenario, the main contractor remains accountable to the client for the entire building job, including the work carried out by the subcontractor.

When it comes to subcontracting in SAP MM, there are several key steps involved. First, the company identifies its requirements and creates a purchase requisition specifying details such as quantity, quality specifications, delivery dates, etc. Once approved by relevant authorities within the organization, this requisition is converted into a purchase order.

The next step entails sending this purchase order to selected vendors/suppliers who specialize in providing the required materials/services on behalf of the company. The vendor then acknowledges receipt of this order and proceeds with fulfilling it according to agreed-upon terms and conditions.

Throughout this process, SAP MM provides functionalities that enable effective tracking and management of subcontracted activities. Companies can monitor vendor performance against predefined metrics such as adherence to delivery schedules or compliance with quality standards using various reporting tools available within SAP MM module.

Overall, understanding how subcontracting works in both general business practices and specifically within SAP MM helps organizations streamline their procurement processes while ensuring successful collaboration with external partners for efficient project execution.