SUBCONTRACTING PROCESS
In subcontracting process we provide raw material to
subcontractor vendor, he processes the material and he returns back
to our company as a semi finished or finished material. We are
paying charges to subcontractor vendor
Example: We have one starter motor manufacturing company
who manufactures the starter motors company provides the raw
materials like starter housing, armature, bushes, solenoid and pinion
bendex to subcontractor vendor. Subcontracting vendor processes
and assembles the all components and finally returns the Starter
motor to our company
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Subcontracting with Subcontractor vendor
When there is no stock available for raw material in our storage
location we will order the materials from Third party vendor. Instead
of receiving materials in our storage location we will directly send
raw materials from third party vendor to subcontracting vendor
Steps Involved in subcontracting with SC vendor process
1. Create materials raw materials and finished materials
T code: MM01
Ex: Finished material starter motor
Raw materials starter housing, armature, bushes,
solenoid and pinion bendex
2. Create vendors
T code: XK01
Ex: Subcontracting vendor & third party vendor
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3. Create Purchase Orders (PO)
T code: ME21N
Normal PO (Raw materials)
Subcontracting PO (Finished material)
4 .Goods receipt for normal PO
T code : MIGO
5. Goods receipt for Subcontracting PO
T code : MIGO
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1. Create Material
T code: MM01
Material Material number Material type
Starter motor 0060080224 parent
Starter housing 0060010062 Child
Armature 0060010063 Child
Bushes 0060010064 Child
Solenoid 0060010065 Child
Pinion bendex 0060010066 Child
2. Create Sub contracting vendor T code: XK01
Subcontracting Vendor 2110000015
Third party Vendor 2110000016
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3. Create normal Purchase Order (PO) for raw material
T code: ME21N
Create PO with third party vendor for raw materials
During creation of Normal PO assign subcontracting vendor in
delivery address tab
Standard PO created under the number 4500023466
Create subcontracting Purchase Order (PO)
T code: ME21N
Create subcontracting PO with subcontracting vendor for the
finished material
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BOM
Standard PO created under the number 4500023467
PO TYPE VENDOR PO NUMBER
Normal PO 2110000016 4500023466
Subcontracting PO 2110000015 4500023467
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4. Goods receipt of the Normal PO for raw materials
T code: MIGO
Before this let’s check stock of all raw materials in
MB52
Do GR in MIGO for raw materials
GR for raw materials with Mvt type 101 for normal PO
Material document 5000001845 posted
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Check stock in MB52 after GR
Accounting entries after GR for raw materials
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5. Goods receipt of the normal PO for finished materials
T code: MIGO
Material document 5000001846 posted
Movement types in Sub contracting while doing Goods receipt
(GR)
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101 Parent material (Finished)
543 Child materials (Raw)
Accounting Entries in Subcontracting Process
During GR
Accounting entries in subcontracting always calculated in formula
- 4+2X
X No of child materials
4 accounting entries for finished material
BSX Inventory account
WRX GR/IR clearing account
BSV Change in sub contracting stock
FRL Sub contracting charges
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(In subcontracting FRL always comes as service charges paying to
vendor)
2 accounting entries For Raw materials
BSX Inventory account
GBB Consumption account
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