Sub-Contracting process with Scrap and Few more Examples- SAP MM

Sub-Contracting process with Scrap and Few more Examples

Concept:

To work on all these assembly parts/Extra accessories, we need manufacturing unit where we can do all this assembly but its costly and time taking for the preparation and we may have some quality issues, by keeping all this in mind every company would like to go for Sub-contracting process- Which means

Certain companies which will be outsourcing (Giving products to other companies), where they use to work only on this assembly with best quality and take the price for only service.

Examples:

Few of the scenarios with explanation.

1     We have 3 child materials and we need the Parent Material (final product), but we will not assemble or manufacture any tools but for the production/sales requirements we need the final product to be assembled.

we will take the 3 child materials from 3 different vendors and we will maintain a BOM with parent material, after that creating subcontracting order for parent material (BOM will be taken automatically with child materials in components).

Do the GR for all 3 materials, and do the transfer posting for all child materials to vendor through MB1B or ME2O

Now do GR for subcontracting vendor, where you can see movement types 101 and 543.

Child materials

1.      L-shaped metallic plate

2.      Spring

3.      Bolts for fitting

Parent Materials

1.      Metallic plate with full furnished.

Implementing:

·        First, we need to procure the materials which are required to prepare the parent material, here we need to procure L-shaped metallic plate, Spring, Bolts for fitting from the respective vendor.

·        We can create 1 PR, with 3 lines mentioning 3 materials in each line individually with respective vendors or same vendor (based on your requirements)

·        Create PO for above 3 materials and as per the respective quantity and do the MIGO (Goods receipt), so that stock will be stored in the plant premises.

·        Complete all 3 material MIGO as mentioned above

·        Now create a BOM for the parent material, so here BOM is very important for all Parent materials.

·        CS01-Create BOM

·        Enter parent material following with all child materials inside

We are maintaining BOM for-what are the components that required to create a one complete parent material.

·        Now create New PO with Item category L-mention the parent material number, so that automatically child materials will go to Material Data-Components (BOM -we maintained)

·        Now in components we have 3 materials (Child)

·        Al the 3 child materials will go to sub-contract vendor for assembly, to send those materials to vendor we need to perform the movement type.

·        MB1B-stock transfer- we need to transfer the stock of all 3 materials to vendor stock by using the movement type 541,

·        Once the stock is transferred, we can see those stock in MMBE-stock under vendor.

·        Now vendor will deliver the assembled goods to plant and we need to perform the MIGO

·        Perform the MIGO with 101- now the stock should be available in MMBE for parent material

·        Remaining child materials quantity will be 0

     Vendor to vendor material shifting through Subcontracting process:

Scenario: 

We need a parent material which will get from subcontracting vendor and child material from another vendor, the child vendor should send the material directly to subcontracting vendor.

Eg: we would like to order a cell phone battery from child vendor, and he will directly send that battery to subcontracting vendor and subcontracting vendor will deliver the fully furnished phone. We need this to be implement in the SAP.

Step 1: Create a normal PO with cell phone battery and go to the delivery address tab in PO, here you can find SC vendor, check the SC vendor and mention the vendor number in the vendor field.

o   So that SAP will pick the delivery address as vendor address automatically.

o   Now the child vendor will deliver the cell phone battery directly to subcontracting vendor (to view this action in SAP, follow below)

o   Now post the GR for the child material PO, MIGO and mention the PO number and date.

o   Enter the quantity, system will not ask for storage location and tick OK and post the GR.

o   Now check in MMBE (Stock Overview), you can see the material is maintained with vendor.

Step 2:

Now create subcontracting PO for the parent material (Phone) with item category L, as we maintained BOM the components will be taken automatically (Child materials) and delivery address to plant in the PO.

Now process for GR for the parent material and maintain the quantity.

If required explore the parent material with + icon and you can see the child materials maintained with movement type 543.

§  541- Sending the material to the subcontracting vendor stock.

§  543-Consumption of material which is delivered to subcontracting vendor.

§  545-scrap material while consumption or vendor material used for the parent material.

Ordering Material and scrap from the subcontracting vendor:

Subcontracting material with scrap.

As we know when the material is manufactured by the vendor, scrap will generate automatically and few of the scraps will be costly or needs to be moved to plant scrap process, so in this case we need to implement such that vendor should provide the parent material along with the scrap.

E.g.: we are ordering a material of sofa; we procure wood from one vendor to plant and will move that material to subcontracting vendor through 541 and will order a subcontracting order along with scrap.

Step1:

o   Create a normal PO for procuring the wood from the vendor and once we receive that wood to plant(warehouse), we can follow the remaining process as mentioned below.

o   Maintain BOM for parent material, while maintaining we will update child materials with specific quantities, basically it will multiply with PO quantity. So, maintain accordingly.

o   Here for scrap, we are taking the scrap from vendor which are consumed for the child materials. If we want that material to plant, we need to create a new material with the name “Scrap” and maintain in BOM as 1- and save the BOM.

·        Meanwhile create a subcontracting PO with parent material with item category L, where BOM will be taken automatically with 1- quantity and child materials.

·        Now do the goods transfer in MB1B with movement 541, so that stock in the warehouse move to vendor stock and now the subcontracting vendor will perform the manufacturing process of sofa.

·        He will create the sofas as per the quantity and delivers the goods to plant along with scrap.

·        Now do the MIGO with 101 movement and post the sofas quantity and click on + icon in parent material, you will see the child materials with scrap.

·        Child materials – means consumed and will be used for sofas.

·        Scrap+ means waste generated and needs to bring to plant as per the PO.

Now go to MB1B and mention the movement 542, bring back the scrap to plant (SAP stock overview)

Final: if we are procuring one material with subcontracting vendor, we need to go with 3^rd example, where we need to process the BOM with -quantity instead of scrap we need to post procuring extra material number.

No need to do 542 movement, where this will be consumed for the parent material.

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Inventory Management with Movement types and Stock types- SAP MM

Inventory management with Movement types and Stock types:

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Inventory management deals with movement of goods and requirement (What is the need of movement of goods), we will be moving the goods inter company, warehouse to production, Production to sales, vendor to plant, return to vendor, movement to scrap. So everywhere we are moving the goods from one location to other location as per the nosiness requirements.

So, we need to monitor the movement of goods, we cannot monitor 24/7 with all the stocks in the warehouse and maintain the business LOB, we need to maintain the inventory management in the organization.

Coming to the responsibility of every individual in inventory is mentioned below.

Stakeholders: needs to post the movement type, whenever they are shifting or receiving goods from other source with correct movement type and quantity.

Buyers: Buyers are responsible for ordering the stock to plant, whenever the requirement is need and need to resolve the Goods receipt issues, when stakeholders are posting in the SAP.

We have 4 types of inventory Management; we will deal and learn all these 4 types of inventory management.

1.     Goods receipt

2.     Goods Issue

3.     Transfer Posting

4.     Physical Inventory

Goods receipt:

Goods receipt means receiving any material from vendor through any source to plant as an new quantity then we are considering as on Goods receipt and posting in MIGO as 101 Posting.

Goods Issue:

Goods issue deals with issuing goods to other department, like production and scrapping and cost center, as per the requirement we will make a goods issue.

Goods issue against cost center:

T-Code: MB1A- Movement type 201

Transfer Posting:

Transfer posting deals with transferring the goods from one place to other for the business requirements.

Eg: Quality to Blocked stock

Un-restricted to Quality Inspection

Physical Inventory: It deals with physical inventory in the plant and physical inventory mentioned in the SAP system, and there checking and it should be equal as per the business requirements.

Few Basics of Inventory Management as mentioned below:

MMBE- Stock Overview report:

Here we can find the stock present in that department and by this we can transfer the posting as needed.

Few of the fields that you can see in this screen are:

Un-restricted
Quality Inspection

Blocked

IN-Order

Reserved

Consignment

Un-restricted:

Un-restricted is a type of stock where there are no restrictions to use by any department, we can transfer the goods as per our requirements from Unrestricted stock.

Quality Inspection:

Before using any stock in production, the requirement is to inspect the stock we received by the quality department.

We can directly Post the goods to quality inspection or we can move from Unrestricted to Quality department.

Few materials its mandatory to move directly to quality inspection department when they receive goods to plant.

Blocked:

Blocked stock is a type of stock, where when we receive the goods and found some damages in the stock and we require to vendor to inspect and take back those goods in a procurement manner, such stock will be keeping in blocked stock.

IN-Order:

This is a type of stock, where material is in placed with vendor to receive to plant and we can maintain the goods receipt after receiving goods.

 In order stocks teach how much quantity is coming to plant and requirements of space in warehouse

Reserved:

Reserved stocks are type of stocks, where we can keep this stock for department use and no other department will touch those goods if they are reserved.

For few materials which are in demand, we normally keep in reserved stock.

Consignment:

This is the type of stock, where material will be in the plant premises, but total authority will be taken care by vendor and stakeholders needs to report the quantity usage on monthly basis.

We can check all this stock in MMBE- And as per that we can function Transfer posting, Goods issue.

MMBE-

            Enter-Material, Plant-

                                                Execute-

Few of the errors we receive while posting goods receipt Monthly.

*Posting only possible in periods 2016/06(Sample) in company code 1000(Sample)

This explains posting period is not maintained, it means every month we need to close the previous posting periods and automatically new posting period will be open and posting will be possible for previous month also, through one field setting.

Check the period which was maintained as per that time in MMRV

If the current posting period is not maintained, then go to MMPV and maintain the dates as per monthly.

Once you enter that month, the system will accept the posting period.

*Number range WE and number assignment for material document.

When you post the goods receipt, automatically one material document will be created backend and that is the reference for posting goods receipt.

Material document is the reference number for all other postings.

 To maintain the number range, follow the path

SPRO

            Materials management

                        Inventory management and physical inventory

                                                Number assignment

                                                            Define number assign for Material and phy Inventory

                                                                        Maintain new group

*FI Posting period error

As we have posting period in GR, we have posting period in FIL also which will be taken care by FI Consultants

OB52 is the transaction to maintain the posting period.

*FBN1 number ranges does not exist.

FBN1-maintain the number range.

Movement types:

Movement describes the type of movement and it’s a 3-digit numeric number.

It determines the automatic account determination and it controls the field settings as per the movement type.

Few movement types with explanation:

Goods receipt with respect to PO

101- Its helps in posting the goods receipt with respect to PO and we can mention the quantity we received for that PO and item ok and Post the goods receipt.

Here if we need to cancel any movement type, we entered is 1+

102-cancellation of goods receipt wrt material document

Now we can cancel the GR entered and it automatically takes 0 when you cancel.

Normally, if you had posted the wrong quantity then we will make cancellation for that document and repost the GR with correct quantity.

122-return delivery wrt PO

We can maintain the return document if you had returned that material to vendor

First post the GR with full quantity you received and process again with movement type 102.

123-cancelltion of return delivery, we can cancel the return delivery posted in the material document.

****we cannot change any movement type or posting once entered, we need to cancel and repost with correct quantity and movement type****

Stock types:

here we have different types of stocks

Unrestricted

Quality inspection

Blocked

Others

We can maintain type of stock to be posted directly, when the PO is created only.

PO level- we can define in delivery tab

Material master- in purchasing view

GR-stock type

Transfer posting

Let’s discuss some movement types for transfer posting

322- Unrestricted to Quality

321-Quality to unrestricted

350-Quality to blocked

349-blocked to quality

344-unrestricted to blocked

343-blocked to unrestricted

We can do the above transactions through MB1B/MIGO

Other Goods Postings

We have some postings without PO

Sample goods- we can have sample goods without PO and with PO, if there is a PO then we can post through MIGO, if no PO

Then MB1C-Movement types are

501- Sample goods posting

511- Free goods postings

Initial entry of goods

MB1C

We have something where we must enter the goods initially like when you are moving from other tool to SAP, we need to maintain the material inventory manually.

561- Initial entry to unrestricted stock

563-Intitial entry to quality

565-Initial entry to blocked

562-Cancel the initial entry to unrestricted stock

564-cancel the initial entry to quality stock

566-cancel the initial entry to blocked stock

Goods Issue

MB1A

Here we need to issue the goods to certain departments

Goods issue against cost center-201 movement type

We can issue the goods against cost centers

Goods issue against production order-261 movement type

We can issue goods to the production order

Goods issue against scrapping- mentioned below

We can directly move the material to scrapping if the material is damaged.

551-scrapping against unrestricted stock

553-scrapping against quality inspection stock

555- scrapping against blocked stock

552- cancellation of scrap posted in unrestricted stock

554- cancellation of scrap posted in quality stock

556- cancellation of scrap posted in blocked stock

Purchase Order and Purchase requisition field settings and Number ranges-SAP MM

Purchase Order and Purchase requisition field settings and Number ranges

For Videos Explanation, please go to YouTube and Subscribe -  Studyuuu  SAPMM

In the previous blogs, we have studied the Material groups, Material types, PIR.

Now we are going to study about Purchase order and Purchase requisition Back end and front-end Configuration.

PR is an internal document, where requisition will be created as per the needs in the plant by the stake holders (Non-Purchasing department). Whereas PO is an eternal document, where a document will be sent out of department to the vendor to procure goods to fulfil our production.

Some of the mandatory fields to create a PR are Material, plant, vendor, Purchase organization. And for PO we can create without reference of PR also, but this is against the procurement policies.

T-code to create the purchase requisition is ME51N followed by ME52N, ME53N.

T-code to create the purchase order is ME21N followed by ME22N, ME23N.

PO Order for pulling reports: ME2M, ME2L.

Unit of Measurement in PR

Unit of measurement plays an important role in purchase equation and purchase order.

Few of the types and back end settings are mentioned below.

Base unit of Measurement:

 The UOM where we will discuss internally, and we will measure as per our requirements and when we are creating PR, the BUM plays an important role, the UOM will be pulled from Material master because its master data for procurement team.

Price:

 While creating PR, price will be automatically taken from Material master, we will maintain valuation price as S or V, whatever we maintain in Material master it will be pulled to purchase requisition.

Eg: If we maintain Standard price and moving price in the Material master, then which UOM will be taken in the PR?

We are maintaining the valuation type as-S or V, so price will be decided by the S or V.

Order Unit of Measurement: 

Order unit is the vendor Unit of measurement, where we need to send the external document to the vendor for procuring goods from them, so we need to order as per there UOM, so we have order unit of measurement.

1^st scenario: When we are creating PO, UOM will be pulled from material master, Order unit and if there is No order unit is maintained then PO will automatically take from Base unit of measurement (This is the case without PIR)

Variable UOM in material master

Variable unit will be additional unit maintained in the material master, where we will maintain the conversion for that order unit.

Eg: if we want to maintain Box as an alternate unit for order unit PC, then we need to maintain 1 BOX is equal to 10 PC, so that while creating PO we can change as per our requirements.

We need to maintain the variable UOM to 1(Active)

UOM in PO

If there is no PIR, then PO automatically takes from Material master Order unit

If there is no order unit maintained, then PO will take Base unit of measurement in PO.

If there is PIR, then priority is PIR and then Remaining.

Price in PO

Price in PIR will be always taken from PIR and if there is no PIR system will take from Previous PO.

If any data is not available, then we need to enter the price manually.

 Back end settings for Purchase Order

We are creating PO and we know numbers will be generated automatically or we are defining numbers manually within few ranges, how?

We have few fields as mandatory and few of them are Optional, we need to customize the data as per the organization requirements.

In the PO, we have Document type creation, Number ranges and field selection

We can define the above settings as per our requirements.

Document Type:

Document types defines type of PO, is it Auto PO, Standard PO, Service PO, STO PO.

We are defining a new document type in the purchase order like.

NB is the standard document type and if we are creating new document we need to create the reference of copy as from NB.

SPRO

       Materials Management

                                    Purchasing (OLME)

                                                Purchase Order

                                                            Define Document types for the Purchase order

Once we enter path, find for NB document type as select as Copy as and maintain the new document type and save, we have created a new document type in the purchase order.

PO Field selection

We can define a field to be Optional or mandatory, while we are creating PO the we cant save the PO without entering those fields.

SPRO

       Materials Management

                                    Purchasing (OLME)

                                                Purchase Order

                                                            Define Document types for the Purchase order

Double click on document type and enter inside to maintain the field selection, we have fields sorted with group of items like purchasing data will available in once place.

We have 4 options like hide, Mandatory, Optional, Display.

Select the fields as per the requirements and save the document type.

If we have copied 2 documents type from NB, then we need to create a new reference field in define screen layout.

Once we define new reference field then we need to assign the new reference field to those new document type.

PO Number ranges

Number ranges, we have internal and external number ranges for PO also and please fallow the below path for defining number ranges.

SPRO

       Materials Management

                                    Purchasing (OLME)

                                                Purchase Order

                                                            Define Number ranges

Please select the interval and select the internal number ranges and maintain the field number as some new number and select the ranges of the numbers for internal and external.

Go back to the document type and there you can find the internal number range and external number range columns in the respective document type field.

Change the number range field to number you defined in the number ranges, so that number ranges will assign automatically.

Note: we have field reference field in the PO Document type, so we are coping document type from existing document type. So, we need to maintain a new field reference in the document type.

First, we need to define a new field selection number from Field selection (path mentioned above) and we need to change in the document type, so that everything will work fine.

Back end settings for Purchase requisition

We are creating PR and we know numbers will be generated automatically or we are defining numbers manually within few ranges, how?

We have few fields as mandatory and few of them are Optional, we need to customize the data as per the organization requirements.

In the PR, we have Document type creation, Number ranges and field selection

We can define the above settings as per our requirements.

Document Type:

Document types defines type of PR, is it NB, ZNB,ZNC.

We are defining a new document type in the purchase requisition like.

NB is the standard document type and if we are creating new document, we need to create the reference of copy as from NB.

SPRO

       Materials Management

                                    Purchasing (OLME)

                                                Purchase requisition

                                                            Define Document types for the Purchase requisition

Once we enter path, find for NB document type as select as Copy as and maintain the new document type and save, we have created a new document type in the purchase order.

                   PR and PO remains same steps, as I mentioned above-Please follow