What is subcontracting in SAP MM - Materials Management?

SAP Term: subcontracting

• Component: MM

• Component Name: Materials Management

• Description: The processing, by an external supplier, of materials provided by a customer. The result of this processing is the manufacture by the supplier subcontractor of an ordered material or product, or performance by the supplier of an ordered service. Subcontracting is therefore a form of outsourcing.

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• Key Concepts: 
  Subcontracting is a process in SAP Materials Management (MM) that allows a company to outsource certain production activities to an external vendor. This process involves the transfer of materials from the company to the vendor, who then performs the production activities and returns the finished goods back to the company. The subcontracting process is used when a company does not have the resources or capabilities to produce certain goods in-house. 
  
  How to use it: 
  In SAP MM, subcontracting is initiated by creating a purchase requisition for the materials that need to be transferred to the vendor. Once the purchase requisition is approved, a purchase order is created and sent to the vendor. The vendor then sends an acknowledgement of receipt of the purchase order and begins production activities. Once the production activities are completed, the vendor sends an invoice for payment and delivers the finished goods back to the company. 
  
  Tips & Tricks: 
  When creating a purchase requisition for subcontracting, it is important to include all relevant information such as material description, quantity, delivery date, and payment terms. Additionally, it is important to ensure that all necessary documents such as quality certificates and inspection reports are included in the purchase order before it is sent to the vendor. 
  
  Related Information: 
  For more information on subcontracting in SAP MM, please refer to SAP Help documentation at https://help.sap.com/viewer/product/SAP_ERP_6.0_EHPs_6/6.0/en-US/f3d8f9a7c2b04d2f9e7a8b3c5f9e4d1a.html