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How to manage the Vendor supplied components in Subcontracting scenario.

Former Member
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Hi experts ,

I have to complete the finished product say "A" by subcontracting scenario.

I am supplying A1, A2, A3 to the vendor as components.

Component A4 is the item required for the final product "A" but this will be supplied by the Vendor.

Please let me know how can I handle both the material movements and the cost of the product in this scenario thru Subcontracting PO.

Thanks & regards,

Rachan.

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Answers (2)

Answers (2)

JL23
Active Contributor
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what did your purchasing department negotiate?

do you get billed for the component A4 separately? or is the cost for A4 inlcuded in the service charge for subcontracting?

does your purchasing department order A4?

is it in your bill?

if it is in your bill and you create an extra order for this part, then you should set the SC flag in the delivery address tab of your PO along with the vendor number of your subcontractor.

Subcontractor will then tell you when the material arrvied and you post a goods receipt, this is then directly posted into special stock at subcontractor. When you receive the finished material A and post GR with MIGO all components will be issued.

you will then receive a bill for subcontracting fee that is posted to your subcontract order, and another bill for the component A4 that is posted to this component order.

If costs are included in subcontract fee, then you dont need to manage inventory, do not need an extra PO and extra invoice, and dont need the A4 in your BOM

Edited by: Jürgen L. on May 6, 2010 9:01 AM

Former Member
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Thanks for the explanation , I got the idea how the cost flow in SC scenario.

But my main query is on how the material movements happen , means do I need to include A4 (Vendor supply) in PO? and while sending materials to vendor thru ME2O do i need to send A4 material along with A1,A2 and A3?

Can you please give hint on this scenario?

regards,

Rachan.

JL23
Active Contributor
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if you do it like I described, then you do not need to perform ME2O.

All depends on your process negotiations with the vendor. if you buy only the quantity that is used in the subcontracting process and vendor includes this into his subcontracting fee, then you do not need to manage inventory at all.

if you buy more than needed and keep it at vendor location for future subcontract orders, then you certainly need to manage inventory and can make use of PO with delievery address SC indicator and do not need an extra ME2O.

Former Member
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Hi,

Don't add the A4 material in the PO. Supply only A1, A2 and A3 to him through ME2O. In the PO too, add only these 3 materials as component. Let the vendor add the A4 from his stock or procure by himself for the production of A. He can charge the cost of A4 with his subcontracting charges he will be billing to you.

Former Member
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>

> Hi experts ,

> I have to complete the finished product say "A" by subcontracting scenario.

> I am supplying A1, A2, A3 to the vendor as components.

> Component A4 is the item required for the final product "A" but this will be supplied by the Vendor.

>

> Please let me know how can I handle both the material movements and the cost of the product in this scenario thru Subcontracting PO.

>

> Thanks & regards,

> Rachan.

In PO, in subcontracting price you add the price of A4 + cost incurred in manufacturing the finished product as price, then transfer A1, A2, A3 to vendor and when you take the finished product back your accounts will get hit with the price mentioned on PO.