Internal Subcontracting (Toll Manufacturing)

[Former Member]

Dear SAP Expert,

We have requirement that our sister company is doing subcontracting to us (toll manufacturing).

Basically our sister company is supplying us the main raw material and then

we add our company own material plus some overhead.

The problem is we need our company to recognize the COGS during we produce

in the same period.

Example: in April we produce 1000 CTN, we dispatch the goods to customer (sister company) 800,

we want to recognize the COGS on April based on 1000 CTN (not based on 800). The remaining

200 we just need to record quantity.

My question is:

- What is SAP best practice of internal subcont (toll manufacturing)?

- Any idea how to recognize COGS in produced quantity?

something cross in our mind is we sell all right after we produced and receive remaining qty in virtual Plant non valuated.

That means once 1000 CTN is produced we sell it immediately (to recognize 1000 CTN as COGS),

then remaining stock of 200 CTN (physical dispatched 800 CTN) we need to GR again in different plant (which is non valuated)

or

Is there any idea to simplify this process?

Moreover we implement material ledger

Thanks in advance,

Subur

[ajaycwa1981]

Hi Subur

Dont worry.. Its quite a common scenario and I have myself implemented it in the past...

The main challenge in this case is that for your Company its a Non valuated stuff.. however, for the Sister Company, its a valuated stuff.... With right kind of settings, you can achieve it....

The way I have implemented is as below

1. Use MTO scenario where Sales Order is the CO object...

2. IMG Settings

a. Create a requirement class in IMG > CO > Prod Cost Contr > Cost Obj Contr > Product cost by Sales order > Control of Sales-Order-Related Production/Product Cost by Sales Order > Check Req Class

Assign Account Assignment Catg = E; Valuation Field = Blank; And a Settlement Profile

b. Assign this requirement class to your requirement type and hand it over to your SD guy... The SD guy needs to assign this Req Type to his item category and always determine this Item category in the Inter Company Sub contracting Sales order...

Its advisable you create a separate sales order type for it

3. Process

a. Create a Sales order in Company A (Company B is the Sister Concern)

It may have 2 materials i.e. One material will be the FG and another will be service material for Sub contracting charges

b. Receive the raw material supplied by Company B against the sales order... Mvt Type 501 E.... (This would receive the stock in your books as Non valuated i.e. @ Zero value)

c. Create a Production order for the FG associated with the Sales order.. (CO08)

d. Issue the goods to the prod order / Confirm the operations

e. Do the GR from prod order... The GR will be Non valuated in Company A.... Only Qty will be updated in the stock.. No Value

f. At period end, settle the Prod order upon sales order.... With this, the total cost of 1000 will be settled to Sales order

g. Do the billing, which will also post to the Sales order....

h. Settle the sales order from VA88... This will settle the total cost of 1000 CNT to COPA....

4. Ensure that the Item Category / Req Class you use in this process for Company A, should not be used for Company B.. Else, it would also be treated as Non valuated GR in Company B as well

br, Ajay M

[Former Member]

Hi Ajay,

Thanks for the complete explanation and this is really give us good option.

Just need to ask you 1 last point is regarding the Billing, is it relevant for Delivery or not?

Because what we need to do is to perform the billing in full Production quantity but

the physical dispatch to customer is happening partially.

Thanks again.

[ajaycwa1981]

Hi

In that case - Choose Order relevant Billing.... and not delivery relevant billing

br, Ajay M

[Former Member]

Ajay,

Quick one on the process above.

The Sales Order created at Company A is non-valuated correct?  How do the cost get passed to the Company B.

The Process details a non-valuated sales order based on Item Cat/Req class settings?

Basically I cant see the connection back to Company B in terms of cost.

I may be missing something here?

[ajaycwa1981]

Can you detail your query... I suggest open a new thread for the sake of simplicity

[Former Member]

http://scn.sap.com/thread/3175529

[Former Member]

Dear ajay could you please give me your advice because i have the same case.

[hafizmuhammadasfandyar]

Dear ajay.maheshwari

Which Item category you are using in Sale order for Raw material and what are the entries at PGI and Billing level ?