Subcontracting

Subcontracting is the process in which a material or product consisting of certain components is procured from a vendor, whereby these components are provided by the ordering enterprise, either directly or through a third party (another vendor).

The material the subcontractor is to manufacture can be requested in a purchase requisition and ordered via a purchase order or scheduling agreement item of the category L (subcontracting). Item category L enables the enterprise to create sub-items covering the components to be provided to the subcontractor.

The individual component items can be:

• Entered manually, or
• Generated via the BOM explosion, if a BOM exists for the ordered material.

For a purchase requisition for subcontracting with a source to be generated from within materials planning, the following prerequisites must be satisfied:

• A special procurement key for subcontracting must be set in the material master record (MRP View 2).
• At least one source of supply (subcontracting info record or outline purchase agreement with subcontracting item) must exist.
• The MRP-Relevant indicator must have been set for a source of supply in the source list. If several sources of supply exist, a quota arrangement with the special procurement type L for subcontracting can be created.
• A BOM containing the components to be provided must exist.

Understand more about Subcontracting in this PDF Document.