Item subcontracting - setup

You can use item subcontracting to subcontract an item's entire production process. If you apply item subcontracting, no production order is created.

For item subcontracting, set up the following data:

Step 1. Implemented software components

If you want to perform full subcontracting, you must select the Subcontracting with Material Flow check box in the Implemented Software Components (tccom0100s000) session.

Step 2. Warehouse at the subcontractor's site

Define an administrative warehouse in the Warehouses (whwmd2500m000) session. The administrative warehouse reflects the external warehouse at the subcontractor's site.

For more information, refer to Vendor managed inventory and VMI warehouse settings

Step 3. Item related data

Define the following item related data:

  • Item Base Data
    Define the end item that you want to subcontract in the Items - General (tcibd0501m000) session.
  • Item Production Data
    To send material to the subcontractor, select the Subcontracting with Material Flow check box in the Items - Production (tiipd0101m000) session.
  • Item Purchase Data
    In the Items - Purchase (tdipu0101m000) session, enter the appropriate price in the Subcontracting Purchase Price field.
  • Item Sales Data
    In the Items - Sales Business Partner (tdisa0510m000) session, enter the administrative warehouse defined in the previous step in the Ship-to Warehouse field.
Step 4. Supply data for components

You can regulate the supply of components to the subcontractor in the following ways:

  • Order specific supply

    Order specific supply means that supply is linked to the subcontracting purchase order. The supplied quantity is the quantity required for the purchase order. To use order specific supply, the component's supply system in the Warehouse - Item (whwmd2510m000) session must be Order Controlled/Single, for the correct combination of component and administrative warehouse.

    Order specific supply can exist between manufacturer and subcontractor, or directly between supplier and subcontractor:

    • Manufacturer - subcontractor

      Select the Supply from Warehouse check box in the Warehouse - Item (whwmd2510m000) details session, for the relevant combination of component and administrative warehouse.

      Supply happens via warehouse transfers.

    • Supplier - subcontractor

      Clear the Supply from Warehouse check box in the Warehouse - Item (whwmd2510m000) details session, for the related combination of component and administrative warehouse. The Order System must be Manual in the Items - Ordering (tcibd2500m000) to clear this check box.

      Enter the supplier in the Ship-from Business Partner field and the Buy-from Business Partner field.

      Supply happens by purchase order.

  • Bulk supply

    Bulk supply means that components are sent to the subcontractor anonymously, independent of the subcontracting purchase order. You must chose one of the these methods for a subcontracting (administrative) warehouse.

    • Supply system
      In the Warehouse - Item (whwmd2510m000) details session, for the correct combination of component and administrative warehouse, you can choose Time-Phased Order Point, KANBAN, or Order Controlled/Batch to generate bulk supply. Note: If the administrative and the supplying warehouses are assigned to a cluster it must be the same one, otherwise they should not be clustered.
    • Enterprise Planning
      To generate bulk supply using Enterprise Planning, the administrative warehouse must be in a different cluster than the main warehouse. Furthermore, distribution relations must be defined between the two warehouses. The supply system defined in the Warehouse - Item (whwmd2510m000) details session, must be Order Controlled/Single. For more information about clusters, refer to Clusters in Enterprise Planning.
Step 5. Terms and conditions

Define terms and conditions in the following cases:

  • If components are shipped by sales orders.
  • If the subcontractor is responsible for the components' planning.

Complete these steps:

  1. From the Terms and Conditions (tctrm1100m000) session, start the Terms and Conditions (tctrm1600m000) session to define a terms and conditions agreement. The Terms and Conditions Type field must be Sales.

  2. Define a terms and conditions search level for which the Search Attribute 1 field is Item Group, and the Search Attribute 2 field is Warehouse. Select the Order check box and the Planning check box.

  3. Double-click the defined search level to start the Terms and Conditions Search Level (tctrm1610m000) session. In this session, define the items to which the agreement applies.

  4. Double-click the defined items to start the Terms and Conditions Line (tctrm1620m000) session. On the Planning tab or in the Planning Terms and Conditions (tctrm1135m000) session, select the Responsible for Supply Planning check box. On the Order tab or in the Order Terms and Conditions (tctrm1130m000) session, select Sales Order Transfer in the Transfer Type field.

For more information about agreements, refer to Setting up terms and conditions.

Step 6. Sales contract

If components are planned by the subcontractor or shipped by sales order, define a contract in the Sales Contracts (tdsls3500m000) session. The Sold-to Business Partner field must contain the subcontractor code. Use the Terms and Conditions ID field to link the applicable terms and conditions agreement.

Define the rest of the contract in the Sales Contract Lines (tdsls3501m000) session.

Step 7. BOM

In the Bill of Material (tibom1110m000) session, create the subcontracted item's BOM.

If the Supplied by Subcontractor check box is cleared, the components are sent to the subcontractor to be used in the subcontracted item. If this check box is selected, the components are directly supplied by the subcontractor.

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