Subcontracting is a process wherein a company outsources specific tasks or operations to external vendors or suppliers. This kind of process is widely used in the manufacturing industry and can be implemented in SAP MM (Materials Management), a module that manages procurement and inventory.
There are different types of subcontracting processes available in SAP MM, and these are:
1. Standard Subcontracting Process – This process involves the transfer of raw materials to a subcontractor, who will process or manufacture them into a finished product. The finished goods are then sent back to the company.
2. Stock Transfer Subcontracting – This process is similar to standard subcontracting, but instead of transferring raw materials, it involves transferring semi-finished goods to a subcontractor. The subcontractor will then finish the product before sending it back to the company.
3. Subcontracting with External Service Management – This process involves the outsourcing of services rather than the production of goods. The company can define the services required, and the subcontractor will perform them as per the agreement.
4. Consignment Subcontracting – In this process, the company will provide the subcontractor with materials that they keep in their inventory until required. The subcontractor will then use these materials to produce the finished product.
5. Pipeline Subcontracting – This process is similar to consignment subcontracting, but the materials are supplied to the subcontractor in a continuous flow. The subcontractor will use these materials to produce the finished product, which is then sent to the company.
6. Third-Party Subcontracting – In this process, the company subcontracts a third-party vendor, who in turn, works with the subcontractor to produce the finished product. This type of subcontracting is used when the company cannot find a subcontractor for the required operation.
Implementing these types of subcontracting processes in SAP MM can help companies reduce costs, increase efficiency, and improve product quality. It is essential to choose the right type of subcontracting process that best suits the business requirements and to have a proper agreement in place with the subcontractor. By doing so, companies can achieve their business objectives and maintain their competitive edge in the market.