Special Procurement Process of Subcontracting

During subcontracting, your company orders material from an external supplier. Unlike a normal external procurement process, your company makes the components for the production of the materials partially or completely available to the supplier (subcontractor).

The subcontracting process has the following characteristics:

1. You order the finished product with a subcontracting order that also contains entries about the components to be provided for the subcontractor.

2. In inventory management, you post the components which are delivered to the subcontractor in the “stock of material provided to the vendor”.

3. The subcontractor supplies the service and delivers the manufactured or processed material. You enter the GR for the finished product in inventory management. At the same time the consumed components are cleared by the system from the stock of material provided to the vendor.

4. If the subcontractor reports an excess consumption or underconsumption of components after the GR posting, you can correct the GR with a subsequent adjustment. 

5. The subcontractor invoices the service rendered. You enter the invoice in Logistics Invoice Verification.

Inventory management supports the following functions within subcontracting:

- Provision of components, special stock form “stock of material provided to vendor”

- Goods receipt for finished product with consumption of components

- Subsequent adjustment in the case of excess consumption or under consumption of components

- Transfer postings (material to material, stock to stock, and plant to plant)

Stock of Material Provided to Vendor

The components that you provide for a subcontractor are managed in a vendor-related special stock, O (stock of material provided to vendor). The system updates this special stock at plant level because the material is not stored in your own company but is with the vendor. However, this special stock is valuated and available for planning.

For the stock of material provided to vendors, the available stock types are unrestricted-use stock and stock in quality inspection. The quantities consumed by the subcontractor can be withdrawn only from the unrestricted-use stock. A physical inventory is to be carried out for the stock of material provided to the vendor.

To analyze the stocks of material provided, in the Inventory Management menu, choose

Environment → Stock → Stock with Subcontractor

(or call transaction MBLB). 

You can select using the name of the subcontractor (vendor) as well as the plant, material, or company code.

Subcontracting in Purchasing

You represent subcontracting items in purchasing documents with a special item category. For each subcontracting item, you must enter one or several subitems for the components to be provided. When there is a bill of material (BOM) with the components for the material to be procured, then the components are copied from this BOM into the subcontracting item. You can also enter the components manually or add the components from the BOM. The PO price is the price of the supplier subcontracting work and the materials that the subcontractor provides. You can defi ne conditions for subcontracting in a subcontracting purchasing info record.

The following transfer postings are allowed for the stock of material provided to the vendor special stock:

- Plant to plant in the one-step procedure (movement type 301)

- Material to material (movement type 309)

- Stock in quality inspection to unrestricted-use stock (movement type 321)

To execute these transfer postings for the stock of material provided to the vendor, you must specify the special stock indicator O; otherwise, the transfer postings do not diff er from normal transfer postings.

Subcontracting: Provision of Components

From the point of view of inventory management, the posting of a provision of components corresponds to a transfer posting from unrestricted-use stock to the stock of material provided to vendor. This transfer posting can be carried out using the one-step procedure (MvT 541), or the two-step procedure (MvT30A and 30C).

There are different options available for posting the provision of components.

1. In Inventory Management, you can post a provision of components using transaction MIGO and the corresponding SAP Fiori App Post Goods Movement. You can refer to the subcontracting item (SC item) of the purchase order when entering this transfer posting. The components and their quantities are then proposed from the SC item. You can change the proposed quantities of the materials to be provided. Provision of components with reference to a purchase order is not updated in the purchase order history because the stock of the material provided is not purchase-order based.

2. In transaction MIGO and the corresponding SAP Fiori App Post Goods Movement , you can also provide components without reference to a purchase order. To do this, you enter another transfer posting and specify the required materials and quantities as well as the subcontractor manually.

3. In Purchasing, you can use the Subcontracting Cockpit (transaction ME2ON )to post a goods issue for the components. As selection criteria, you enter, for example, the vendor, the component to be provided or the material to be produced. A list containing the requirements and stocks of the components, and the pegged requirements is then displayed. To post a provision for a component, select the relevant line and choose

Edit → Post goods issue.

You can also use the subcontracting cockpit to create an outbound delivery for shipping. The prerequisite for this is that the data relevant for shipping has been maintained in Customizing, in the material master, and in the business partner record for the subcontractor. 4.

If you have to procure components from a second supplier, you can have them delivered to the subcontractor immediately.

To do this, you must specify the following in the item details in the delivery address: the supplier number of the subcontractor the Subcontractor supplier (SC Supp) indicator

When your subcontractor informs you that the components have arrived, you enter the goods receipt for the component purchase order. At this goods receipt, the components are posted directly to the stock of material provided which is assigned to the subcontractor.

You cannot do without this goods receipt posting, since it is the only way to update the stock of material provided and thus also your own, usually valuated stock.

Subcontracting: Goods Receipt for the Finished Product

When the subcontractor delivers the ordered material (finished product), you then post the GR for the subcontracting order as you would post a GR for a normal PO (MvT 101). For the subcontracting order item, the system determines the components and creates a GI item internally for each component.

GR for Subcontracting Order

The material document consists of the following items:

- GR item for the material delivered by the supplier 

- GI item(s) for the components 

Before posting the goods movements, you can change the component quantities in the goods issue items. Such a change is necessary if the subcontractor notifies you of an excess consumption or under consumption of components in the delivery.

Subcontracting: Subsequent Adjustment  

If the subcontractor reports excess consumption or underconsumption of subcontracting components after delivery of the finished product, you have to post a subsequent adjustment to correct the component consumption. In the transaction for goods movement MIGO, or the corresponding SAP Fiori app Post Goods Movement, enter Subsequent Adjustment from the list of business transactions. As a reference document, the system automatically enters Purchase Order. After you have specified the purchase order item, you can enter the difference quantity for each component. If a component has excess consumption, you only need to enter the additional quantity consumed. If less was consumed by a component than was posted at goods receipt, you also set the Underconsumption / Short Receipt indicator. This increases the stock provided of this component by the difference quantity (the consumption is reversed).

SAP Ariba Latest Innovation!

SAP Procurement to Pay Cycle!!

SAP Training & Career Opportunity in Bangladesh!!

Looking for your dream job? Find it at SAP. Bring your best ideas – and we’ll make them come to life.

Before continue you may find interest to SAP Career opportunity:

SAP jobs salary range - The Reality.

SAP position on 8 among top 10 highest-paying tech companies.

SAP Jobs Salary

 Let's Discuss on SAP JOBS salary comparison at worldwide with real picture:

We have discussed on my blog why SAP Jobs Salary is higher than other functional jobs. But like every other jobs here also the hike depends on many variables, experience , your location, education level, as well as the location of the company you work for and the industry type you are in.

A very good and vast research has been done by panayainc.com  on SAP salary worldwide, let’s find some of those real facts.

·         The salary of SAP professionals in North America is 25% higher than in Europe and those working in Europe is getting 35% higher than Asia or other parts of the World.

·          SAP Jobs Salary trend is much higher for high revenues companies, the partners and integrator than the companies using SAP or SAP clients.

·         The survey found that the education level is playing a great role in salary hike or SAP jobs.

The World’s uncertain economic environment for last few years seems to have a mixed effect on the salaries expectations of SAP professionals worldwide:

·         Among 8000 SAP professionals 62% got an increase in their 2011 earnings compared to 2010, and for trend to get more frequent Increases were more common for SAP professionals working for companies based in Asia (66%), Latin America (67%), European (57%), and American companies (61%).

·         And more about 65% employees (SAP Professionals) are Looking ahead to 2012, to have an increase in their salaries.

1.       Company and Job Characteristics:

2.       SAP Professionals come from SAP clients or SAP partners. Among 805 individuals the majority of the survey respondents (55%) come from companies that run their own business on the SAP system. (43%) from SAP partners. 

And if you compare the 2 company types “SAP Jobs Salary range” or “average salary SAP” you will get to know SAP pay scale for employees of SAP partners/integrators is (4%) higher than the average salary SAP of those working for SAP customers or SAP using Companies.

Which is just opposite than the same survey result on 2011.

We can have a look at the below chart for the SAP Jobs or SAP recruitment in world wide. 39% d in North America, while 33% for European companies. 28% for companies based in other parts of the world.

The salary of SAP professionals in North America is 25% higher than in Europe and those working in Europe is getting 35% higher than Asia or other parts of the World

On the other side 51% work in organizations that have more than 50 SAP professionals. Over a third (36%) work for organizations that have more than 100 SAP professionals.

Job Function, Experience, Gender, Education

As normal, the most earned professionals are in director and manager positions, but the difference of the highest earning position (ERP or Application Director) is as much as 75% higher than SAP Super User. Bellow we can find the salary range and sap salary package of the various SAP Jobs positions like:

 All the SAP jobs salary range depends on job experience levels. The SAP average salary range for respondents with more than 10 years of experience is 44% higher than for those with 1-6 years of experience.

In SAP salary range for women or female are not that much difference than men. But female should get encouragement as because the first 1-6 years shows higher salary for SAP jobs salary for female or women than men.

Obviously as expected higher education corresponds higher earnings for SAP professional’s salary range.

SAP / ERP Implemented in Bangladesh Corporate Office:

Now In Bangladesh Lot of leading 100+ companies already implemented SAP / ERP for their Industrial, Trading, garments and Manufacturing business. Like:

ACI Logistic, Bangladesh Bank, Bangladesh Edible Oil Ltd., BASF, Bashundhara Group, British American Tobacco, Berger Paints Bangladesh Limited, Butterfly-LG Bangladesh, CEAT Bangladesh, Ceragem Bangladesh Ltd., Coats BD, Erricsson, Gemcon, House of Pearl Fashions Ltd., Incepta Pharmaceuticals Ltd., Karnaphuli Fertilizer Company Ltd (KAFCO), Lynde Bangladesh, Madina Group, Marks Spencer, MGH, Nestle Bangladesh, Novertis, Otobi, Partex, Pedrollo, Perffeti, Rahimafrooz, ROBI, Samung, Sanofi Bangladesh Limited, Santa Group, SAP India, Siemens, South China Bleaching & Dyeing Factory Ltd., Square Group, Tigerco Ltd., Uilever of Bangladesh, Ultratech Cement, Unique Group, Viyellatex Group, Young one.

In Bangladesh SAP job average salary 50,000 BDT/ month.

By using SAP company get benefited for company accounts balance sheet, profit and loss, Inventory balance, HR all actives and controlling with pay roll and salary management, sales profit and controlling.

SAP / ERP Knowledge Advance in Business Process:

Manage your business operations more effectively

The SAP Business Suite delivers operational efficiency with improved line of sight to your financial performance and meeting customer needs. Master Business Objects and HANA for business intelligence and insights to power your competitive advantage. Official SAP training from Global Knowledge will ensure you're continuously improving processes in every facet of your business.

Importance of SAP Training for Organizations & FICO

SAP is one of the number one providers of business software solutions towards better work and data management in organizations across industries. When Systems, Applications & Products in Data Processing (SAP) was founded in June, 1972, it was centered to only a type or big businesses. However over a period of time, small and medium size companies adopted SAP towards achieving organizational goals and today SAP is the leader in enterprise applications. Various SAP modules have been developed over time focused on different areas. Professionals can become SAP Network Specialists, SAP FI/CO course for finance and accounting control, SAP Database Administrators, SAP Security consultants etc. On the other hand, management professionals can opt for SAP customer relationship management, SAP business intelligence, SAP sales and distribution, SAP business information warehouse and more. SAP implementation is a very complex process and requires adequate knowledge and training on the subject to attain the maxim benefits. It takes years for professionals to gain expertise in handling SAP. SAP training helps one to gain expertise in software and programs that run them along with SAP modules. SAP builds a strong technical support for organization.

Advantages of SAP HCM Module in Organizations

SAP offers software for the business world and a host of their solutions are management based. SAP HCM module is the apt software for the HR department of an organization. The job of an HR is much beyond just recruiting. From hiring professionals to managing details of designation, payment, compensation, promotion etc., are taken care by the HR. SAP HCM module enables one to keep a better track of everything. There are various sub-modules of SAP HCM for different processes such as organizational management, personnel administration, e-recruitment, time management, payroll, ESS and MSS, and reporting. Organizational management manages the human resources of an entire organization towards achieving a set goal; personnel administration on the other hand manages details like compensation, performance appraisal and so on. E-recruitment's enhances the recruitment processes of an organization, time management enables better management of work and time of employees, payroll manages the payment details and so on.

Advantages of SAP SD Module in Organizations

SAP Sales and Distribution is the ideal software for every organization that helps in managing master data, system configuration, order and cash process related transactions and more. Using this module, organizations can better manage their Customer Master and Material Master Data, Sales Orders, Deliveries, Pricing, Billing and Credit processes and so on. There are various sub-modules of SAP SD for different processes such as Master Data, Sales Support, Pendulum List Indirect Sales, Sales, Shipping and Transportation, Billing, Empties Management, Credit Management, Foreign Trade and Sales Information System. Each SAP SD module provides easy and swift management of task lists within the broader process of Sales and Distribution.

Advantages of SAP MM Module in Organizations

With the changing world, mostly all the commercial organizations are managing a process that initiates through sourcing and procurement of various types of materials and resources. Since the time from which the procurement begins, until the payment has been paid. There is need for a procedure that is well-organized, effective and makes financial sense as well, since the time that such procurement begins, to the time that the payment is completed. This is where the need for SAP MM arises and comes to play for the organizations. With such efficient procedure, a business organization can deploy:

•  Healthier purchasing mechanisms,
• Advanced value of materials evaluation
• Organized data storage, retrieval and usage,
• Global development in quality control as well
• Smoother inventory management and
• Improved vendor management

Each commercial enterprise should participate in smoother materials management processes, seeing the point that deprived quality resources will bring down the total quality and worth of the complete products.

Advantages of SAP PP Module in Organizations

Production Planning (PP) module in SAP-ERP offers powerful tools in the area of shop floor production, process industries and lean manufacturing. The ability of SAP in operation efficiency, inventory control and process automation is compatible to businesses such as automotive, petrochemical, pharmacy, and food industries. PP integration with supply chain entities including procurement, storage, inventory control, sales and distribution, provides the production flow optimization, material tracing, and planning strategies (make to stock, make to order, engineer to order, etc.).

Product life cycle database, Bill Of Material, routing, demand forecast, material and capacity planning, production plan, production control and production line charge, production output record, material tracing until it’s on customer’s hand, plan and actual product costing, are of main tools which SAP Production Planning module offers. In the following, a review of these tools is represented:

Master Data

The key components of SAP Life-Cycle Data Management are Material Master, BOM (bill Of Material), Routing, Work center and Documents.

Uses

·      Implement Planning And  Execution Processes

·      Calculate Planned Costs

Advantages

·      Integration of Information

·      Diversity Reporting

·      Calculate Standard Planned Costs Of Semi-Finished And Finished Products Based On BOM And           

     Routing

Demand Forecasting

Demand forecasting based on historical data is one of the main tools in material requirement planning. The purpose of Demand Planning is to forecast future demand using data of material consumption in previous periods, probability distribution functions, such as seasonal distribution, normal, average weighted and uniform functions.

Uses

·      Forecast supply chain plans including production plan, procurement plan and sales plan for make- 

      To-stock businesses

·      Forecast supply chain plans including production plan, procurement plan and sales plan for

      Seasonal businesses

Advantages

·      Improve forecast accuracy, reduce lost sales volume and reduce storage cost

·      Capability to forecast in different levels such as product group, product and assembly

Material Requirement Planning

Material requirements planning is the central function of production planning. The main point in planning is to guarantee material availability when it is needed. Procurement proposal creation should be based on minimizing ordering and storage costs. SAP MRP provides feasible planning for purchasing and production based on net requirement and requirement date for planning department.

Uses

·      Purchasing and production planning

·      Automatic creation of procurement proposal for semi-finished and raw-material based on product’s sales or production plan

Advantages

·      Capability to plan assemblies and products based on bill of material

·   Capability to plan spare parts and consumable material based on reorder point and past consumption data

·   Capability to consider different type of scrap like component scrap, assembly scrap and operation scrap

·   Capability to consider safety stock

·   Capability to use quota for different production methods or various source of supply based on predefined percentages.

·   Capability to plan subcontracting and consignment materials

·   Capability to Simulate material requirement planning based on virtual plans

·   Capability to calculate activity rates (such as operators, machines) based on production plan

·   Integration with logistic processes including reservations, inter-company transfer, intra-company transfer and sales to other organizations

·   Integration with Project module

Capacity Requirement Planning

One of the challenges of production planning is to optimize resource allocation to productions .Using capacity requirement planning, available capacity and capacity requirements are determined and compared with each other in each work stations. Afterwards Capacity leveling can be executed based on capacity evaluation.

Uses

·   Determine work stations with overload

·   Determine production sequence when requirements exceed available capacity

·   Capacity leveling in Production bottleneck

Advantages

·   Integration with preventive maintenance and consider preventive plans in available capacity calculation

·   Capability to plan tools needed according to production plan

·   Integration with material requirement planning

Missing Part List

In production control and maintenance planning, it’s so critical to guarantee material availability for production and also spare parts for machinery maintenance. Missing Parts Information System is a reporting tool that alerts planners of component or spare parts shortages that could block production or maintenance. Before proceeding with production, planners can use the Missing Parts Information System to gain comprehensive visibility of the missing components that may lead to production slowdown or stoppage.

Uses

·   Determine how much partial production (out of the total planned production quantity) the available components can ensure.

·   Control production plan and maintenance plan Feasibility

Advantages

·   Capability to predict production slowdown or shortage based on current stock level

·   Capability to reserve materials based on missing part list

·   Capability to send automatic email to the MRP controller in case of missing parts goods receipt

Production Confirmation

While production processing, the produced amount as well as material consumptions need to be recorded. These data is important for inventory and financial updates.

Uses

·   Final product receipt and BOM material consumption recording

·   Reporting over production plan satisfaction

Advantages

·   Possibility work in process recording

·   Possibility of automatic consumption of materials based on BOM

·   Possibility of partial confirmation based on production steps

·   Possibility of in process scrap recording

·   Possibility of in process and after production reworks

·   Managing special processes such as sample production in integration with quality control process   

   (E.g. supplier substitution)

·   Integration with production plan

·   Integration with material requirements planning

·   Integration with actual product costing

Serial Number

Serial number is one of the most common methods for material tracing. This capability of SAP is applicable in most of logistic processes such as production conformation.

Uses

·   Material tracing for internal movements as well as sales transfers

Advantages

·   Serial number tracking in packaging and inventory control

·   Integration with barcoding, quality control, transfer in warehouses, and sales orders

SAP / ERP Training Modules List:

Functional Modules:

1. Financial Accounting and Controlling (FICO)

2. Sales and Distribution (SD)

3. Material Management (MM)

4. Production Planning (PP)

5. Quality Management (QM)

6. Human Capital Management (HCM)

Techno Functional Modules:

1. Business Applicable Software Integrated Solutions (BASIS)

2. Advance Business Application Programming (ABAP)

Do not be late entering in to prestigious and most highly paid job opportunity. We are here to help you.

SAP and Sports - a Perfect Match!!

What Is Fiori!!

Cost Center & Work Center Integration!!

What is a Cost center in SAP?

SAP cost center can be created for each organization function or department to record the cost incurred which contribute to a company’s profitability indirectly. Here some of the cost center categories generally used in SAP

·         Production

·         Sales

·         Administration

·         Service Cost center

In SAP production planning, each work center will be assigned to one cost center. For every activity type defined in a work center, an activity rate will be maintained in the cost center. SAP system uses this information to calculate activity cost for an operation.

We can assign a work center to only one cost center. But we can assign several work centers to one cost center.

Example

Consider a cement making industry where cement bulk are manufactured from Clinker, Gypsum, Fly Ash, Slag (Granulated), Limestone etc. A Ball Mill operates on 120 T per day and the following activities are performed in Ball Mill to make the Bulk cement:

1. Machine hours

2. Labor hours

3. Setup hours

In this case, we can define 3 activity types in the work center MILL-1 (Ball Mill - A) and assign them to work center MILL-1. The work center is assigned to the cost center EX1_PQ_Production.
Activity rate for each activity (Machine hours, Setup hours and labor hours) are maintained against the cost center. Planned Machine hours, Setup hours and labor hours are maintained for the base quantity of 120 T (ball mill capacity) in a routing. Formula for each activity (Machine hours, Setup hours and labor hours) are maintained in a work center.

                                                        Activity Cost Calculation Formula

 When a production order is created in the SAP system, it uses the above information to calculate the activity cost.

                        Example of SAP Work Center and SAP Cost Center Integration

Activity Types in Costing

Activities produced in a cost center are created as activity types. In the above example, 3 activities are produced in a ball mill which are machine hours, setup hours and labor hours. We can create these 3 activity types and assign them to the cost center of production. 

 

                                                  Activity Types in SAP Cost Centers

Activity Price of Activity type

Activity price will be defined for each activity type and cost center manually. In this example, even though we have similar activity types for the cost center, activity price will be different for the cost center. The activity price is defined in the transaction KP26.

Activity Cost in Product Costing

In general, product cost in SAP comprise of three primary components:

1.    Raw material or component cost

2.    Activity cost

3.    Overhead cost

Here, activity cost is calculated based on work centers, cost centers and activity prices. The SAP system calculates the activity cost by multiplying the activity price to quantity of operations.

Example of Activity Cost in Product Costing

Let’s consider an example. A work center ball mill produces bulk cement for 50 kg Cement Bag. This work center has the following activities:

1.    Setup

2.    Machine

3.    Labor

                                SAP Work Center Assignment to SAP Cost Center

The work center is assigned to the cost center (3010255001) and each activity (setup, machine and labor) is assigned with an activity type (MSUSFG, MACSFG and LABSFG).

Now, let’s look at activity price calculation. Activity prices are maintained for the cost center (3010255001) and activity types (MACSFG, MSUSFG and LABSFG) in the transaction KP26 by a controlling person.

               Setup Activity Price (Cost Center 3010255001 and Activity Type MSUSFG)

 

              Machine Activity Price (Cost Center 3010255001 and Activity Type MACSFG)

                     Labor Activity Price (Cost Center 3010255001 and Activity Type LABSFG)

Next, let’s check routing details of the material. It will specify how many units of each activity are required for manufacturing a base quantity of this material.

                                  SAP Routing for a Material (Transaction CA01)

Now lastly we perform a costing run for the material in transaction CK11N to see how the SAP system calculates product cost for this material.

The calculation is performed according to the following formula:

Machine hour activity cost = Machine activity price / Unit * Quantity from Formula