Part 1
Course reading
Subcontracting means buying a finished or processed material while providing some or all of its components to a vendor. The components remain company-owned; sending them is not a sale. Agree the output specification, processing price, delivery date, component quantities and allowed scrap before dispatch. A subcontracting purchase order normally uses item category L and a bill of materials or component list. Do not confuse it with purchasing a service using a service entry sheet.
In a standard SAP MM process, movement 541 transfers components to stock provided to the vendor, typically special stock O. Check the vendor, plant, material, batch, quantity and delivery evidence. Reconcile stock physically held at the vendor with the system. Movement 542 reverses a 541 transfer when appropriate. When the processed material is received against the subcontract order using 101, component consumption is normally posted automatically using 543. Actual consumption may differ from the planned BOM; use the approved subsequent adjustment process rather than changing quantities without evidence. SAP configuration can vary, so practise in a training system.
Worked example: supply 200 blanks to make 100 finished brackets, at two blanks each. If 80 brackets are received and 160 blanks consumed, 40 blanks remain at the vendor before scrap or additional issues. If the vendor reports only 32, investigate the eight-blank difference against authorised scrap, dispatch records and consumption postings. Never write off a difference simply to make the balances agree.
Keep a reconciliation sheet with vendor, component, opening balance, quantities sent, consumed, returned, authorised scrap, closing system balance and confirmed physical balance. Review ageing of vendor stock and overdue finished goods weekly. A good control separates buyer approval, physical dispatch and receipt confirmation. The learning goal is an auditable material flow, not merely a correct transaction code.