Leveraging External Processing in SAP PP for Production Efficiency

In today’s dynamic manufacturing landscape, flexibility and cost-effectiveness are paramount. SAP Production Planning (PP) offers a valuable tool: External Processing. This functionality enables you to outsource specific operations within a production order to a vendor, optimizing your production processes.

What is External Processing?

External processing, distinct from subcontracting, focuses on procuring a service from a vendor. It’s ideal for scenarios where:

• The vendor provides an on-site service, eliminating material movement.
• Material movement is managed outside SAP using a dedicated container system.
• The operation involves processing in-house Work in Process (WIP) material without additional components.

Benefits of External Processing

• Increased Capacity: Address capacity bottlenecks by delegating tasks to external specialists, ensuring timely order fulfillment.
• Cost Optimization: Focus on core competencies and outsource less critical operations, potentially at a lower cost.
• Enhanced Expertise: Access specialized skills or equipment unavailable in-house, improving product quality.

Setting Up External Processing in SAP PP

1. Control Key Configuration: Ensure the operation’s control key allows or mandates external processing.
2. Master Data Management: Maintain accurate master data for vendors and materials involved.
3. Work Center Definition: Create a work center for the subcontractor, focusing on capacity rather than costing views.
4. Production Order Creation: Utilize the appropriate control key during production order creation to designate external processing.

Integration with Purchasing

External processing triggers the creation of a purchase requisition in SAP. This requisition outlines the vendor’s service requirements, ensuring a seamless purchasing process.

Important Considerations

• External processing is not suitable for assembly activities requiring additional components.
• Material movement between your facility and the vendor might need external tracking mechanisms.

Conclusion

By effectively leveraging External Processing in SAP PP, you can achieve greater production flexibility, optimize resource allocation, and potentially reduce costs. This approach empowers you to focus on core competencies while ensuring the timely delivery of high-quality products.