Mastering Job Work in SAP PP: A Streamlined Production Process

Businesses often rely on external resources to supplement their manufacturing production capabilities. This is where Job Work in SAP PP comes in. It allows you to leverage subcontractors for specific tasks, optimizing production flow and reducing overhead costs.

Understanding Job Work

Job Work refers to a production scenario where a company (the principal) sends raw materials to a subcontractor for processing or assembly. The subcontractor returns the finished product to the principal for further sale or use. SAP PP (Production Planning) offers robust functionalities to manage this process efficiently.

Critical Functionalities in SAP PP for Job Work

• Subcontracting Purchase Order (PO): This PO defines the agreement with the subcontractor, specifying the raw materials to be provided, processing requirements, and expected finished product.
• Non-Valuated Materials: Since the raw materials remain the principal’s property, they are typically managed as non-valuated materials in SAP. This ensures quantity tracking without impacting inventory valuation.
• Production Order for Job Work: A particular production order type is used to manage the job work process within SAP. This order references the subcontractor PO and tracks the progress of the job.
• Goods Issue and Receipt: The principal issues raw materials to the subcontractor (movement type 541) and receives the finished product upon completion (movement type 101).
• Billing: Once the finished product is received, the principal can create a sales order and invoice the customer, reflecting the subcontractor’s processing charges.

Benefits of Using Job Work in SAP PP

• Increased Flexibility: Allows you to expand production capacity without significant capital investment.
• Focus on Core Competencies: This enables you to concentrate on your core strengths while outsourcing non-critical tasks.
• Cost Optimization: Reduces overhead costs associated with in-house production for specific tasks.
• Improved Efficiency: Streamlines production flow by leveraging subcontractor expertise.
• Enhanced Transparency: Provides clear visibility into the job work process through detailed transaction records.

Getting Started with Job Work in SAP PP

• System Configuration: Ensure your SAP system is configured for subcontracting with proper account assignment and movement types defined.
• Master Data Setup: Create master data for subcontractors, materials (including non-valuated materials), and bill-of-materials (BOMs) for finished products.
• Process Training: Train your team on managing job work transactions in SAP PP, including creating purchase orders, production orders, and goods movements.

Conclusion

Job Work in SAP PP is a powerful tool for businesses to optimize their production processes. By leveraging its functionalities, you can gain greater flexibility, reduce costs, and improve production efficiency. You can seamlessly integrate job work into your SAP PP environment by understanding the core concepts and implementing the necessary configurations.