Leveraging Assembly Subcontracting in SAP PP for Efficient Production

In today’s dynamic manufacturing landscape, companies constantly seek ways to optimize production processes and adapt to changing demands. Assembly subcontracting, a functionality within SAP PP (Production Planning), offers a strategic solution to achieve these goals.

What is Assembly Subcontracting?

Assembly subcontracting allows you to outsource the complete assembly of a finished product to a qualified vendor. You provide the vendor with the necessary raw materials and components, and they handle the assembly process at their facility. The finished product is then delivered back to your warehouse.

Benefits of Assembly Subcontracting

• Increased Capacity: This approach is particularly beneficial when your in-house production capacity is constrained. You can fulfill customer orders by leveraging a subcontractor without investing in additional equipment or personnel.
• Focus on Core Competencies: Subcontracting frees up your resources to focus on your core competencies, such as product design or marketing.
• Cost Optimization: In some cases, utilizing a subcontractor can be more cost-effective than in-house production, especially for products with complex assembly processes or high labor costs.
• Flexibility: Subcontracting allows you to adapt to fluctuating production demands without significant changes to your internal infrastructure.

How to Implement Assembly Subcontracting in SAP PP

Here’s a simplified overview of the process:

1. Material Master Setup: Maintain material masters for the finished product (header material) and all component materials within the MM module.
2. Bill of Materials (BOM): Create a BOM in CS01 that outlines the components required for the finished product assembly.
3. Controller Data Configuration: In the MRP 2 view of the finished product’s material master (MM02), set the particular procurement type to “30” (Subcontracting) with procurement type “F.”
4. Purchase Requisition and Purchase Order: The MRP run in MD02 will generate a purchase requisition for the finished product, which can then be converted into a purchase order (ME21N) for the subcontractor.
5. Goods Issue to Subcontractor: When the purchase order is confirmed, you can issue the required components to the subcontractor using movement type 541 (MB1B).
6. Goods Receipt of Finished Product: Upon completion of the assembly, the subcontractor will deliver the finished product to your warehouse. You can perform a goods receipt (MIGO) to reflect the finished product inventory.