Unlike a regular PO, a subcontracting PO involves sending material or items to the vendor and receiving them back after the contracted service is performed. This calls not only for a tracking mechanism for the material, but for a process to perform the shipping functionality as well.

In a sales order delivery note, for example, you can allocate a material and identify the shipping process (which, in turn, initiates the transportation). You then perform the follow-on function, such as picking, packing, or post-goods issue. The shipping function allows you to do transportation planning, route determination, service-level selection for the carrier, tracking the outbound activity through deliveries, planning and scheduling the picking and packing, and reporting on the in-progress deliveries.

Although documentation and help information are available for setting up subcontracting POs and enabling shipping functions in general, what is lacking is information on how to make use of shipping function for subcontracting POs. Only a few scattered SAP notes mention piggybacking on the shipping functionality available in SD and offer scant information on how use it for the subcontracting process. I'll provide the missing links, using the business scenario of a plant located in Rotterdam, Germany.

The German plant has to send a component for subcontracting work to Los Angeles in the US. I will walk you through how to make use of this SD shipping functionality and how to make it available in MM for use in the subcontracting PO process. I will go over the complete setup (configuration and master data) and transactional processes.

Customizing Steps

To elaborate on the business scenario, the plant in Rotterdam is known as the Rotterdam Distribution Center. It is defined in the system as the supplier of the components to the vendor. Since you are moving the shipping function from purchasing, you need to identity the vendor as a customer to mimic the data for the SD process. Let's call the plant Adecon SA. You have to create this customer in the selling sales area. The selling sales entity is the company or customer sending the part to the vendor.

Step 1. Assign the sales area and customer to the plant. As you know, a sales area consists of sales organization, distribution channel, and division. They must be assigned to the plant from which the components should be delivered. In my example, the selling entity is in Germany. You do this via the Customizing menu path Materials Management> Purchasing>Purchase Order>Set up Stock Transport Order>Define Shipping Data for Plants. In this step, you assign the customer number associated with the plant supplying the component to the subcontracting vendor and the sales area data (organization, distribution channel, and inter-company billing division). See Figure 1.

Figure 1

Assign the plant to a customer number (representing the vendor receiving the part for performing subcontracting work) and to the sales area

Step 2. Define the delivery document type. Use Customizing menu path Logistics Execution>Shipping> Deliveries>Define Deliveries Types or transaction OVLK. The standard-delivered delivery type is LB (delivery for subcontracting or subcontracting). You can copy with reference to that. Make sure the Order required indicator is set to Delivery for subcontracting (Figure 2).

Figure 2

Designate the type of order

Step 3. Assign a partner schema to the delivery type. As a vendor is one of the functions within the subcontracting delivery, you need to define and assign it as part of the procedure. The delivery type should be assigned to a partner schema containing the partner function “vendor.” Do this via Customizing step Logistics Execution>Shipping>Basic Shipping Function >Partners>Set Up Partner Determination for Deliveries or via transaction VOPA (Figure 3). In the Partner Determination Procedures folder, click on the Partner Functions in Procedure sub-folder.

Figure 3

Set up Partner Determination for Deliveries. Partner Functions in Procedure is defined within Partner Determination Procedure.

This brings up all the partner functions assigned to the procedure, which are assigned to the delivery type. Make sure partner function vendor (VN) is included and that the mandatory (M) function is checked (Figure 4). Once Partner VN is assigned, maintain the assignment of procedure to the delivery type within the folder Partner Determination Procedure Assignment. Define the partner function within Partner Functions. In this case, VN is standard-delivered, so I don't have to create it. In Account Groups>Function Assignment, you would define the Customer Account Group, if you have any, to the partner function. If you need to maintain a non-standard partner function code, do so within Partner Function Conversion.

Figure 4

Include Partner Function VN (vendor) and check M (mandatory function)

Step 4. Assign a supplying or issuing plant to the delivery type. The supplying plant is the entity from which the components are supplied to the vendor or supplier. In my example, the supplying plant would be the plant located in Germany, identified by the number 2500. The delivery type must be maintained for the provision of materials from a plant. Use the Customizing menu path Material Management>Purchasing>Purchase Order>Set up Subcontract Order. Delivery type LB is delivered in the standard system (Figure 5).

Figure 5

Establish the plant and delivery type relationship

Step 5. Maintain shipping condition mapping to shipping point determination. A shipping condition maps the shipping point determination. In other words, a shipping point must be assigned to the combination shipping condition, loading group, and the plant. Shipping conditions are maintained at the customer master data record, which is shown later in the section on master data maintenance. The customers, representing vendors, are assigned to the plant, as seen in the earlier customizing step. Follow menu path Logistics Execution>Shipping>Basic Shipping Function>Shipping Point and Goods Receiving Point Determination> Assign Shipping Points (Figure 6).

Figure 6

Map the loading group, plant, and primary shipping point to the shipping condition

Step 6. Maintain the route determination. The route helps you define the physical movement of the material from your company to the vendor. Route determination is based the country and departure zone, shipping conditions, transportation group of material, and country and transportation zone. In my example, the route defines the stages it goes through to be shipped from the plant in Germany to the vendor located in Los Angeles. As you know, one of the criteria for route determination is based on the shipping condition, so in this configuration step you maintain the appropriate route determination (Figure 7). Follow the menu path Logistics Execution>Shipping>Basic Shipping Functions>Routes>Route Determination> Maintain Route Determination.

Figure 7

Define the route determination

In Figure 7, you see the route determination as well as the shipping condition 02 (standard), transport group 0001 (on palettes), and weight groups (0001 up to 1 KG, 0010 up to 10 kg, and so on).

Master Data

Having defined necessary configurations, you need to maintain a few prerequisite master data records for the shipping function. I'll walk you through the steps involved in setting up the master data.

Step 1. Create the customer number representing the vendor. The vendor that performs the subcontracting work must be maintained as a customer for use in the shipping function. In other words, you need to tell the system that the vendor will be receiving the part from the supplying plant. Create the vendor receiving the part as the sold-to party and ship-to party. Shipping conditions are maintained in the customer master data record (shipping view). Shipping point and route are determined by the shipping condition through that configuration setting. Transaction V-09 allows you to maintain the shipping point (Figure 8). You could also use transactions VD01 or XD01 (Customer create).

Figure 8

Display of customer created with the Shipping tab within the sales area data for shipping condition maintenance

Step 2. Set up the debtor (vendor customer) partner function. The or vendor, acting as customer here, is considered a debtor (component/material issuer) to the subcontracting vendor in the master record. This debtor must be created for the sales organization, distribution channel, and division of the delivering plant. Go to the customer master create screen or change transaction, which is within the partner function screen. Maintain the partner function VN and enter the existing vendor number (Figure 9). Use transaction XD02 or VD02.

Figure 9

Partner function screen for customer master data

Step 3. Maintain the material master. The component to be issued to the vendor from the delivery plant in Germany has to be extended to the Germany sales order. Create or extend the component or the material for the sales organization, the distribution channel, and the division of the delivering plant (Figure 10). Use transaction MM01 or MM02.

Figure 10

Create Material master within the supplying plant, sales organization, and distribution channel

Transactional Data

Now that the configuration steps and the master data setup are complete, you must create a delivery. I'll go over the steps for creating a delivery, which helps you perform the shipping functions. This will help you understand the implementation aspect of this change in terms of training and the different groups that are affected by the process.

Step 1. Create deliveries. These are outbound deliveries for sending the part or component to the vendor from your plant through the regular shipping process, like your sales transactions. Use transaction ME2O to create a delivery. The standard delivery type is LB and the relevant item category is LBN (material provided item). Once the delivery note is created through the above transaction, the rest of the function is the same as SD activities.

Step 2. Process deliveries. Once you have created a delivery, you may want to take it further by, for example, adding details to the delivery note related to the shipment. The processes for changing the delivery note (VL02), creating a transfer order (LT03), confirming transfer, creating shipment, assigning to deliveries, post goods issue (VL02), and printing delivery note are the same as those used in the sales order delivery process.

Even though you use the shipping function from the SD module, only some of the SD functionality is transferred to the subcontracting process. The document flow of sales orders allows you to see the delivery notes created. With subcontracting purchase orders, you are not able to see the deliveries. However, the delivery note has a link to the purchase order, so if you want to see the deliveries in a report form, you could write a Z-program for reporting purposes.

Once you pick, pack, and post the goods issue the delivery note, it is shown as having been transferred to the subcontracting inventory. This outbound delivery allows you to ship the component out of your area through the regular shipping process. You can refer this delivery for the shipment through your carrier or freight forwarder. It can also be used to notify the vendor of the component they may expect at their door.

Rajen Iyer

Rajen Iyer is the cofounder and CTO at Krypt, Inc. Rajen has written several in-depth, best practice articles, white papers, patents, and best-selling books on SAP Logistics and SAP Global Trade Services, including Effective SAP SD and Implementing SAP BusinessObjects Global Trade Services. He is also an invited speaker at industry conferences.

You may contact the author at Rajen@kryptinc.com.

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