Sub-Contract Price Charges

Hai,
I have created a Sub-Contract Order for Finished Product, with some Components(Semi-Finished Products) the same is send to the Vendor.
The vendor assembled Finished Product by Using free issue of Stock from my company and the same way he consumed his own Stock to assemble the Finished product.
Now my question is, the payment we are doing to the vendor is Service Price or Material Price(Vendor Consumed for Assembling the finished product) or both.
Regards
JC

Hi JC,
As you told you are supplying sub -components materials to vendor, the supplied material will be own by your company .Only the stock will updated as "stock provided to vendor".When you do the GRN against your subcon PO the components will be consumed will be consumed and what are all the value used for subcon process and material value will loaded to your FG account.
So as components are owned by you you should be only for processing charges which is negotiated between you and the supplier which you will putting while creating the subcon PO.
Aside of this if the subcon vendor also adding some materials to process the FG , it depends how you had tied with your supplier whther he will be charing you the service charges including the charges of added materials.
By the by i don't think so why he is adding the material extra.As alreday you are sending the components which are necessary to produce the FG material.
Hope this is clear to you.

Similar Messages

Not able to create Free of charge Sub contracting PO

Hi,
When I am trying to create Sub contracting PO with "FREE" tick system is asking me to tick GR based IV (It is not mandatory in config) then tick to IR Receipt and then net price.
My requirement is no SC charges.
Thanks in advance,
Prasad

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First, As you are dealing with an upgrade issue to Oracle Enterprise Business Suite (EBS) 11i application, I strongly suggest you submit a Service Request with Oracle Support instead of asking for support here in the Forms Forum. If you had a contractor perform the upgrade, then you could also persue the upgrade issue with the contractor.
Second, this forum is for general Oracle Forms questions. Please post your question in the General EBS Discussion forum. If you have a general Forms question, by all means, ask it here! ;-)
Craig...

Sub-contracting charges to be capitalised

Dear All,
Kindly give your input on the following,
One of my client who is manufacturing Circuit Board, this activity is done both in-house production as well as sub-contracting.
i. they are producing circuit board in In-house, as per the BOM component and costing CK11n, the price of the Circuit board will be updated in the Material master as standard price, but
some time they will give to sub-contract, (material + labour) and they want to capitalise the sub-contracting labourcharges (job work charges) to the cost of the material,
One material code with standard price and when i try to do MIGO from sub-contractor , i dont know how the system will behave
How do i do and capitalize the labour charges to the cost of material (material code is only one)
Kindly give me your valuable input which will help me to solve this issue
Thanks and regards
Elan

Thanks for your input.
Correct me if am wrong
As per your input,
if the Material Master is Standard Price "S"
I created Sub-contracting PO and when I receive the goods against the PO (MIGO), system will check the price in the material master and price in the MIGO, if any difference it will post price difference account in FI , Material master price with "S" will be remain same.
In such case, am not capitalising the job work charges to the material is it?
Kindly clarify the same
Regards
Elan

Price Difference in Sub contracting

Hi all,
I have a question on price difference on sub-contracting. The issue is, there is a sub contracting PO for Rs.100 for 10 units. GR is done for 100 units. Before the IR is done, there is a change in the PO price to Rs.60. Further of the 10 units which was received, 6 units have been issued out. Now the stock in hand is only 4 units. As there is a price change, the difference in the price to the extent of the stock availability is posted to Stock account (40/10*4 = 16) and the balance of price difference (for non-availability of stock) *shoud be* posted to price difference account.
Wanted to confirm from where is the price difference account is picked up for sub contract? Whether it is the GL account given in PRD or FRL in OBYC settings.
Also please throw light on how to stop the changing the price after GR and before IR.
Thanks in Advance.
Narasimhan.J

Hi Kishore,
Thanks for replying. Yes, we use MAP only.
I created a test scenario and changed the GL accounts at Transaction FRL - External activitiy in OBYC settings and could see that the GL account specified in the FRL is picked up to post the price difference.
To the extent of stock availablility it is posted to the FG account and rest is posted to the GL account specified in Transaction FRL in OBYC setting.
Regards
Narasimhan.J

How to calculate or capture the Sub-Contracting Charges

In CK13N, How the Sub-Contract rate is derived.
Kindly the tell the derivation methodlogy for SubContract Rate.
Thanks in advance
K.Natarajan

Dear Natarajan,
1.For Sub-sontracted products ,the cost of that product = Raw-materials cost (which are sent to the third
party) + External processing cost(as per the cost mantained in ME11 for sub-contracting).So if the raw
materials cost is Rs 10 & the processing charges are Rs 25 means then the sub-contracted product cost
= 10+25 = Rs 35.
2. For sub-contracted Product you will be getting only the sub-contracting cost and not the manufacturing
cost.It will be having only raw material cost and sub-contracting charges.
Or do you want in this way?say X is a sub-contracted part and its made up of raw materials X1 & X2 and
once X is received ,its used for manufacturing Y ,So if you check the cost of Y it will having the sub-
contacted item (X) cost + Internal processing cost (operation cost for producing Y),so if you check for Y it
should show the split up of internal activity cost + sub-contracting charges +raw materials cost ?
3.For your information,if you check CK13N for your finished product which is produced using the Sub-
contracted product,then after giving the input and press enter ,then press F5,now you will get the exact
split up in which you were looking for.like processing cost ,conversion cost + material cost.
check the link - [Product Costing for Sub Contracted material|Re: Product Costing for Sub Contracted material]
Check & Revert back.
Regards
Mangalraj.S

Sub-contracting PR

Hi,experts,
My scenario is like this - I want to send some components to outside vendor for repairing purpose and sometimes along with some spare parts also.
My requirement is to create sub-contracting PR from any maintenance order and in the line item of the PR , the component which I want to get repaired should come . From that PR , MM will create sub-contracting PO , assign some spare parts to that PO and send these to vendor.Is there any option available in SAP to map this scenario?Also while receiving the repaired material the price should be the summation of damaged one plus service charge plus spare parts consumed.Can it be done by refurbishment order??
Please guide me.
thanks in advance
rgds
rajib

hi
In standard SAP for PM you cannot create sub contract PR from Maintenance order ,since the indicator sub contracting indicator is only available for Aerospace and defense.
since standard PR doc type is specified in the IMG settings for order category if you create separate PR type for subcontracting and assign the same it will reflect to the entire order types .
regards
thyagarajan

SUB CONTRACTING ACCOUNTING ENTRY - DOUBT

Hi,
the blw is the a/cing entry for the sub contract process , here pls tell me how the a/c detemination for Rs 1000 is picking i.e for BSX & BSV..
i knew that FRL & WRX picked based the po price say Rs .200
and GBB & BSX is picked based on the mat master value of the ram mat, which we send to subcontractor.. say Rs 800
i need to know , how the BSX and BSV value is picking?? pls clarify
BSX- stock account finished -
1000(+)
BSV- change in stock -
1000(-)
FRL-external service----
200(+)
WRXGR/IR clearing acct--
200(-)
GBB_VBO- consumption acct raw material sent to vendor-----800(+)
BSX- stock account--
800(-)

in your case , Your Finished material is valuated at MAP with price control "V" , so the total value of material produced will be the sum of the Raw material components consumed and the subcon charges.
Change in stock account is hit when you receive any material from subcontracting .
so BSX entry is "Stock debit " 800 +200 = 1000 (sum of Components consumed and Subcon charges)
BSV Entry is for "Change in stock " credit = 1000 (equivalent to Finished material value)

Mb1b (sub contract)

while doing MB1b ( for sub contract)
error is
G/L account 799999 does not exist in company code AAA
i tried
fs00
g/l account - 799999
c,code - aaa
the following error comes
" Account 799999 does not exist in company code AAA
and
Account 799999 blocked for creation in chart of accounts INT
what to do
ali

Hi,
For subcontracting process you need to set up following
If Material has Price Control as "V" (MAP)
(BSX) Stock A/c of Assembly - Dr
(BSV) Change in Subcon Stock - Cr
(FRL) Subcontracting Charges - Dr
(WRX) GR/IR Clearing A/c - Cr
(BSX) Stock A/c of Components - Cr
(GBB-VBO) Consumption A/c of Components - Dr
If Material has Price Control as "S" (Std. Price)
If Material is having Price Control as "S" then Price Difference A/c will also in picture.
This depends on configuration; SPRO > MM > Inventory Management and Physical Inventory > Goods Receipt > Price Differences for Subcontract Orders at Goods Receipt
Price Differences for Subcontract Orders at Goods Receipt
In this step, you configure for each valuation area whether price differences are generated for a Subcontract order at the time of a goods receipt if the manufactured material is managed at standard price and the standard price varies from the receipt value (externally performed service + value of components + delivery costs).
Example
Finished product: $400 (value at standard price)
Subcontract order:
o Ext. service : $250
o Components : $100
Posting schema without price differences:
Stock account FERT : 400 +
Stock change : 400 -
GR/IR clearing acct : 250 -
External service acct : 250 +
Compon. stock account : 100 -
Consumption account : 100 +
Posting schema with price differences:
Stock account FERT : 400 +
Stock change : 350 -
Price difference : 50 -
GR/IR clearing acct : 250 -
External service acct : 250 +
Compon. stock account : 100 -
Consumption account : 100 +
And cost center is mandatory for subcontracting process
the accounts for the BSX FRL and GBB-VOB needs the cost elements
Thanks
Diwakar

Sub contract po coproduct issue

Hi All,
In sub contracting process one(raw material) material is supplying to vendor .During single punching the process we are getting 2 products & scrap.For this process we are paying some amount to sub contractor.
While raising the Sub contarctor PO, raised aganist one product .Here iam able to maintain job charges for one product only .But at the same time it should apporinate to coproduct also.
I have maintained a bom for one product (header material) & i maintained second product as coproduct,raw material & scrap .In bom & material master for that material i maintained as coproduct
After maintaing this price is not apporinating to co product.Pls guide me how to solve this issue.
Regards
Vr

close not ansered

Sub contract in sales

I need sub contract in sales.
Ex:
Customer sent material to plant they need some process in our plant for that I need scenario and configuration.
How we allow customer material into plant?
After finished work how to deliver products to customer and billing also.
Please help me any one

Hi Dharmananda rao
Sub Contracting Cycle :
(1) You have a material that can be procured externally, and you have maintained BOM with components. Any waste generated and received during subcontracting process can be maintained as component with negative quantity.
(2) You create a subcontracting PO (PO with Item Category L). You can also maintain Purchase Info Record for Subcontract category for material and subcontractor.
(3) You make a transfer posting to issue components for SC PO. Material is sent to subcontractor. As material remains under your ownership, system does not make any value entry. But quantity is shown as "Material Provided to Vendor"
(4) You receive finished material against SC-PO. You also specify components consumed in manufacturing of finished goods. Additionally, if you have negative components in BOM, now you'll also receive subcontracting by-products. There are three events, so three accounting entries are generated:
DR FG Stock/ SC By-Product Stock
CR Change in Stock (FG/ SC By-Product )
(for finished goods received)
DR Subcontracting Charges
CR GR/IR Clg
(for moneys payable to Subcontractor)
DR Consumption (Components)
CR Change in Stock (FG/ SC By-Product )
(material provided to Vendor is now charged to expense)
5) You do the IV for SC Invoice, and the process is complete.
Process of Subcontract in MM :
Sub-contract business process:
You want to buy material from the supplier (processed material/ assembled item) , but for some reason (quality of certain item / price ) you will give some component to vendor .
Vendor shall process the item / use the item provided & supply the final item.
SAP process:
1.Create the finished goods material code.
2.Maintain the BOM for the material.
3.Create PO with item category as "L" .
4.Issue material to vendor with movement type 541
5.Receive the material against the PO with movement type 101.
6.MIRO to account for vendor's invoice for the service charge& material used by him.
Can anybody tell me how a process has to be given to subcontracting?
Suppose, I have 3 operations 1)weaving 2)dyeing 3)cutting & packing
if no 2 process (i.e Dyeing) has to be given to subcontracting, what process should i follow ?
The following process to be followed for subcontracting.
1. Item code(material master) to be created at the stage of before dyeing.
2. Item code(material master) to be created after Dyeing as subcontracted item.(F30)
3. Bill of material to becreated for the material(2) calling for material(1)
4. Inforecord and source list to be created for material(2) with the corresponding vendor
5. PO to be released for material (2)
6.Along with PO the material(1) to be issued to vendor
7.On receipt of material when GR is made the stock with vendor will get updated.
How to Create a Subcontract Order?
To create a subcontract order, proceed as follows:
Enter the material you want to order and the item category for subcontracting (L) in the order item.
Press ENTER to display the screen for component processing.
Enter the components that the vendor requires to manufacture the product.
Please note:
You do not need to enter the date required for the components. This date is proposed by the system when you press ENTER.
It is calculated as follows:
Delivery date of the item - Planned delivery time
If you do not want the quantity of the components to be changed if the order quantity of the end product is altered, set the indicator Fixed quantity (column F).
You can determine whether the components are available on the date required by selecting Edit -> Availability check.
If you entered a bill of material as the material in the subcontract order, the components are created automatically.
If you want to determine the components in the bill of material at a later date (for example, if the bill of material is subsequently changed), choose Item -> Component -> New BOM explosion. The existing components are deleted and redetermined in the bill of material.
Save the purchase order.
When you print the purchase order, the components are printed per order item
Subcontracting - Key Points
Special Procurement Process.
Item category: L
Order type: NB
In info record vendor should be maintained as subcontractor.
Vendor (Subcontractor) receives the components used to manufacture a finished product directly from your company or through third party.
Your company should place a purchase order for the finished product. In this manually you can enter the required individual components or it can be determined via the explosion of BOM (if exists).
Stock check at vendor level: ME2O
Company stock check: MMBE
GR for individual components through movement type: 501 or 561 (if with out PO or without reference).
GI to subcontracting vendor: through movement type 541.
GR from sub contracting vendor: through movement type: 101
Movement type 543 is displayed to cancel the material cost account.
If the subcontracting order has to be generated through materials planning,the special procurement key has to be set in MRP 2 screen.
- To create the Subcon Info Record : Tcode ME11 - Info Category - Click Subcontracting
- To create Material BOM : Tcode CS01
- With the Info and Material Setup, you can then create the Purchase Order in Tcode ME21N
Reward if useful to u

Sub contracting postings

Hi Friends,
                          While doing the subcontracting, I have got the below said postings. my problem is semifinish price is picking from material master.But it should add the rm1, rm2, jobwork chg. So please suggest
1     89     22301100     semi finish                     300          bom
2     96     18729001     vendor                     25-
3     91     41301100     chg in stksf     300-          semi finish     1. rm1
4     86     40491100     jobwork chg     25               2. rm2
5     99     22401100     stk rm 1                     2898.71-
6          40401100     consumption     2898.71
7     99     22401100     stk rm 2     10-     10-
8          40401100     consumption     10+
               mat master price
          semifinish     300
          rm1     2898.71
          rm2     10
          service charge in PO     25
Regards
sridhar.k

Hi,
In general FI postings for sub contract will be as under, if
Raw Material Value - 100/-
Job Work charges - 50/-
Semi Finished Material Value - 150/-
Service Tax - 12%
ECess - 2%
Higher Education Cess - 1%
FI Entries during MIGO
Semi Finished Stock - 150/- Debit (BSX) Posting Key - 89
Change in Stock - 150/- Credit (BSV) Posting Key - 91
GR/IR - 50/- Credit (WRX) Posting Key - 96
Job Work Charges - 50/- Debit (FRL) Posting Key - 86
Raw Material Stock - 100/- Credit (BSX) Posting Key - 99
Raw Material Consumption - 100/- Debit (GBB-VBO) Posting Key - 81
FI Entries during MIRO
Vendor - 56.18 Credit Posting Key - 31
GR/IR - 50/- Debit Posting Key - 86
Service Tax - 6/- Debit Posting Key - 40
ECess - 0.12 Debit Posting Key - 40
HECess - 0.06 Debit Posting Key - 40
Posting Keys and GL account numbers may change depends on client.
bye
Sridhar Thota

Sub-contracting for the Customer

Friends,
Here is one scenario where I need your suggestions
Scenario
Client A is subcontractor for their customer B
B receives 10 Components from A along with a subcontracting order from B to assemble material X (consisting of the 10 components supplied by Customer).
Part Number of the 10 components are also used by B for their other finished products which are sold against Customer Purchase Orders. This means they are Quantity and Value managed material. They are valuated material for them
Q1. How does B receive 10 components from A (T Code and movement type)
Q2. How do we prevent valuation of these 10 components in my plant. (Because the same part numbers are used by me and valuated in my plant)
Q3. Is there any implication if I include them in the BOM and the cost roll will not include the cost of those 10 components.
Thanks in advance for your response.

Sub-contract business process:
You want to buy material from the supplier (processed material/ assembled item) , but for some reason (quality of certain item / price ) you will give some component to vendor .
Vendor shall process the item / use the item provided & supply the final item.
SAP process:
1.Create the finished goods material code.
2.Maintain the BOM for the material.
3.Create PO with item category as "L" .
4.Issue material to vendor with movement type 541
5.Receive the material against the PO with movement type 101.
6.MIRO to account for vendor's invoice for the service charge& material used by him.
Note:: At the Time of GR 543 Mvt is up dated for Raw Material.
Can anybody tell me how a process has to be given to subcontracting?
Suppose, I have 3 operations 1)weaving 2)dyeing 3)cutting & packing
if no 2 process (i.e Dyeing) has to be given to subcontracting, what process should i follow ?
The following process to be followed for subcontracting.
1. Item code(material master) to be created at the stage of before dyeing.
2. Item code(material master) to be created after Dyeing as subcontracted item.(F30)
3. Bill of material to be created for the material(2) calling for material(1)
4. Info record and source list to be created for material(2) with the corresponding vendor
5. PO to be released for material (2)
6.Along with PO the material(1) to be issued to vendor
7.On receipt of material when GR is made the stock with vendor will get updated.
How to Create a Subcontract Order?
To create a subcontract order, proceed as follows:
Enter the material you want to order and the item category for subcontracting (L) in the order item.
Press ENTER to display the screen for component processing.
Enter the components that the vendor requires to manufacture the product.
Please note:
u2013 You do not need to enter the date required for the components. This date is proposed by the system when you press ENTER.
It is calculated as follows:
Delivery date of the item - Planned delivery time
u2013 If you do not want the quantity of the components to be changed if the order quantity of the end product is altered, set the indicator Fixed quantity (column F).
u2013 You can determine whether the components are available on the date required by selecting Edit -> Availability check.
If you entered a bill of material as the material in the subcontract order, the components are created automatically.
If you want to determine the components in the bill of material at a later date (for example, if the bill of material is subsequently changed), choose Item -> Component -> New BOM explosion. The existing components are deleted and redetermined in the bill of material.
Save the purchase order.
Q1. How does B receive 10 components from A (T Code and movement type)
see above
Q2. How do we prevent valuation of these 10 components in my plant. (Because the same part numbers are used by me and valuated in my plant)
Use split valuation so for sub contracting compenent will be one valuation and other component is other value
Q3. Is there any implication if I include them in the BOM and the cost roll will not include the cost of those 10 components.
No, costing is depend how you do costing

SAP PP-difference between External processing & Sub-contracting

Hello SAP-Guruu2019s
What is the difference between External processing & Sub-contracting w,r,t PP module

HI
Operations that are performed by a third party are called external processing operations
The detailed data you can enter in external processing operations can be divided into two basic groups:
External processing data
Procurement option data
External processing data contains information from the supplier on net price and planned delivery time. The procurement option data contains vendor account and purchasing information, such as the purchasing info record, purchasing group and organization.
In subcontracting, the vendor is provided with materials (components), which he uses to produce the finished product.
This section describes how to procure materials using a subcontract order. It describes how subcontract orders are processed in Purchasing, Inventory Management, and Invoice Verification.
In subcontract order processing, the vendor receives materials (components) with which it produces the end product. The following are involved:
You order the end product using a subcontract order. The components that the vendor needs to manufacture the end product are specified in the purchase order.
In Inventory Management, the components are posted to the stock of material provided to vendor. The components are then supplied to the vendor.
The vendor performs its service and delivers the ordered material (the end product). The consumption of the components is posted.
If, after the goods receipt has been posted, the vendor informs you that a larger or smaller quantity of the components was actually consumed than planned in the purchase order, you must make an adjustment.
The vendor charges for his or her service. The invoice is posted in Invoice Verification.
The quantities of the components to be provided to the vendor are entered into the stock of material to be provided to vendor. This stock has the following features:
It is managed as part of your total valuated stock, and is available for MRP.
It is only managed at plant level, since it is not stored at your own company but on the vendor's site.
Two stock types are possible:
unrestricted-use stock
quality inspection stock
Stock can be transferred between the two stock types. Withdrawals can only be posted from unrestricted stock, however.
You can take a physical inventory of the stock of material to be provided to vendor
-ashok

Sub contract

my client running fg sub contracting (electro plating )cycle through the MRP
after return from vendor with mvt type 105 (543) i check document list with MB51. i found following g/l account effects :
SFG consumption for sub contract account = 602026
Gr/IR Clearing Account = 164335
SFG-inventory account = 323055
for sub contract account = 602130
Inventory account = 320010
Costs of goods mfg = 602200
but if do whole sub contracting cycle without MRP i can see effect in following G/L a/C:
Manual Cycle .
Inventory account = 320010
Gr/IR Clearing Account = 164335
Price Differance Account = 602155
change in stock = 603010
Sub Contract expense = 603000
SFG-inventory account = 323055
SFG consumption for sub contract account = 602026
my question is why this differance comes ?
if i want gl accounts hit by manual process in MRP process what changes to be made ?

Hi,
Price diffrences arise during valuation @ GR if the material is managed at standard price in MMR.
Also there is one more setting in customizing that for a plant that price differences should or not be posted during GR.
spro-IMGMMInv MGmtGR--price differences for subcontracting at GR
Regards,
Deepak.

Sub Contracting Process

my client running fg sub contracting (electro plating )cycle through the MRP
after return from vendor with mvt type 105 (543) i check document list with MB51. i found following g/l account effects :
SFG consumption for sub contract account = 602026
Gr/IR Clearing Account = 164335
SFG-inventory account = 323055
for sub contract account = 602130
Inventory account = 320010
Costs of goods mfg = 602200
but if do whole sub contracting cycle without MRP i can see effect in following G/L a/C:
Manual Cycle .
Inventory account = 320010
Gr/IR Clearing Account = 164335
Price Differance Account = 602155
change in stock = 603010
Sub Contract expense = 603000
SFG-inventory account = 323055
SFG consumption for sub contract account = 602026
my question is why this differance comes ?
if i want gl accounts hit by manual process in MRP process what changes to be made ?

Hi
Kindly check with the following:
In customizing for that plant price differences should or not be posted during GR.
SPRO->IMG>MM>Inv MGmt>GR-->price differences for subcontracting at GR
Thanks

Sub-Contract Price Charges

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