step by step “subcontracting” process

[Former Member]

Dear Experts

Req the experts to comment on the step by step “subcontracting” process :

1. Outgoing material M1 is with short text and without any material number. What happens in case the material cost = ZERO? Is there any issue?
2. PR is created as Subcontracting with material code for incoming material M2 (what happens in case the material cost = ZERO material = M2) for which component has gone out as M1 and comes back from subcontracting vendor as M2.
3. Outgoing material M1  is issued  to SC vendor using standard Mvt type(561)
4. Can 57F4 document be manually created while component is going out or has to be necessarily thru SAP ?
5. What is the transaction used to track material issued to SC vendor through standard SAP report for tracking “elapsed “ period
6. GRN of incoming material M2 is made with material code M2 & follows std. process of Quality Management.  Does the vendor have to return the material with 57F4 back?
7. How costing module is affected ? How are various A/Cing entries are generated at various stage?
8. What happens if the  material M1 is NOT given out from the client premises but comes back as incoming material M2. Is 57F$ reqd in such cases and if YES,who will make the 57F4 document ?

Thx.....

[Former Member]

1. Outgoing material M1 is with short text and without any material number. What happens in case the material cost = ZERO? Is there any issue?

There wont be any issue

1. PR is created as Subcontracting with material code for incoming material M2 (what happens in case the material cost = ZERO material = M2) for which component has gone out as M1 and comes back from subcontracting vendor as M2.

ow come material cost be zero? Still sobcontractor will be paid for subcontracting charges and material cost will be increased by this value n material master if moving average is used, otehrwise, it wil got to PDF account.

1. Outgoing material M1  is issued  to SC vendor using standard Mvt type(561).

561 is for initial uploads, so not possible to issue material to subcontractor using 561, you have to use 541

1. Can 57F4 document be manually created while component is going out or has to be necessarily thru SAP ?

57F4  need to be done through SAP, however you always have option of manually doing it and maintaining manual copy as well.

1. What is the transaction used to track material issued to SC vendor through standard SAP report for tracking “elapsed “ period

ME2O and ME2ON

1. GRN of incoming material M2 is made with material code M2 & follows std. process of Quality Management.  Does the vendor have to return the material with 57F4 back?

Yes, register needs to be updated based on GRN date.

1. How costing module is affected ? How are various A/Cing entries are generated at various stage?

Look for SDN for subcontracting accounting entries. At the time of GR therre are 6 accounting entries - 2 for issued material , 2 for received material and 2 normal GR entries. At the time of IR, normal Vendor acct Dr and GR account Cr entries will be generated.

1. What happens if the  material M1 is NOT given out from the client premises but comes back as incoming material M2. Is 57F$ reqd in such cases and if YES,who will make the 57F4 document ?

What do you mean by this. It means that you are not providing any material to subcontractor?

Howcome subcontractor giving you M2 without receiving M1. In other case you need to allow subcontractor to procure it for you, let him enjoy excise Modvat, you need not have to worry about 57F4.

Hope your issues are answered.

[Former Member]

Guys any more update of this Query

Many Thanks

[Former Member]

Defination

Procurment preocess in which manufacturing process or part of manufacturing process is outsourced due to manufacturing or capacity constraint wherein basic in put material is provided to out sourcing party  refered as subcontractor.

Overview                                 

1. When you issue materials to a subcontractor, you need to keep track of what materials you have issued and when they have to be returned by through subcontracting challan.
2. The challan is also widely know as the 57 f4 challan after the law under which it was defined up until 2000 budget this law has been superceded by new one, 57ac.
3. The reason for this close monitoring has to do with indiau2019s tax law. Under excise law 57ac, when you send materials to a subcontractor for processing, you are not required to pay any excise duty, even though the materials have left your premises & good receipt of subcontracing material is also with zero tax.
4. However, if the materials have not been returned to you within a given length of time specified by the law (in 2000, 180 days), you will have to reverse any excise credit that you posted when you purchased the materials (see completion, reversal, and reaccredit).
5. In the case of materials that you have manufactured in-house, you will have to post credit entries to the extent of the cenvat rate of the assessable value of the materials
6. 57 fc challan print out consisit of two parts part i & part ii.in good prctices four print out with diffrant colour codification is taken out

  A.      Red: subcontractor copy   

B.      Green: excise copy returned by subcontractor duly signed & stamped after total subcontracting material is sent back

C.      Yellow: material acknoledgement copy for transporter.

D.      White: reference copy for material issuing store.

Sap

Process flow

Maintain material master for incoming material

1. In’ mrp 2’ view maintain special procurment flag 30 along with procurment type' f 'for header level item.
2. In accounting 1 tab maintain price control’s’
3. Cin master data ‘t code j1id’: maintain below settings.
4. Enter material part nos., plant, chapter id, sucontractor indicator, material type and gr reference.
5. Maintain assessable value for supplied material. This value is refered to print material value in 57 f4 print out
6. Maintain modvat determination table.enter plant input material and out material.
7. Maintain bill of material for header level mateal

              t code cs01 with valid from date six month back.  

8. Maintain info record with info categary subcontracting(t code:me11)

Create po

1.       Vendor no,pur org,p group, co code     

2.       Item categary ‘l subcontracting’

3.       Plant ,storage l  

4.       Tax code     : v0 as for subcontracting tax involved is 0

Material post to vendor account

1.       To post materail to vendor account movement type ‘541’is used.

This actvity can be done in three different transction codes.{ migo,mb1b         and me2o}

2.       Go to transction j1if01 – create

Enter: material document no( created for 541 movement), year, excise group, series group & press enter.   Tick print immediately tick {which can be seen in posting tab when we scroll down.} & save the document.

3.       We get document no (57f4 challan no) & priount out for same.          

4.       We can view stock details in below transctions.

T code: mmbe {stock at subcontractor}

5.       T code: mblb {stock at subcontractor}.with this t code we can view stock value with subcontractor.in sap stock at subcontractor is owened by the plant & have same valuation price as plant there in no fi document is created during stock transfer.{ movement type 541}.

6.       Report {t code: j1ifr}.we can see 57 f4 challan listing, details & status in the report ‘j1ifr’.we can get the list as per requirment with he help of detailed selection criteria.

Make good receipt: t code migo

[trans/event good receipt, reference document purchase order & movement type 101.]

1. Enter po no, document date {delivery challan/invoice date}, delivery notr no {delivry challan no/invoice no},
2. Enter quantity received, item ok indicator & enter.
3. Go to excise tab select {13 refer subcontracting challan} tab & press

  More data for excise invoice window pop up.here we can refer 57 f4 chllan no against which we have received the material & year of the challan  

1. Go to item detail row & press tab .this will open second row giving input material detail.here ensure qty ok tick. 
2. Check the document & save.

  Reconciliation enter t code j1ifq  

Enter material document no (good receipt no), material document year,57f4 challan no,57f4 challan year & press

3. Verify item details & press allocation tab .this will allocte input material qty in assigned quantity tab.
4. Save the document.we will get message as below

  Material document 5000003716 2012 was successfully reconciled  

5.       After reconsilation if we see the status of 57f4 challan in repost ‘t code: j1ifr’,it shows status either fully rec. Or assigned depending upon material receipt i.e. Full receipt or part receipt.

6.       After status fully rec we have to complete the 57f4 challn in sap system.

7. Enter transction j1if13 - complete/ reverse/ recredit ( t code:j1if13)

Regarding accounting entries I suggest you to go through one complete cycle in SAP oterwise you will not knw it in complete

Regards

Gadgil D.R.

[JL23]

a text item in a Bom is not considered in purchasing subcontract scenario.

you cannot have any costs for a text item, nor can you move a text item with SAP movements without reference.

561 movement is initial stock entry, which is supposed to be used just at go-live date and not anytime beyond.

561 is certainly not a movement to transfer goods to a subcontractor.

[Former Member]

Hi

Any more update please share

THx....

[Former Member]

Hi,

BOM material = M2

Sub componentes = M1

   CS01 create BOM material, here you maintain sub componentes,

sub componentes items stock avilable your plants send material your SC vendor 541 movement type based you send sub components your sub contracter,

other vise recive Incial stock with 561 mov.type send material SC vendor through 541 mov.type.

In ME2O you find the SC vendor avilable stock.

   Rise PO that BOM material,  & Recive GR