Subcontracting Process in SAP MM

What is subcontracting process? 

Subcontracting is one of the procurement processes available in MM. In this process, components are shared to vendor to get the final product.

Here i will share one example then you clearly understood the Sub-Contract Process in SAP MM.

Eg: In Production industry to manufacture one product it go's through no.of process to complete the product. In this sequence of operations (1,2,3)imagine we have 3 types of operations and we have equipment only for 1st and 3rd but we don't have facility for 2nd operation then in this type of situations we send Semi finished product (i.e After completion of 1st operation) to external Vendor to process the 2nd operation in their premises and send it back to our's location. After receiving the semi finished material we perform 3rd operation on that material in our plant. Like this we get the Finished Product.

In this process sending Semi finished material to vendor and get it back from vendor is called Sub-Contracting Process. Here we pay money to vendor as Sub-Contracting Charges.

The steps involved to complete this Process are attached below.

In PO  we must select  Item Category as Sub-Contracting (L) in Item Level.