Integrated MM sub-contracting process and benefits of S/4 HANA master data simplification

Since professional shipping in SAP S/4 HANA Supply Chain for Transportation Management (embedded TM) has additional license cost, it is necessary to understand the benefits it offers, while resolving various business problems/issues in transportation process. Last two blogs (event driven charge calculation and resolution of ‘cubing-out/gross out’ problems) focus mostly on standalone transportation issues. However, with S/4 HANA simplification, we have advantages in designing integrated business process scenarios. This blog focuses on transportation process during the sub-contracting, where S/4 HANA business partner simplification along with professional shipping functionality, plays a major role in consolidation and cost reduction.

Subcontracting is the practice of assigning part of the obligations and tasks under a contract to another party known as a subcontractor. In manufacturing process, rather than manufacturing all the products inside the plant, some of the production are sub-contracted to vendors.

Subcontracting (in manufacturing) involves providing the sub-contractor (Vendor) with components from which finished/semi-finished product is manufactured. The finished/semi-finished goods will be transported back to the manufacturing plant, another plant of the manufacturer, specific storage location/warehouse, end customer, another vendor/sub-contractor etc. Since components are manufactured and sent to the sub-contractor (vendor), its is critical to manage the inventory along with visibility of stock status. Also, transportation of these products is important and there is high potential for consolidation of various orders.