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In third-party process the delivery of the goods required by the customer is not done by sales organization where customer orders. Instead, the request of the goods is forwarded to an external vendor who sends the material directly to the customer.

Here is what happens in third-party process:

  1. Customer orders goods and a sales order is created in a sales organization
  2. Purchase requisition is created automatically when sales order is saved.
  3. Purchase order is created at the vendor in the MM purchasing application (manually or automatically)
  4. If the vendor does the outbound delivery to the customer, the goods receipt can be posted in the system
  5. Invoice receipt is created (invoice from vendor)
  6. Invoice to customer is created (order based invoice)

SALES ORDER

Third-party process is triggered when the sales order with third-party item is created. Depending on settings done in customization third-party item categories can be automatically determined by the system (automatic third-party processing) or they can be changed from standard item to third-party item category in sales order (manual third-party processing).

Sales order type used for third-party – OR (standard order)

Item category for third-party – TAS

Schedule line category for third-party – CS

Let’s look deeper into the settings in the system done for automatic and standard third-party process:

ITEM CATEGORY TAS:

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Create PO Automatic indicator is not marked in TAS. ALES is an item category for third-party processing where this indicator is marked.

ITEM CATEGORY DETERMINATION

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Item category TAS will be determined automatically for standard order (OR) and item category group BANS (third-party item). Item category group can be found in material master, Sales: Sales org.2 view.

SCHEDULE LINE CATEGORY CS

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Data: Order type = NB, Item Category = 5 and Acct.AssgntCat  = X is the data for Purchase requisition. If it is filled like above the purchasing requisition will be created automatically as standard purchasing requisition (NB), with item category S and acc.assign cat X. The mapping of item category (from 5 to S) can be found in IMG:  MM->Purchasing->Define External Representation of item categories. The definition of account assignment category can be found in IMG: MM->Purchasing->Account assignment->Maintain acc.***. categories

SCHEDULE LINE CATEGORY DETERMINATION  

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THIRD-PARTY PURCHASE REQUISITION

After saving sales order with item category TAS the purchase requisition is automatically created. In order to see the document go to: Environment -> Status overview and expand data for item, then expand data for purchase requisition as well:

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Double click on the requisition number and you will be taken to the purchase requisition document. The other way is to go to schedule line where you can find the purchase requisition number.

If third-party item has more than one schedule line with confirmed quantity > 0, then purchase requisition is created for each schedule line.

It is wise to have the vendor determined in source of supply at this stage of the process (i.e. source list)

MANUAL PURCHASE ORDER

The purchase requisition needs to be converted into purchase order in MM (t-code me21n). The purchase order document type is NB (standard order), item category S, that must be assigned to account. Thus account assignment category needs to be given. In this example it is X (automatically taken during conversion from purchase requisition, as it was defined in item category CS).

The definition of acct assignment category can be found in IMG: MM->Purchasing->Account assignment->Maintain acc.***. categories:

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Note: There is also a third-party account assignment category created in the system and its definition looks as follows:

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The mapping of item categories: IMG:  MM->Purchasing->Define External Representation of item categories:

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AUTOMATIC PURCHASE ORDER

As it was written before – the purchase requisition is created automatically when sales order is saved. It is possible to automatize the next step, the creation of purchase order, as well. The ALE function is used for that purpose.  The indicator for the automatic creation of purchase order is not set for TAS item category. However, there is a special item category – ALES which can be used instead in third-party process. The indicator for the automatic creation of purchase order is marked in ALES by default.

Prerequisites for the automatic creation of purchase order are as follows:

  • The indicator automatic purchase order needs to be marked in item category definition (item category ALES has it by default)
  • Unique source of supply needs to exist for third-party item
  • At least the document type for the purchase order must be assigned for Sales organization in customizing under Enterprise structure->Definition->SD->Define, copy, delete, check sales organization

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If all above prerequisites are set up correctly, purchase order will be created when sales order is saved. Then, it can be found in document flow in sales order.

GOODS RECEIPT

Since during third-party processing goods are moved directly from the vendor to the customer, inventory management is not affected by this event. However, if sales department would like to document and enter delivery to the customer in the system it is possible depending on settings in customization. If account assignment category 1 is used in item category definition, goods receipt is not possible, as the goods receipt indicator is not set for this account assignment cat. If account assignment category X is used, goods receipt is possible.

The goods receipt posting (t-code migo) would have the following effects:

  • The warehouse stock is not updated
  • The goods receipt is posted directly to consumption and the consumption quantity is updated
  • The order value is posted to a GR/IR clearing account for invoice verification purposes
  • The goods receipt can be traced in the purchase order history

The goods receipt posting should happen when the vendor reports that outbound delivery was executed or customer confirms that delivery arrives.

Since no flow of goods occurs in the enterprise, the goods receipt posting results in updates on value basis.

INVOICE RECEIPT

The invoice verification with reference to purchase order needs to be created when invoice from vendor arrives to enterprise (t-code miro). The value and, if goods receipt was done earlier, the quantity are proposed by the system. When the incoming invoice is posted following are updated:

  • Purchase order history
  • G/L  accounts
  • The vendor account in subledger accounting, as well as the liabilities account (general ledger)

CUSTOMER BILLING DOCUMENT

Once invoice receipt has been entered, the customer can be billed as well (t-code vf01). Since an outbound delivery doesn’t exist for the third-party the invoicing will be order based. In the item category TAS definition, the billing relevance indicator is set to F by default. That means: relevant for order-related billing document: status according to invoice receipt quantity. That is, the system allows invoicing the order only when vendor’s invoice has been processed in invoice verification.

The customer invoice is created for the quantity specified in the vendor invoice. The setting in the copy control for the third-party item category from sales document to billing document specifies that the quantity from the invoice receipt is transferred to the billing document instead of the order quantity (billing quantity indicator in copy control is F)

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36 Comments

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  1. Tomasz Domanski

    Does this work in std SAP with different MM setups eg. Scheduling Agreement w. Delivery Schedule instead of Purchase Requisition + Purchase Order? Have you tried this one also?

    (0) 
    1. Joanna Gawelczyk Post author

      Hi,

       

      It is not possible to choose other “order type” than purchasing requisition type in schedule line category (purch. doc. cat. = B), so you cannot have the scheduling agreement w. delivery schedule instead of Purchase Requisition + Purchase Order. However, it is possible to create scheduling agreement with reference to the purchasing requisition that is created when Sales order is saved. In such situation, you have scheduling agreement number in Sales order history. Unfortunately, you cannot use ALE function for automatic creation of this scheduling agreement, as in Sales organization definition you can choose only purchase order type (purch. doc. cat. = F).

       

      As far as I know, there is an additional solution from SAP – ACS (Automotive Consulting Solution) that makes the third-party process with scheduling agreements (on both, SD and MM sides) possible. For more info, please, check the links:

       

      http://www.sap.com/germany/campaigns/2010-10-automotive-acs/en/resources/index.epx?tab=sales

      http://www.saptechies.com/thirdparty-order-processing-scheduling-agreements-633503/

       

      Regards,

      J.

      (0) 
  2. Sriram D

    Jonna,

     

    Wow your post is quite good and informative.

     

    I have a scenario

    Think that we are good and done upto invoice. If the vendor does the delay at sending the invoice to the enterprise what do u recommend in this scenario?? If the enterprise delay in posting the invoice to the customer, you know the consequence..

     

    i heard about Advance Shipment Notification ?? have you configured this ?? if so could you please explain this as well..

     

    Sriram.

    (0) 
    1. Joanna Gawelczyk Post author

      Hi Siriam,

       

      As you can read in my blog above, the billing relevance indicator is set to F by default in item category TAS. That means: relevant for order-related billing document: status according to invoice receipt quantity. That is, the system allows invoicing the order only when vendor’s invoice has been processed in invoice verification. Of course it’s the standard setting. As I understand, your enterprise would want to have the possibility of creation the customer invoice irrespective of invoice receipt. If you change this indicator (i.e. for B – Relevant for order-related billing – status acc.to order qty) it is possible to create customer invoice before invoice receipt. I would suggest to test this on your test environment and check if that is suitable for you.

       

      Unfortunately, I don’t know ASN and have never configured that process.

       

      Best regards,

      J.

      (0) 
      1. venu gopal

        Dear Joanna

         

        I found one thing in some links ,, ex:suppose if i created 100 qnty in sales order and in Me21n ( po) if i changed qnty automatically it will reflect in sales order

        but if we changed in sales order level but it wont reflect in PO PLZ comment on this

        plz check this links

        http://help.sap.com/saphelp_erp60_sp/helpdata/en/dd/5602c8545a11d1a7020000e829fd11/content.htm

        http://scn.sap.com/thread/3176487

        http://scn.sap.com/thread/1839363

         

        Thanks a lot

        (0) 
        1. Joanna Gawelczyk Post author

          Hi,

           

          I have checked the change order quantity case and my comments are as follows:

           

          1) ALE scenario (when the PO is created automatically when you save the SO) – if I do the change in qty in Sales order it is populated to purchase requisition and also PO is updated.

          2) Manual PO creation – if I do the change in qty in Sales order it is populated to purchase requisition but PO is NOT updated.

           

          Unfortunately, in both scenarios – if I do the change in PO it is not populated to SO/PR (only the confirmed qty changes). I don’t know the reason but in your links it states that it should work… Maybe some note would be helpful (as discussed in the second link you gave).

           

          I especially suggest reading the note: http://www.stechno.net/sap-notes.html?view=sapnote&id=550192 some helpful things are described there.

           

          BR,

          Joanna

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          1. Iqbal Ahmed

            Hi Joanna

             

            Can u tell me If i change Something in PO then how its automatically update in Sales Order. Where is the Control?

            I tried a lot but i could not find the reason.

             

            Thanks n Regards

            Iqbal

            (0) 
        2. Shiva krishna

          Hi Venu,

           

          For sales order if you want to change the quantity and the same changes if you needed then to any increase in qty u need to add 1 more line item with the same material and you can see with these effects in p.o.

          (0) 
  3. Jignesh Mehta

    Good document Joanna, thank you for sharing, specially the details of Account Assignment Category and automatic Purchase Order.

     

    Just a comment, I believe in Item Category TAS, is the Billing Relevance is set to G, while creating Customer Invoice, system will refer to quantity from MIGO (Statistical Good Receipt) and not MIRO (Invoice Verification).

     

    Thanks,

    Jignesh Mehta

    (0) 
    1. SAP Light

      Hi

       

      Billing relevance G will be configured in the Third Party Process With Shipping Notification (the other one being Without Shipping Notification) which is, if the vendor delays sending the Invoice then the business asks the vendor to send the shipping notification instead. When the Billing relevance is G, the system wont allow creation of Customer Invoice without MIGO.

       

      And in the copy control of OR to F2, at the Item level the Billing Qty is configured as E. This E here ensure that wile creation of the Cust Invoice the qty. is copied from MIGO .

       

      But as a standard, the Billing Relevance is F,as mentioned in the doc.

       

      These are my 2 cents. Hopefully, useful.

       

      Joanna, please correct me if i am wrong.

       

       

      SAP

      (0) 
  4. Atul Keshav

    Excellent Blog Joanna, I have one question with regards to goods receipt which you posted in the blog

     

    If account assignment category 1 is used in item category definition, goods receipt is not possible, as the goods receipt indicator is not set for this account assignment cat. If account assignment category X is used, goods receipt is possible.

     

    I could not find 1 anywhere in the schedule line category CS or the Item Categor TAS. Where can I find the indicator 1. Appreciate if you could let me know

     

    Kind Regards

    Atul

    (0) 
    1. Joanna Gawelczyk Post author

      Hi!

       

      Thank you

       

      As you know the acc assignment actegory is in item category definition. And there are the options you can choose. As you write there is X used for CS and TAS, but you can change it to 1:

       

      /wp-content/uploads/2016/01/2016_01_08_11_49_58_864284.jpg

       

      I hope it’s clear.

       

      Best regards,

      Joanna

      (0) 
      1. gur alper

        Hello Joanna,

         

        Thanks for the clear info. I actually configured all. It works actually for material with good receipt. But for the materials without good receipt, MIRO generates the error “No (suitable) item found for purchase order”

         

        Is there something we are missing?

         

        Actually all is corrent in PO. as it is not a GR-bsd IV.

         

        Screen Shot 2016-05-04 at 15.10.33.png

        but getting the error “M8035 – No (suitable) item found for purchase order xxx”

         

        Thanks for your comments

         

        G.A.

        (0) 
  5. Srinivas Kari

    Great article Joanna.

    One doubt : If we create a sales order for 100 qty and the vendor delivers 50 qty but still sends an invoice of 100 qty, how will we know how much the vendor has actually delivered?

    In shipping notification, the vendor sends a notification that the material has been shipped. However, there is no confirmation from the ship to party that the material has been delivered.

    (0) 
    1. San Sam

      Hi Srinivas,

       

      When MIGO is done, it will identify the qty delivered. But in case  of  No GoodsReceipt,I am not sure  how  it can be  handled. Here we need to rely on vendor.

       

      But if  business need to bill after  Goods  received by customer, then EDI customization required  .  But this is also the same  case  in Normal sales cycle.  After goods issue in system we  are able to invoice..  There is no check if customer  received the materials.

       

      I hope  I understood your  question and answers  as per  my understanding.

       

      Thanks

      SS

      (0) 
  6. Hanna Cieslik

    Joanna,

    for the automatic PO creation, I have maintained the data as you specified:

    Prerequisites for the automatic creation of purchase order are as follows:

    • The indicator automatic purchase order needs to be marked in item category definition (item category ALES has it by default)
    • Unique source of supply needs to exist for third-party item (PIR and a source list with marking fixed)
    • At least the document type for the purchase order must be assigned for Sales organization in customizing underEnterprise structure->Definition->SD->Define, copy, delete, check sales organization

    However, the system is not creating a PO, it is still creating a PR.

    There is no error message or warning.

    Would you be able to advise?

    Thank you,

    Hanna

    (0) 
  7. Stéphane HENRY

    Hi all,

    what if the vendor is in the same sap system ? Is there a way to have an intercompany PR (then PO) in this process ? (ie NB type but with intercompany sto).
    I expect to have issues with goods movement (outbound delivery on intercompany sto + goods issue), but it’s worth to test it.

    Have you ever tried ?

    PS: very clear article by the way, thanks !

    (0) 
  8. Raj kumar

    Hi,

    Very nice document. I have a query on auto PO creation.

    If we tick checkbox “Create PO Automatic” in item category TAS instead of item category ALES and maintain the below 2 prerequisites, then will system not generate Auto PO when item category is TAS in the sales order ?

    • Unique source of supply needs to exist for third-party item
    • At least the document type for the purchase order must be assigned for Sales organization in customizing under Enterprise structure->Definition->SD->Define, copy, delete, check sales organization

    Unfortunately, I don’t have access to SAP system and cannot try the same. Hence asking this query. 

    Br,

    Raj.

    (0) 
  9. Arriaga Ana

    Hi Joanna,

    Have you ever worked with third party scenario purchasing services instead of goods? we have this one case where SD sales a service that a third party performs. So, in order to provide the service we need the PO to that vendor.

    thanks in advance,

    Ana

    (0) 

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