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Subcontracting in Business ByDesign

Many of you are already aware that sub-contracting business scenario is a part of our larger product map and we plan to release the complete scope of subcontracting in future release of ByDesign. Until the functionality is available you can use the work around mentioned here to implement subcontracting in Business ByDesign. Please note the below mentioned method is only a work around.


  • Finished Good is produced at your subcontractor.
  • Raw materials are supplied by the company.

Master Data Settings:

  • Create a site in your system which will denote your subcontractor. I have assigned  created a new org unit with ID C1100  as you can see in the screen shot below.

  • Mark the Site C1100 as Logistics Relevant so that the planning area is active as well.

  • Once the subcontracting site is configured create two transport lanes connecting Main Site and the Subcontracting site. One lane should have Ship-From site as Main Site(P1100) and the Ship-To site as Subcontracting site (C1100). The second lane should have Ship-From site as Subcontracting site (C1100) and the Ship-To site as Main Site (P1100). These transport lanes will be used to ship the components to the subcontracting site and to ship finished product from subcontracting site.

  • The Planning tab of the Final Product should be maintained as follows. Procurement type for Planning area P1100 should be Internal Procurement and for Planning Area C1100 should be In-house Production.

  • The Planning tab settings for the raw materials in the planning area C1100 should have Procurement Type as Internal Procurement.  In the planning area P1100 you can have the Procurement Type as either External Procurement or In-house Production depending on your business use case. I have maintained as External Procurement in this particular example.

  • Create a Production Bill of Material and Production Model for the site C1100. I have used the below configuration for the BoM in this scenario.
    • Output Product: MSCM_SUB
    • Input Products : SUB_RAW_MATERIAL_01 and SUB_RAW_MATERIAL_02

Pre-existing condition:

  • We have a demand of 5 qty for the product MSCM_SUB via a sales order. The product is shipped from our main site P1100.

Business Scenario Execution:

  • Execute MRP for the Product MSCM_SUB for the planning area P1100. You can see that the system will create Supply via Stock transfer proposal to be shipped from C1100.

  • Now, for the product MSCM_SUB, there will be a Stock Transfer dependent demand at the subcontracting site C1100. If you execute MRP for for the MSCM_SUB in C1100, the system will create a Production Proposal. There will be dependant demand for the raw materials “SUB_RAW_MATERIAL_01” and “SUB_RAW_MATERIAL_02” .

  • Execute MRP for the raw-materials SUB_RAW_MATERIAL_01 and SUB_RAW_MATERIAL_02 at the site C1100. Stock transfer proposals will be created for the products.

  • If the main site P1100 has stock of the item the components/ raw materials will be supplied to the subcontractor via the above created stock transfer proposals. If not on executing MRP for the raw materials at site P1100, the system will create supply as per the Procurement Type maintained for the planning area P1100 for the above components.
  • Once the components are available at the subcontractor via the stock transfer proposals, the production proposal can be executed and production completed for the finished goods MSCM_SUB.
  • Once the production is completed the final product will be supplied back to the main site P1100 via the stock transfer proposal that was created at the site initially.

The above steps will take care of the logistics part of your subcontracting process.

Payment to Subcontractor:

To pay the subcontractor you will have to create a purchase order with service item with your subcontractor as the supplier. You can create a supplier invoice against this purchase order and pay the subcontractor as per your agreement.

The above steps will help you execute the work around for subcontracting business process in your ByD system. Please do reach out to me via the comments section for any more queries on the same.


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  • Sir, how do you difine the BOM and routing of the product MSCM_SUB?  How to deal with the production proposal of C1100? To create production order?

    • Hi Jackson,

      You can create the BoM as you create the BoM in any normal production site of yours. The components used in the BoM are the ones which will be supplied by your company to the Subcontractor. Of-course you will have to have a main resource maintained, the variable/Fixed duration updated etc in the BoM for C1100.

      Once the production proposal is created you can use the Release button available to release the production proposal into a Production Request. You can create your production orders from the production request as well.

      I hope this clarifies.




      • Hi Anand,

        By doing this as you said, we might get several postings during the raw matrial consumption, resource time confirmation for the production order, which will probably involve Work-in-process account. Work-in-process account has nothing to do with Subcontracting transaction, so accountant will probably not accept this postings. What do you think about this problem? Or you have some ideas to deal with it?

        • The material postings cannot be avoided. However, if you maintain the valuation of the Resources which are being used in the subcontracting site to zero, you might get around the above problem. You can also make sure you don't tag any services with the resource or in the model.

          Finally, the above method will have all the limitations of being a work around :(.




  • Anand

    I think there is a GAP in the process. The flow does not take the cost of the subcontracting service into the cost of the product and thus inventory or into cost of sales. We have solved the problem using 3 part numbers. XXX-C for the coated parent, XXX-S for the cost of the coating service, XXX-U for the uncoated product. The BOM for XXX-C includes both XXX-S and XXX-U. The PO to the coating supplier will be for part XXX-S which is the cost of the coating service. XXX-S is received into inventory and then issued to the production order.

    If you don't include the cost of the service somewhere on the BOM or Production Model, then standard costing is off, inventory valuation is off, cost of sales and gross margins are off.



    • Hi David,

      Thank you for pointing out the issue here and the solution as well. Yes, you are right that the cost of the service should be included in the BoM else the valuation will be off. The gaps in the above work around will be covered when sub-contracting is introduced in ByDesign as a standard functionality. Untill then we can use your work around to cover the cost part in the BoM itself.

      Thanks again.



  • Hi Anand,

    May I know when ByD is going to release sub-contracting business scenario?

    Is there any other workaround for subcontracting costs to be included in the cost of product? Service costs shouldn't be treated as inventory. We had tried to create new account assignment type and assign production order in PO. But it is not working. Do you have any idea on this?





    • Hi DK,

      There is no official due date for when will subcontracting will be provided. However, subcontracting is in our road-map to provide in ByDesign.  Coming to costs , when the above work around is used you will have to create manual JE entreis to work with your costing in the system.



  • Hi Anand,

    Thanks for this blog. I am stuck when we create a production proposal system should create an automated demand for the raw material at sub contractor site. But it doesn't create any. Request you to please help




    • Hi Saurabh,

      If you maintain the configurations as mentioned in the blog the system should create a dependent demand for the raw materials when multi level MRP is run on the main product.

      Is there any difference in the settings you have done ??

    • I will need to see the setting in your system. The BoO/BoM Structure, the master data settings etc.  can you provide me the details of the same ?

      Sorry for my delay in getting back, I was on vacation and jut got back.



    • Hi Daniele,

      There are two sites involved in the above scenario, the internal site and your subcontractor configured as a site. Production Model is always based on a site and hence as long as you have your sub-contractor configured as a site we cannot have the whole process managed by a single production model. I hope this helps.

      However, could you please let me know the business via which you are planning to have this executed via a single production model.



  • How do you execute this if your subcontractor is also your 3PL?  Ideally, i'd like to buy all of the raw materials and have them shipped to the 3PL. Create a production order at the 3PL that contains a service item so that i can also issue them a PO for the subcontract service fee, and then ship the finished good from the 3PL directly to the customer.  If i set up a separate site for the subcontractor, it also needs to be 3PL.  But if it's a 3PL, I can't produce there.  What's the work around? Have 2 sites for the subcontractor? An 'internal' site and the 3PL site?  And then do a stock transfer between the internal site and the 3PL site when the product is produced?  That seems like a lot of work and quite clunky!  Any 'outside the box' ideas??

    • Dear Julie,

      If your subcontractor is also your 3PL warehouse provider , you will have to create a Business Partner for your subcontractor and assign him/her the role of warehouse provider. That means there will be two entities for your subcontractor in the system. One as a warehouse provider and the other as Sub-contracting site, which is externally managed by the warehouse provider.

      The payment for your subcontractor has to be dealt  separate until sub-contracting is released as a standard functionality in ByD

      Once the above setting is done you should be able to perform the steps mentioned in the blog. Please let me know if this helps.



  • Hello Anand,

    I would like to know how to handle subcontracting process in bydesign  for a trading company.The scenario is explained below:



    • Customer places orders for coated tools to the Client.
    • Client takes the order and sends a standard tool for coating to sub contractor.
    • Once , coating is done , client issues the coated tool to the customer.
    • Service charges are paid to sub contractor for coating

    kindly advise me to capture this process without moving to production process.



  • Hello Anand, Hello Everyone,

    thank You for Your detailed description of the workaround.

    But could you please explain me David Spellman´s solution for integrating the costs of the subcontracting service into the costs of the product (May 23. 2017),

    especially where and how to integrate the subcontractor´s service into the BOM or BOO.


    Thanks a lot in advance for Your help,



  • Hello Anand,  you initially mentioned that this process will eventually make it into OOTB ByD functionality.   Any update here.   Is it on the roadmap ?   Thank you

    • Dear Benoit,

      Please refer the YouTube link here for understanding the future roadmap on subcontracting. You can fast forward to 21:00 and 24:00 to understand an approximate plan of the features that are planned for ByD including subcontracting.

      Apologies for the delay and Happy New year to you.



    • Hi Vishal,

      Not yet. No confirmation on the version at which this will be available has been published/decided yet.



  • Hi Anand,


    we have an issue at customers site, that belongs to the subcontracting scenario in ByD.

    I would like to use the described workaround above but for multiple different subcontractors. So the delivery address will be different. Is there a possibility to change in the delivery address for in the stock transfer order?

    I don't want to create a site for every subcontractor because it would be to much.

    Any thoughts?

    Best regards,


    • Hi Vitus,

      Since you do not want to create multiple site for different sub-contractors, you can try creating Locations under the Sub-contracting site for each subcontractor and see if the location can be changed in the STO that gets created.

      However, this is very crude and you will have to see if it works for all process , including return and cancellations.  I hope this helps, do let me know if it works.



  • Hi Anand Deth G

    I encountered a business scenario: refurbishment.

    1. Returned products from customers; 2. Extruded unsold products in the previous year.

    How to deal with it in SAP ByD?



  • Hi Anand,

    Thanks for your workaround.

    We have a customer need very close to your example, but with one difference, the finished good is directly shipped to clients by the subcontractor.

    Is it possible to do this instead of a stock transfer to the main site ?

    By the way, do you have an update on future roadmap for subcontractor, I could not see this topic yet ?



    • Hi Maxime,

      Sorry for the delay in responding to you. As the subcontractor is maintained as a site in the system, you can choose to

      1. Have the goods not ship back to the main site and create a sales order and use the sub-contracting site as a internal fulfillment center.
      2.  Mark the sub-contracting site for the finished goods to be "Disable for ship from determination" use Third party order processing scenario to ship goods via Supplier (subcontractor) when product needs to be shipped.

      These are just random ideas from me and not specific recommendations from SAP. You can try and check which of the above two options can be feasible for your customer.



  • does SAP ByD have a proper solution for subcontracting now? if so, where do we find the documentation?

    edit: i want to outsource some tasks in my BoO, for example hardening or coating (both suppliers)

  • Hey Anand. The last time I checked in was a little over 3 years ago. Any signs of movement in terms of this topic earning a spot on a roadmap anytime soon? More projects, yet the same requirement for subcontracting. I'm curious why this isn't more of a priority given the interest...

    Appreciate an update.