Subcontracting Stock Transfer Order (STO) process

 STO process in  Subcontracting

We are referring to the Subcontracting Stock Transfer Order (STO) process in the context of SAP or a similar ERP system. Subcontracting is a business arrangement where a company sends components or raw materials to a subcontractor (a third-party manufacturer) to have them processed or assembled into finished goods.

Here's a general outline of the Subcontracting Stock Transfer Order process:

Create Purchase Requisition (PR):

A purchase requisition is created to initiate the procurement process. This is usually generated based on the requirements for the components that need to be sent to the subcontractor.

Create Purchase Order (PO):

A purchase order is created based on the purchase requisition. The PO specifies the details of the subcontracting arrangement, including the components to be sent, quantities, delivery dates, and the subcontractor's details.

Goods Issue (GI) - Stock Transfer to Subcontractor:

Before sending the materials to the subcontractor, a goods issue is performed to reduce the stock of the components in the issuing plant. This is done using a stock transport order (STO) to transfer the materials to the subcontractor's stock.

Transportation of Components to Subcontractor:

The components are physically transported to the subcontractor's location. This may involve coordination with a logistics or transportation system.

Goods Receipt (GR) at Subcontractor:

When the subcontractor receives the components, they perform a goods receipt to acknowledge the receipt of the materials into their stock.

Subcontracting Process at Subcontractor's Facility:

The subcontractor processes or assembles the components into finished goods according to the specifications outlined in the purchase order.

Goods Issue (GI) - Finished Goods Transfer:

Once the subcontracting process is complete, the subcontractor issues the finished goods back to the originating plant using a goods issue.

Goods Receipt (GR) - Finished Goods at the Originating Plant:

The originating plant receives the finished goods through a goods receipt, and the stock is updated accordingly.

Invoice Verification (MIRO):

The originating plant performs invoice verification to process the subcontractor's invoice based on the services provided.

Payment to Subcontractor:

The payment is made to the subcontractor based on the terms agreed upon in the purchase order.

This process ensures that the components are sent to the subcontractor, processed into finished goods, and then returned to the originating plant, all while maintaining proper stock and financial records in the ERP system.