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Third-party process overview

June 8, 2013 | 36,036 Views |

Joanna Gawelczyk
more by this author

SD (Sales and Distribution)

SAP ERP | enterprise resource planning | order | sap erp sales and distribution | sd | third-party

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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.

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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

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

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:

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:

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

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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

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.

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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)

Alert Moderator

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36 Comments
You must be Logged on to comment or reply to a post.

Tomasz Domanski

June 10, 2013 at 9:54 am

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?

Joanna Gawelczyk Post author

June 10, 2013 at 3:24 pm

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

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

Regards,

J.

Sundar S

February 27, 2014 at 1:28 pm

Good Job Joanna, keep it up

Karuna Ravuri

July 1, 2013 at 11:30 am

Joanna,

helpful one..

Joanna Gawelczyk Post author

July 9, 2013 at 2:18 pm

Thanks!

Khushi Mughal

September 8, 2013 at 1:01 pm

I have enjoyed and learnt from your blogs.

Keep posting…

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venu gopal

September 9, 2013 at 4:38 am

Hai thanks a lot for sharing this

Naresh Krishnamoorthy

September 9, 2013 at 5:59 am

Good One…Thanks.

Best Regards,

Naresh K.

Joanna Gawelczyk Post author

September 19, 2013 at 6:27 pm

Thank you all!

Iqbal Ahmed

July 2, 2015 at 11:18 am

Thanks Joanna

Its really valuable information related to Third Party

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Sriram D

September 20, 2013 at 8:19 am

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.

Joanna Gawelczyk Post author

September 24, 2013 at 6:51 pm

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.

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

Best regards,

J.

venu gopal

September 25, 2013 at 1:57 am

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/5602c8
545a11d1a7020000e829fd11/content.htm

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

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

Thanks a lot

Joanna Gawelczyk Post author

October 18, 2013 at 9:41 am

Hi,

I have checked the change order quantity case

and my comments are as follows:

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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

Iqbal Ahmed

July 2, 2015 at 11:23 am

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

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Iqbal

Shiva krishna

June 4, 2015 at 5:55 pm

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.

Aniruddha Tripathy

April 17, 2015 at 9:13 pm

Nice Document, Thanks for sharing.

Jignesh Mehta

May 4, 2015 at 7:56 am

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

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SAP Light

May 11, 2015 at 1:17 pm

Hi

Billing relevance G will be configured in the Third Party Process With

Shipping Noti cation (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

Joanna Gawelczyk Post author

May 18, 2015 at 6:15 pm

Hi SAP Light,

yes, I believe what you wrote is true. Thanks for your

comment!

Regards,
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J.

Maulik Bhavsar

May 29, 2015 at 10:08 am

Useful document and detailed insight in process.

thx.

Sourabh Panditrao

July 17, 2015 at 8:53 pm

Good information , easy to understand

Parag Pandya

September 5, 2015 at 9:45 am

Wow, This is very helpful….its one stop information….

Thank You and keep it up.

Regards

Parag Pandya

Atul Keshav

January 8, 2016 at 9:56 am

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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

Joanna Gawelczyk Post author

January 8, 2016 at 10:50 am

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:

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I hope it’s clear.

Best regards,

Joanna

Atul Keshav

January 8, 2016 at 11:36 am

Hi Joanna,

Thank you very much yes the issue stands resolved.

Kind Regards

Atul

gur alper

May 4, 2016 at 1:11 pm

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.

but getting the error “M8035 – No (suitable) item found for

purchase order xxx”
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Thanks for your comments

G.A.

Srinivas Kari

January 12, 2016 at 2:10 pm

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.

San Sam

May 19, 2016 at 2:19 am

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

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SS

Noormahammad Amingad

January 30, 2016 at 5:54 am

Very use full…

Hanna Cieslik

April 26, 2016 at 4:00 pm

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

Stéphane HENRY

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October 12, 2016 at 10:39 pm

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 !

Adam Czubek

October 14, 2016 at 12:30 pm

Very useful, thanks Asia

Raj kumar

December 12, 2016 at 9:25 pm

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.

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Arriaga Ana

April 5, 2017 at 1:02 pm

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

Nagarajan Naga

May 30, 2017 at 4:41 am

Hi Really it is a good document

Thanks

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