Third-party process overview

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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.

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

Item category for third-party – TAS

Schedule line category for third-party – CS

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:

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

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:
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:

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
 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.

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)