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Question : Subject : Materials provided by customers


Does anybody know how to handle the production with components provided by customer ? We're on 4.0B.

The case is like that ;

Our customer will provide the necessary components and we will keep them in our stock area. So there
will be GR but without any valuation. Later on we will produce the product with these components and
labour will be the only added value at our side. At the end there will be GI for the components and
GR for the produced material with reference to production order. Finally delivery, GI and invoicing
will be carried for the product. This is a case similar to subcontracting.

1. Which type of material should we use for the materials provided by customer?
2. Is there any standart movement type for GR of the materials provided by customer ? If so, what's it ?
3. What's the function of the indicator for material provision (type K) in BOM ?

Any help or suggestion will be greatly appreciated.


Answer : Subject : Materials provided by customers

We have an identical case to the one that you describe.  Since I am not a PP Specialist, I cannot answer your question #3.

We use a slightly modified version of UNBW (non-valued) Material Type.
We perform a movement type 501 to bring these materials in.
We use the standard 261 Movement Type to post the goods issues in the production order.

Good Luck,

Answer : Subject : Materials provided by customers

How would you handle this situation if the same material can either be provided by the customer
or can be your own. Then you have the same material which needs to be valuated if it is your
own and not valuated if it is the customer.


Answer : Subject : Materials provided by customers

Thanks for your instant response.
But, I have forgotten to mention that we need to see the inventory of these materials customer
based, just like customer consignment stocks, in stock overview (MMBE). Is this possible ?

Thanks in advance,

Answer : Subject : Materials provided by customers

Since one material is valuated and will use a valuated Material Type and the other one is non-valuated and will use UNBW or another non-valuated Material Type, you must create 2 material masters, even though it is the same substance.

Answer : Subject : Materials provided by customers

Hi :

You could experiment with different stock categories.  I do not have access to an SAP System at the moment, and so I don't know which Stock Categories are associated with the 501 Movement Type.  This is tricky, and would likely cause more effort than it is worth.

Otherwise, the simple (yet effective) solution, would be to manage all of these materials in a separate Storage Location.  This way you always have a complete overview, of which materials are on stock for that customer.

I hope that this helps.

Answer : Subject : Materials provided by customers


The Material Provided by Customer can be handled by using the Material Provision Indicator 'K' in BOM. BUT THIS IS NOT CURRENTLY ACTIVE. The standard practice is to get this material in stock and then perform goods movement as any other material.

Answer : Subject : Materials provided by customers

Hi there,

It is not necessary to have two different materials, you can use one material with split valuation.

With a new valuation category with two valuation types (own stock and customer stock), you can maintain one valuated material. In the 'own stock' valuation type you could have a standard or moving average price as normal, and for the 'customer stock' valuation type you could have a standard price of zero. The valuation area (normally the plant) will then show the average of the two valuations ...

The drawback to split valuation is that you have to enter the valuation type into the batch field when you perform any inventory management transaction.

If you are already using batch management then you only need use valuation category X, which would drive the valuation down to the batch level (all customer batches = zero price again)

Kind regards

Answer : Subject : Materials provided by customers

Thanks for the lesson about split valuation.  Please tell us why you would use a Material Type like HAWA or FERT which is valuated for a non-valuated material, which is what they want.

Split valuation has other drawbacks like the fact that it creates inconsistencies in COPA.

If they want a REAL non-valuated material and a standard valuated material, then this is defined at Material Type level, and split valuation only works for a 2 materials within the same Material Type.

I doubt that they would want to create FI documents for a non-valuated material (even with zero value G/L Postings), which is what would happen with your proposed solution.

Of course, within SAP there is almost always more than one solution to any business requirement, and finally it depends on their preference.

I do not believe that split valuation is a viable solution for this case, if I correctly understood what Murthy was asking for.

Answer : Subject : Materials provided by customers

I will gladly explain why I was recommending a valuated material type for a master that could be stocked in different states/values.

I was responding to Murthy Sivan's question about how to cope with a material that could be provided by themselves and by the customer. In this case, there is only one material but in two different conditions - one condition has a value and the other condition does not. If you only want one material master, then you have to have a material type that allows you to
stock valuated material and use split valuation to force the other condition to zero.

As for FI documents with a posting for a zero value - I think this is a small price to pay (pun intended) for a logistics process that simulates reality.

In addition, in my experience there is normally a big push back from the client about multiple material numbers for the same material.

I'm not certain what your understanding of the question is because in your first answer you stated that there was only one substance but a need for two material masters. I disagree with this statement. One material and two values (even if one of these values is zero) can be achieved with split valuation. From my point of view, in the case where there are multiple values for the same material, split valuation is a viable option.

Kind regards

Answer : Subject : Materials provided by customers

Fair enough!!  I still agree to disagree, but as I said before, in SAP there are normally at least 2 viable solutions for any business requirement.

When I referred to one substance, I meant, one physical substance, which I realize is not a standard SAP term, in order to differentiate the fact that I was talking about 2 material masters for the same physical material (substance).

Its true that double materials are generally to be avoided, but in my experience with exactly the same situation, my customer opted to have a 2nd non-valuated material.  Maybe in Murthy's case, they will opt for another way.

At least we are offering 2 viable solutions, either of which would work within this process.

Have Fun!!

Answer : Subject : Materials provided by customers

We dealt with this issue a few months back and I wish I had you guys to bounce this with at that time.

To better explain the issue, our Customer may sometimes ask us to "store/manage" a material for a period of time. In most cases, we charge a small fee for the service. We could be using the same material to satisfy Demand from other customers. The stock is all comingled and the main reason why Customers ask us to store, we ensure that there is good rotation of stock all the time and stock stays fresh at the same time ensuring the customer that there stock is always there ready when they need it.

We looked at several options, multiple storage locations, split valuation and some more interesting solutions. (We did not look at 2 material masters with different material types).

This is what we have gone with ...

We have created these customers who want their stock consigned at our warehouse as dummy vendors. We store the stock as vendor consigned in our plants. When the customer requests their stock, through EDI a special kind of Sales Order is created. This initiates a 411K movement to transfer stock from vendor consigned to our inventory. To ensure that there is no payable to the dummy vendor, we have modified config so that it hits offsetting AP adjustment transactions - meaning a credit and debit to AP adjustments.

We then generate the billing document to close the Sales order. A lot of times we "buy" the stock from the customer to manage surges in inventory and vice versa. In these instances, the sales order is blocked for delivery and we actually issue a credit memo to pay the Customer using a Return type Sales Order.

We have not gone live and it should be interesting to see how all this will work. I am not exactly part of the team but have been involved in some of the discussions.

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