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SAP SD-MM
INTEGRATION: THE
THIRD-PARTY PROCESS

Phone/Whatsapp: +1 (515) 309-7846 (USA)

Email: [email protected]
Website: www.zarantech.com
 SAP SD-MM Integration: The Third-Party Process
Scenario 1: -
Most of the companies will not manufacture all the products which they are selling or have
in their product portfolio, they will manufacture some products and for remaining products
they will do third party process.

Scenario 2: -
In some scenarios even though company manufacture the products and if stock is not
available or if there is some problem in manufacturing unit then they go for third party
process.

Third party process: -

when our customer place order for third party material and when we create 3 rd party sales
order in SAP, then system automatically generates PR and PR will be converted to PO
and PO will be send to vendor and vendor delivers the goods to customer and vendor will
send the invoice to company and company will raise invoice to customer.

Without shipping notification in third party process, is a standard third-party process, in

which vendor will send immediate invoice and based on MIRO we raise invoice to
customer.

Phone/Whatsapp: +1 (515) 309-7846 (USA) Email: [email protected]

www.zarantech.com
Third party with shipping notification
We do third party with shipping notification, if vendor is not ready to send the invoice
immediately, if vendor is not sending the invoice, then we cannot raise invoice to customer
because we don’t know that how much quantity vendor has delivered to customer.

In this situation we ask vendor to send shipping notification to the company which consists
of material details and quantity details which vendor has delivered to customer. Then we
can do MIGO in SAP and based on MIGO quantity we raise invoice to customer.

Important points in Third party process: - Item Category TAS

1. For third party material maintain “Item category group” as [BANS] and maintain
material type as ‘HAWA.
Item category group BANS will help to determine item category “TAS‟ in sales
document.
2. Third party item category determination OR + BANS + Blank + Blank = TAS.
3. Billing relevance „F‟ standard. F means order related billing status according to
MIRO.
If we want 3rd party with shipping notification then we maintain billing relevance as
“G‟ and G means order related billing status according to MIGO.
Billing relevance “F‟ controls that in 3rd party w/o shipping notification if MIRO is not
created then system will not allow to create invoice to customer.

Billing relevance “G‟ controls that in third party with shipping notification if MIGO is
not created then system will not allow to create invoice to customer.

Phone/Whatsapp: +1 (515) 309-7846 (USA) Email: [email protected]

www.zarantech.com
 4. Create PO automatically – In standard process of 3rd party when we create sales
order, system automatically generates PR but if we want system to generate direct
PO automatically then check this field. Along with ALE data for purchases order in
sales organization.
5. Order type “NB” – it will help to generate purchases requisition automatically in the
background while creating sales order in third party process.
6. Item category – purpose of item category in schedule line category: - like sales
documents, MM documents also require item category information while creating
PR manually. User will assign item category manually, but in third party process we
are generating PR automatically in the background so we are passing item
category information from schedule line category to PR.
7. Item category [5]: - item category [5] controls that even we do MIGO in third party
with shipping notification system will treat it as dummy MIGO and stock will not be
update.
8. Account assignment category [1]: - It controls that whether to generate inventory
accounting document or not while doing MIGO and PGI (this field controls the cost
should be assigned to any special cost object or not). This also helps to pass on
customer information from order to PR….
9. In copy control between order to invoice (OR – F2) TAS has billing quantity “F‟ and
it will help to copy the quantity from MIRO to invoice while creating invoice to
customer in third party process.

If we want third party process with shipping notification then we maintain billing
quantity “E” which helps to copy the quantity from MIGO to invoice while creating
invoice to customer in third party process.

Process for creating Purchase order: -

1st step
Maintain purchase organization: - To create PO we require purchase organization, which
is in MM.
SPRO enterprises structure definition MM maintain purchase organization
new entry ZPUR save it.

2nd Step
Assign purchase organization to company code: -
SPRO enterprises structure assignment MM assign purchase organization to
company code position ZPUR ZALK save it

Phone/Whatsapp: +1 (515) 309-7846 (USA) Email: [email protected]

www.zarantech.com
3rd Step
Assign purchase organization to plant: -
SPRO enterprises structure assignment MM assign purchase organization to
plant position ZPUR PLANT save it

Third party w/o shipping notification

We need to do few more configurations to make third party process successfully.
Go to the T-code [OBGG] for country IN assign tax procedure [TAXD] save it.

Go to the T-code [FTXP] and maintain tax code FTXP IN S1 description (Input
tax PO) tax type [V] (input tax) enter input tax [10%] save it.
T-code To create PO [ME21N]

➢ MM01 create material (THIRD1) purchasing view should be selected maintain

BANS purchasing view – purchasing group [001] save it.

To create vendor the T-code is [XK01] :-

XK01 vendor [TVENDOR] ZALK ZPUR Account group [0001] name [third
party vendor] reconciliation a/c [1.6L] cash mgmt grp [A1] order currency [INR]
partner function [VN] save it.
➢ VA01 change mode schedule line tab PR Make a note of PR number
➢ ME21N mention the vendor number [TVENDOR] purchase org [ZPUR]
Purchase group [001] ZALK enter go to item overview go to right side
PR No. [XXXXX] enter enter some price [5000] go to delivery tab and
uncheck good receipt invoice tab tax code [31] enter save it and make
a note of PO number
➢ The T-code for MIRO is [MIRO] we create MIRO with reference to PO

MIRO ZALK Invoice date [24.01.2014] purchase order / scheduling agreement

[XXXXXXX] enter base line date [24/01/2014] enter then go to basic data
amount [5L] enter
We can change quantity from 100 to 70 enter.
➢ Then do Invoice VF01. Reference quantity will copy from order, but actual quantity
will copy from MIRO.

Error: - Company code is not maintained in 169P.

Solution: - SE16N Table [T169P] enter & SAP_edit enter append new mention as above
save it.

Phone/Whatsapp: +1 (515) 309-7846 (USA) Email: [email protected]

www.zarantech.com
Creating automatic PO in third party process
1st Step: -
Maintain ALE data for purchases order
We have this in sales organization, maintain ALE data ZPUR ZMUM 001 ZFG1
Tvendor1 101 NB save it.
{if vendor is not fixed don’t maintain the vendor’s name}.

2nd Step: - Go to item category TAS and create PO automatically

Master data changes for automatic PO

3rd Step: - Go to material master purchasing view Automatic PO save it

4th Step: - Go to vendor master [XK01] Create, [XK02] change scroll down and
automatic PO save it.

5th Step: -
Maintain material info record or purchasing info record. The T-code is [ME11] material
vendor purchase organisation ZMUM enter net price [5000] max quantity
[10000] enter save it.

6th Step: -
Maintain source list T-code [ME01] material plant validity period [ 25.01.2014]
[31.01.2014] TVENDER1 ZPUR save it.

➢ create order, after the 1st time configuration go to ME59N (one time only) execute
purchase group [ ] purchase organisation [ ] vendor plant execute.
➢ Go to VA02 document flow Check whether PO is generated or not?

Third party with shipping notification

We do third party with shipping notification if vendor is not sending the invoice immediately
with delivering the goods to customer.
Without vendor invoice we cannot raise invoice to our customer, so in this scenario we ask
vendor to send shipping notification after delivering the goods to customer.
When we receive the shipping notification then we do MIGO and basing on MIGO quantity
we raise invoice to customer.

Phone/Whatsapp: +1 (515) 309-7846 (USA) Email: [email protected]

www.zarantech.com
Configuration change for third party with shipping notification
In item category TAS, change the billing relevance from “F” to “G”.

In copy control, order to billing for item category TAS change the billing quantity “F” to “E”.
• Billing relevance “G” controls that, while creating sale order in third party process
system checks whether MIGO is created or not. If MIGO is created then system will
allow to create invoice to customer.
• Billing quantity “E” will help to copy the quantity from MIGO to customer invoice.
• When we do MIGO in third party process system will treat it as dummy MIGO and
stock will not be updated. The control is item category [5] in schedule line category.

Third party Returns process

• When customer finds damage or defective goods of third-party material, then
customer will inform to company then company will send employee to cross check
the goods.
• After cross checking employee will prepare return note and submit to company and
company will create return order in SAP.
• Based on return note, then we return the goods to vendor location from customer
location. Then vendor will raise credit memo to company and company will raise
credit memo to customer.

Phone/Whatsapp: +1 (515) 309-7846 (USA) Email: [email protected]

www.zarantech.com
Configuration for Third Party Returns:
Step 1: - Maintain item category determination RE + BANS + Blank + Blank = TASG
Step 2: - Go to TASG and maintain billing relevance as “F”
Step 3: - Maintain schedule line category [CS] in VOV5

Step4: -
IN copy control VTFA maintain item category [TASG] for RE – RE combination
Maintain copy requirement as [028] VBRK / VBRP = [002]
Billing quantity [F] Plus / Minus [+], Pricing type [D]

Phone/Whatsapp: +1 (515) 309-7846 (USA) Email: [email protected]

www.zarantech.com
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