For SAP to handle a subcontracting process correctly, you need to set up three key pieces of master data: the material master for the final product, a bill of materials specifying the components, and a purchasing info record for the subcontractor's service cost. These elements work together to automate the creation of subcontracting purchase orders.

First, we'll focus on the material master record for the assembled item you'll receive back from the subcontractor. This isn't a standard material setup. It needs specific flags that tell SAP this item is externally procured through a special subcontracting arrangement.

In the MRP 2 view of the material master, you must set two fields:

1. Procurement Type: Set this to 'F' for external procurement. This tells the system that the material is sourced from an outside vendor, not produced in-house.
2. Special Procurement: Set this to '30'. This is the Special Procurement Key that specifically designates the material for subcontracting. When you create a purchase order for this material, this key triggers the system to use subcontracting logic, like expecting component materials to be issued.

Next, you need to tell SAP which components you're sending to the vendor for assembly. You do this by creating a Bill of Materials (BOM) using transaction code CS01. The BOM is essentially a recipe for the finished product.

When you create the BOM, the parent material is your finished good (the one you just configured with special procurement key '30'). The child items are all the individual components that you will provide to the subcontractor. This list is crucial because when you later create the purchase order, SAP will automatically pull these components from the BOM and list them as materials to be provided to the vendor.

This diagram shows how the master data records you create flow into the purchasing documents that drive the subcontracting process.

Finally, you need to create a Purchasing Info Record with transaction ME11. This record links the finished material to the specific subcontractor who will perform the assembly. The key difference from a standard info record lies in the pricing.

For a subcontracting info record, the net price you enter is only for the subcontractor's service or labor cost. It does not include the value of the components you provide. The system already knows the value of those components because they exist in your inventory. This record tells SAP how much to pay the vendor for their value-added work.

When these three master data elements are correctly maintained, creating a purchase order for the finished good from that specific vendor will automatically trigger the subcontracting process. The system will use item category 'L' in the purchase order, which is the standard for subcontracting, and it will automatically populate the components from the BOM, ready for you to issue them to the vendor.

With these master data configurations in place, the system is ready to handle the day-to-day transactions of the subcontracting process.