This video explains the concept of External Operations in SAP Materials Management, focusing on how it simplifies the process of outsourcing operations in a production order. The key points discussed in the video are:

1. Introduction to External Operations: External operations are used when one or more operations in a production order cannot be executed internally due to various constraints and need to be performed by a vendor. This can be done either through a subcontracting process or as external operations within the production order.
2. Issues with Subcontracting: When many operations in a production order are outsourced, subcontracting can create issues like more master data, more orders, improper link between parent and child materials, and less clarity on order progress.
3. Advantages of External Operations: External operations simplify the process by requiring only a single level bill of materials and a single routing. However, phantom materials representing the external operations are needed.
4. Master Data for External Operations: The master data required for external operations include the parent component and raw material, phantom materials for each external operation, purchasing info records for the material group, and a work center representing the supplier.
5. Creating a Bill of Materials: The bill of materials for the parent component includes the phantom materials as child components. The phantom materials are included in two lines, one with a negative quantity to bring the phantom stock into the system, and one with a positive quantity to consume the phantom stock.
6. Creating a Routing: The routing for external operations includes the purchasing info record and a control key for external operations. The phantom materials are assigned to the specific operations in the routing.
7. Production Order Execution: The execution of a production order with external operations involves creating and releasing the production order, issuing the raw material to the operation, adding the phantom material to the stock, creating a purchase order for the external operation, sending the phantom material to the supplier, receiving the processed material from the supplier, and confirming the operation.