Subcontracting

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With MRPeasy Professional edition, it is possible to manage outsourced services and operations, which you order from a subcontractor or a contract manufacturer.

It is possible to have outsourced operations in your manufacturing process, which will be scheduled together with other operations in your production schedule. Connected to the manufacturing order, you can easily issue a purchase order to your subcontractor and track its status.

And, in addition, it’s possible to order products from a contract manufacturer so you can free-issue materials from your own inventory to the subcontractor.

Defining a subcontracted service in your product routing

When we want to add a subcontracted service in our product’s routing, then, as the first thing, we must define the subcontractor.

In MRPeasy, a subcontractor is defined as any other vendor in the procurement section.

Now, in a product’s routing, we can define operations performed outside of our facilities by that subcontractor.

To do that, let’s choose the subcontractor from the “workstation group,” to whom this operation will be assigned.

By using the setup and cycle time fields, we can enter the estimated time it takes for this process.

We have defined in our settings an 8-hour workday, so to define a fixed 3 day lead time, we enter 1440 minutes as the setup time. In case the lead time is a function of quantity, then we must also use the cycle time field.

Our subcontractor will bill us by piece; therefore, we’ll enter an estimated variable cost of 50 dollars per piece.

With this information, MRPeasy can easily estimate costs and lead times of your products and build the subcontracting purchase order for the operation.

Manufacturing orders with subcontracted operations

Let’s schedule a production run for our product, which has a subcontracted operation.

Once it’s saved, we see that the subcontracted operation is scheduled together with other operations that we perform ourselves.

Once we’re ready to send the purchase order to the subcontractor, we click the “create PO” button in the subcontracts section of the manufacturing order. MRPeasy automatically prefills the whole purchase order.

At any point, when necessary, we can edit it; for example, when we receive the final price confirmation.

Once the purchase order is saved, it is tied to this manufacturing order – plus, the status of the purchase order drives the status of the corresponding operation in the manufacturing order.

When we ship the products to our subcontractor, we must fill the “shipped on” field in the purchase order. The subcontracting PO status will become “shipped” and the subcontracted operation in the manufacturing order will become “started.”

When we receive the purchase order, we will enter the arrival date in the purchase order, which will now become “received.” Back in the manufacturing order, the subcontracted operation is marked finished.

If this operation was the last step, then to wrap up, the manufacturing order must be finalized, as usual – by clicking the “finish production as planned” button, or “finish production” button in the reporting view.

Now, all products are available in stock and all materials have been consumed from stock, plus the costs of the subcontracting purchase order are included in the cost of the products.

Ordering products from and free issuing stock to contract manufacturers

If you do not perform any manufacturing operations yourself for a given product or assembly, but you just purchase the components and issue them to a contract manufacturer, then you can raise a purchase order for these products, and together with the purchase orders, you can ship the materials.

First, we must define the bill of materials for the product, which lists only the parts that we supply to the contract manufacturer from our stock.

Now, let’s change this item to a procured item and add a purchase term so that MRPeasy can automatically pre-fill the purchase order with vendor details, prices and lead times.

Ordering these products from a contract manufacturer is very similar to working with a regular purchase order.

So, to order the products, let’s create a new purchase order.

After clicking “save,” a new section appears for booking the free issue materials and shipping them.

Let’s click on “book materials” to book them from our stock according to the bill of materials and the ordered quantity of products.

Clicking “show bookings” shows us all materials that have been reserved for this subcontracting purchase order.

To plan the shipment of the materials, let’s add a new shipment.

Let’s check all the pre-filled details and “save.”

Currently, this is a planned shipment, and can now be seen by the stock workers – this screen is a digital picking list for reporting the shipment. Here, it’s also possible to print out the waybill and the picking list.

Let’s report the shipping by picking the items from stock. The free issue materials have now left the stock.

Back in the subcontracting purchase order, we must process and track this as any other purchase order. We can print out a PDF or have MRPeasy open the e-mail client to order it.

We can track the status in the bottom part of the PO.

Once items have arrived, we can report both partial and full receipt.

We’ve received the products into stock and no longer have any materials, which were consumed by the subcontractor, in stock.

The cost of the products reflects both the purchase order cost and the cost of the consumed materials, which MRPeasy automatically keeps track of.

Enabling subcontracting functionality

The functionality can be enabled in the section “settings – system settings – professional functions.”

In this video, we described how the subcontracting functionality works.

To learn more about MRPeasy, please see our other videos.

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Keywords: subcontracting, subcontractor management, subcontractor scheduling, contract manufacturer, subcontracted operations