User Manual

Subcontracting

The Subcontracting functionality enables placing subcontracting orders to manage services which are outsourced.

The subcontracting functionality can be enabled at Settings -> System settings -> Professional functions -> Subcontracting.

When this is enabled, then:

  • It is possible to choose vendors as workstation groups in the Routing, for scheduling subcontracted operations.
  • The Subcontracts section becomes available in the Manufacturing Order details page, if the order has subcontracted operations.
  • It is possible sending Purchase Orders for subcontracted services from Manufacturing Orders (see below the "Strategy 2").
  • It is possible sending Purchase Orders for assemblies or finished goods, and booking the free issue materials and shipping them from within the same Purchase Order. (see below the "Strategy 1").

There are two strategies for managing subcontracted operations:

Strategy 1. If the product or a sub-assembly is fully made by the subcontractor

Then it is possible to create a Purchase Order for the final product at Procurement -> Purchase Orders and consume (free issue) raw materials without creating a Manufacturing Order.

For setting this up:

  1. Save the Subcontractor as a Vendor at Procurement -> Vendors.
  2. Add a Bill of Materials to the product with a list of the items that will be issued to the subcontractor per product.
  3. Check This is a procured item option for the product.
  4. Create Purchase Terms for the product.

Usage instructions: 

The cost of the final product will include:

  • the purchase price on the Purchase Order,
  • plus the cost of materials.

Inventory transactions:

  1. When materials are shipped (picked from the stock), these are subtracted from inventory.
  2. When the PO is marked as received, the products are added to stock.

Strategy 2. If the subcontractor's service is part of the in-house production process

Then it is possible to save the subcontractor as a vendor and assign an operation in the Routing to the vendor.

When the production is scheduled, that operation will be scheduled for the vendor, and it is possible to raise the Purchase Orders from inside the Manufacturing Order at Production planning -> Manufacturing Orders.

For setting this up:

  1. Save the Subcontractor as a Vendor at Procurement -> Vendors.
  2. For setting up the routing, read: How to define subcontracted operations in the Routing?

Usage instructions:

The cost of the Subcontracted service's Purchase Order is added to the manufacturing overhead cost of the Manufacturing Order.

Demo video