The Subcontracting functionality enables placing subcontracting Purchase Orders to manage outsourced services done by subcontractors.

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

When this is enabled, then:

  • In a Purchase Order, it is possible to send materials to the vendor, if the ordered item has a Bill of Materials.
  • In a Manufacturing Order, it is possible to issue Purchase Orders to vendors, if they perform some operations.
  • It is possible to choose a vendor as a workstation group in the Routing.
  • The Subcontracts section is shown in a Manufacturing Order if the order has outsourced operations.
  • The Materials and Shipments sections are shown in a Purchase Order if the items have Bills of Materials.

There are two approaches for managing outsourced operations:

Strategy 1. Using Purchase Orders to issue and consume materials, when a product is fully made by a vendor.

It is possible to create a Purchase Order for the product at Procurement -> Purchase Orders and consume (free issue) raw materials by creating a Shipment to the vendor, and without creating a Manufacturing Order.

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.

For setting this up:

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

Usage instructions: 

Strategy 2. Using Manufacturing Orders, when some operations in the product's routing are done by vendors.

It is possible to assign an operation in the Routing to a vendor, who performs the operation.

When the Manufacturing Order is created, that operation will be scheduled for the vendor, and it is possible to raise a Purchase Order from inside the Manufacturing Order at the Subcontracts section or from Procurement -> Requirements report.

The status of the Purchase Order updates the status of the operation in the Manufacturing Order.

The cost of the subcontracting Purchase Order is added to the manufacturing overhead of the Manufacturing Order.

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:

Demo video

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