If one of the operations in production of finished product is outsourced to a subcontractor, create a new set of document type in order to ensure correct posting.

In the given example, you deliver products to the subcontractor in order to finish them. That is why the entire procedure is performed via the account Products in process of completion and modification - 635. To monitor unfinished production (account 604) or raw materials and materials that are being finished (account 316) you have to open a new set of document types (manufacturing, transfer, receiving) as well as a new ID for services provided by the subcontractor using a different default cost account.

Let us take a look at processing of such an work order!

 1. Product Specification

For example let us say you want to manufacture PRODUCT - K using the following specification (for sake of transparency all quantities for child items in the specification equal to 1 on all levels):

 

 

2. Document Types

To ensure correct processing and posting you need to create separate document types for work orders for that part of production done by the subcontractor, as well as for internal receiving and issues and in transferring semi-finished products to subcontractor's warehouse.

That is why you have to proceed in the following way in manufacturing (see pre-defined work order document types):

• PRODUCT - K - work order document type 600, including predefined document types for internal recieving and issues
• SEMIPROD01 - work order document type 6P0 (manufacturing semi-finished products), including predefined document types for internal recieving and issues
• and SEMIPROD02 - work order document type 6K0 (subcontract manufacturing) where you will use:
• document type K3 for (internal) issues to subcontractor
• document type K1 for (internal) receiving from subcontractor

For all other transactions:

• document type - 2K for transferring to subcontractor
• subcontractor invoice 1Z in collective invoicing of subcontractor

3. Processing Work Orders

Process work orders in sequence required for further use in production:

1. First create SEMIPROD01. As result you get a semi-finished product with its own price.
2. SEMIPROD01 can then be transferred to subcontractor's warehouse (using transfer document type, 2K).
3. Plus create a work order for subcontractor manufacturing. Create internal receiving and issues for work order when returning delivery item that is result of subcontractor processing (in our case SEMIPROD02).
4. Of course, the outsourced subcontractor charges its services to you. Having received subcontractor invoice proceed with receiving of collective invoice. There is a specifal procedure in creating collective invoice for subcontractor invoices: To this end you must create the collective invoice in document type marked as Received Invoice for Sub-Contracting (in our case 1Z). By doing so the subcontractor's service acquires its own price. By confirming collective invoice own price is calculated also for the product delivered by the subcontractor (in our case SEMIPROD02). (See Collective Receiving of Subcontractor's Invoice and Calculating Collective Subcontractor's Invoice).
5. You can proceed to the next stage in manufacturing the moment you receive from subcontractor the required semi-finished products for further processing (in our case: PRODUCT - K).

For a more detailed treatment see Examples Including Posts - MF.

---