If one of the operations in creating finished product is performed by an outsourced subcontractor, you have to create document types set in order to ensure correct posting. Enter subcontractors in the Resources register as external resources.

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 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 PRODUCTK using the following specification (for sake of transparency all quantities for child items in the specification equal to 1 on all levels):

Level	0	1	2	3
0	PRODUCTK
1		OWNSER Own production service.
1		SEMIPRODII Semi-finished product II required in production.
2			SEMIPRODI Semi-finished product I required in production of semi-finished product II.
3				MAT1 Material used in production of semi-finished product I.
3				SERPRO Own production service.
2			SUBC Subcontractor's service.

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):

• PRODUCTK - work order document type 60, including predefined document types for internal receiving and issues
• SEMIPRODI - work order document type 6P (manufacturing semi-finished products), including predefined document types for internal receiving and issues
• and SEMIPRODII - work order document type 6K (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

Set ID of document type for manufacturing, that is, work order in the Items register (see Specification). In order to use it in scheduling module you have to check Doc. Type for WO Created from Items Register in the Administration Panel | Program Parameters | Manufacturing | General | Additional Parameters. If you do not set this parameter, the above-mentioned three work orders are created using the same document type.

Select or create resource of the type External for subcontractor's service. This in addition enables you to enter subcontractor ID representing your external resource.

3. Process Work Orders

Create work orders for all specification sub-levels and process them one by one as required for further use in manufacturing (assuming that you do not have sufficient semi-finished products on stock):

1. First let's create SEMIPRODI. As result you get a semi-finished product with its own price.
2. SEMIPRODI 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 delivering item that is result of subcontractor processing (in our case SEMIPRODII).
4. Of course, the outsourced subcontractor charges its services to you. Having received subcontractor invoice proceed with receiving of collective invoice. There is a special procedure used 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 SEMIPRODII). (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: PRODUCTK).

 

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

 

 

---