Basic subcontracting
In manufacturing, subcontracting is the process of a company engaging a third-party manufacturer, or subcontractor, to manufacture products that are then sold by the contracting company.
In basic subcontracting, the subcontractor is responsible for acquiring the necessary components. This means that the contracting company only has to worry about what happens to subcontracted products once they are produced.
The workflow for purchasing a product manufactured using basic subcontracting is similar to the one used when purchasing a non-subcontracted product from a vendor. The main differences are the way that subcontracted products are configured, and the fact that subcontracted products take longer to be sent from the vendor, since they must first be manufactured by them.
Configure BoM
To configure a BoM for basic subcontracting, click the Bill of Materials smart button on the product form, and select the desired BoM.
Alternatively, navigate to Manufacturing app ‣ Products ‣ Bills of Materials, and select the BoM for the subcontracted product.
In the BoM Type field, select the Subcontracting option. Then, add one or more subcontractors in the Subcontractors field that appears below.
Process PO
- If a PO was created in the previous step, navigate to it by clicking the Purchase smart button at the top of the SO, or by going to Purchase app –> Orders –> Purchase Orders, and selecting the PO. Then, click Confirm Order to confirm it, and move on to the next step.
- If a PO was not created in the previous step, do so now by navigating to Purchase app ‣ Orders ‣ Purchase Orders, and clicking New.
- Begin filling out the PO by selecting a subcontractor from the Vendor drop-down menu. In the Products tab, click Add a product to create a new product line. Select a subcontracted product in the Product field, and enter the quantity in the Quantity field. Finally, click Confirm Order to confirm the PO.
- When a PO is confirmed for a product manufactured using basic subcontracting, a receipt or dropship order is automatically created, and can be accessed from the corresponding Receipt or Dropship smart button that appears at the top of the PO.
Process receipt or dropship order
Once the subcontractor has finished manufacturing the product, they either ship it to the contracting company, or dropship it to the end customer, depending on how the product was configured.
Process receipt
If the subcontractor ships the finished product to the contracting company, once it has been received, navigate to Purchase app ‣ Orders ‣ Purchase Orders, and select the PO.
Click the Receive Products button at the top of the PO, or the Receipt smart button at the top of the page, to open the receipt. Then, click Validate at the top of the receipt to enter the product into inventory.
Process dropship order
If the subcontractor dropships the product, once they have sent it, navigate to Purchase app ‣ Orders ‣ Purchase Orders, and select the PO.
Select the Dropship smart button at the top of the page to open the dropship order, and click Validate at the top of the order to confirm that the product has been sent to the customer.
Process delivery order
If the subcontracting workflow was started by a customer SO, and the finished product was not dropshipped to the customer, but rather delivered to the contracting company, it is necessary to ship the product to the customer, and process the delivery order.
Once the product has been shipped to the customer, navigate to the Sales app, and select the SO. Select the Delivery smart button at the top of the page to open the delivery order, and click Validate on the order to confirm that the product has been shipped.