Outside Processing Configuration: Material Storage and Delivery

When your organization contracts out any operations of the production process, these operations may require materials to be provided to subcontractors. In the following sections, you can find details about the configuration of the system for tracking the materials provided to subcontractors.

Storing Materials for Outside Processing

You can use any of the following scenarios to provide materials to a subcontractor who performs outside operations:

• Your organization stores the materials at your facility. In this case, you need to ship the materials to the subcontractor. You record the shipping of the material by creating vendor shipments related to production orders on the Vendor Shipments (AM310000) form.
• The subcontractor stores the materials at its site. In this case, you may purchase the materials from a vendor and specify the subcontractor's address as the delivery address so that the vendor delivers the items directly to the subcontractor. You use the Purchase Orders (PO301000) form to create the purchase orders for these purchases.
  Attention:

  In this case, the purchase order is not linked to a production order.
• The subcontractor purchases the needed materials on its own and includes the cost of materials in the service charge you will pay. You may include these materials in a bill of material for informational purposes. (The system does not include cost of these materials in the cost of the produced item.) To do this, on the Materials tab of the Bill of Material (AM208000) form, you add a row for the material and specify the Subcontract material type and the Vendor Supplied subcontract source.

Tracking the Subcontractor's Storage of Materials

If the subcontractor stores materials in one of its locations, you may want to track the movement of the stock items that represent the materials. Also, you may want to replenish the items or use inventory planning for them. To track the materials in the system, you may use any of the following approaches:

• Use a specific location in an existing warehouse. If you do, you should consider the following:
  • You can issue or replenish items stored in a warehouse location.
  • You can include all items stored in the location in inventory planning or exclude all of them from inventory planning (at the location level).
  • If you create a purchase order to replenish the items stored by the subcontractor, you need to ensure that you specify the correct warehouse location for the purchase receipt.
  • You can use only single-step transfers between the locations of the same warehouse, which means that you cannot track items that are in transit.
  • You can use the standard inventory inquiries and reports to view the item availability.
• Use a specific warehouse in the system. If you do, you should consider the following:
  • You can use either single-step or two-step transfers for tracking item movement between warehouse locations or warehouses. By using a two-step transfer, you can track items in transit.
  • You can track movement of items by using the Transfer type of sales order. With this document, you can create shipments and the related documents and transactions, including carrier labels, and collect freight or landed costs.
  • You can manage inventory planning calculation by creating multiple locations with different inventory planning settings.