Outside Processing: General Information

An organization may contract out to outside organizations (vendors or subcontractors) particular operations related to the production of items. Contract manufacturing is common in some industries, such as circuit boards, food and beverage, pharmaceuticals, nutraceuticals and cosmetics, aerospace, and defense. An organization might engage a subcontractor when the organization has insufficient production capacity or does not have the specific facilities to perform particular operations, such as plating or heat treating.

Acumatica ERP Manufacturing Edition gives you the ability to track outside processing in the production process and account for the costs related to outside processing in the cost of produced items, as described in the following sections.

Learning Objectives

In this chapter, you will learn how to process production orders that contain outside operations.

Applicable Scenarios

You process production orders with outside operations when your organization contracts out particular operations in the production process to subcontractors.

Outside Processing Operations

When you involve subcontractors in production of items, you add outside processing operations to the production routing (for details on configuration of such operations and bills of material, see Outside Processing Configuration: General Information). These operations require specific processing, which differs from processing of operations performed inside you organization. You may need to do any of the following for outside operations:

• If you store materials for the outside operation at your facility, you use vendor shipments to record shipping of the materials to the subcontractor. For details about storing materials in outside processing, see Outside Processing Configuration: Material Storage and Delivery.
• You usually use purchase orders to pay for subcontractor's services. For more information, see Outside Processing Configuration: Charges for Subcontractor Services.

To indicate that the subcontractor completed the operation, you create a move transaction for the outside operation by using the Move (AM302000) form.

Outside Processing by Using Production Orders

Suppose that you use production orders for tracking outside processing performed by a subcontractor. Further suppose that you have created a non-stock item in Acumatica ERP Manufacturing Edition for this subcontractor's charges, and you will process vendor shipments in the system when you ship materials to the subcontractor. To process of such a production order, you perform the following general steps:

1. On the Production Order Maintenance (AM201500) form, do the following:
   1. Create the production order.
   2. Release the production order.
   3. Issue the materials required for the operations you perform prior to the outside operation
2. By using the Move (AM302000) or Labor (AM301000) form, create and release the move or labor transactions for the operation you perform in-house prior to the outside operation.
3. Create a shipment for the materials required for the outside operation, which are stored in a warehouse at your facility. You do this by clicking the Create Vendor Shipment button on the Production Order Details (AM209000) form. The system does the following:
   • Creates a vendor shipment for the vendor specified on the Outside Process tab. (If no vendor is specified on the tab, you must specify the vendor manually in the corresponding box.)
   • Adds to the shipment items with the Ship to Vendor subcontract source.
   • Opens the shipment on the Vendor Shipments (AM310000) form.
   • Adds the following rows to a vendor shipment: a row for the item to be produced (for informational purposes), which has the WIP type; and a row for each material to be shipped, which has the Material type.
4. For lot- or serial-tracked materials, enter lot or serial numbers for materials on the Vendor Shipments form.
5. Optional: Print the pick list by using the Vendor Shipment Pick List (AM644000) report.
6. Optional: By using the Vendor Shipment Packing List (AM642000) form, print the packing lists that will accompany the items being sent to the subcontractor.
7. On the Vendor Shipments form, confirm the shipment. The system creates the material transaction on the Materials (AM300000) form, issues the materials from the warehouse by using an inventory issue it creates on the Issues (IN302000) form, and updates the cost in the Subcontractor box of the Actual section on the Totals tab of the Production Order Maintenance form. You can also view the quantity of items shipped to the vendor on the Outside Process tab of the Production Order Details form.
8. Create the purchase order to pay the subcontractor for the service by clicking the Create Purchase Order button on the Production Order Details form. The system creates a purchase order on the Purchase Orders (PO301000) form for the vendor specified on the Outside Process tab (if no, you must specify the vendor manually in the corresponding box) and adds items with the Purchase subcontract source to the order. The system inserts the purchase order number in the PO Order Nbr. box on Outside Process tab of the Production Order Details form.
9. Create a purchase receipt for the purchase order on the Purchase Orders form. This will update the cost in the Subcontractor box of the Actual section on the Totals tab with the actual purchase cost on the Production Order Details form.
10. Create and release the move transaction for the outside processing operation by using the Move form to record the receipt of the items from the subcontractor.
11. If needed, on the Production Order Maintenance form, issue the materials for the remaining operations performed in-house.
12. Complete the remaining operations for the production order by creating move or labor transactions on the Move or Labor form.
13. Review the production order variances in the Variances section of the Totals tab of the Production Order Maintenance form, and resolve any discrepancies.
14. Close the production order by using the Close Production Orders (AM506000) form.

Workflow of Outside Processing

For production with outside processing, the typical process involves the actions and generated documents shown in the following diagram.

Calculation of Costs for Outside Services

The planned cost for outside services in a production order includes the cost of the materials you ship to a vendor (that is, material lines with the Ship to Vendor subcontract source) and the cost of the outside services (that is, material lines with the Purchase subcontract source). For a particular production order, you can view planned cost for outside services in the Subcontract box of the Planned section on the Totals tab of the Production Order Maintenance (AM201500) form.

When you release the purchase receipt for a purchase order with the subcontractor service charges and the material used for the charges is not backflushed, the system adds the total cost of the purchase receipt to the Subcontract box of the Actual section on the Totals tab of the Production Order Maintenance form. When you confirm the vendor shipment with materials to be shipped to the vendor, the system adds the total cost of the shipment to the same box. If the material is backflushed, the system adds the amount to the box when you record the movement of items from the outside operation.