Subcontract Order – Purchasing

A subcontract order refers to a purchase order for an operation performed by a subcontractor. Purchasing subcontract work functions according to the same principles used in purchasing material or services in the M3 Procurement module.

There are two types of subcontract orders in M3:

A planned subcontract order is created when the MO is created, regardless of status.

This is designed for companies that do not have in-house production, but administrate operations chains using material either purchased directly or delivered to the subcontractor from an in-house inventory. This refers to items with item category 3 in 'Item. Open' (MMS001) and acquisition code 2 in 'Item. Connect Warehouse' (MMS002). This functionality is described in a separate section below.

Both types of subcontract order must be defined with order category 70 in 'PO Type. Open' (PPS095). M3 also supports delivery of material to the subcontractor.

Prerequisites

Subcontracting orders require the following settings:

Defining general purchasing settings (CRS780)

Defining PO type

PO types are defined in (PPS095). 0 or 2 must be entered for parameter 150 - Update material plan. Entering value 0 means that the subcontract purchase will not be displayed in the material plan. The value 2 means that the subcontract purchase is displayed in the material plan, showing actual status but projected on-hand balance is not adjusted upwards for it. Otherwise available on-hand balance would be adjusted upwards twice, since the MO does this. On-hand balance for items with subcontract orders without MO is adjusted upwards during the last operation, regardless of the value entered for this parameter.

Delivery address

A final destination address and any ship-via address must be specified for the subcontractor in order for the correct suggestion to be made. When no address is present, the subcontractor's mailing address is proposed.

Defining values for the requisition type (CRS200)

To connect integration to Transportation Planning, an appropriate Dispatch policy must be connected to the requisition order type. This integration is required for certain processing, such as for bills of lading, etc.

Basic data for production

The work centers that are subcontractors must be defined as resource type 2 (Subcontract) in 'Work Center. Open' (PDS010).

The subcontract control field must be defined for the subcontract operation and subcontractor in 'Product Structure. Open' (PDS001). When several subcontract operations are defined in sequence, Next subcontractor should be specified in the subcontract operation. The address of the next subcontractor will then be entered as the delivery address in the purchase order for the first subcontractor. The value in the ‘Production days’ field will control the lead time for the operation.

The transaction control field must be defined for the material lines. This parameter determines whether material used in the subcontract operation should be requisitioned using an MO picking list or using the requisition routine. When the requisition routine is specified in this parameter, then the order type used is determined by parameter 07 in 'Settings – Purchasing' (CRS780).

Subcontract order integrated with MO

When entering an MO, a planned PO is created for operations with a work center having resource type 2 (subcontract). This is done regardless of status. However, the status of the planned PO is determined by the values in the planning policy. The planning policy is defined by parameter 32 in (CRS780).

If the value in Transaction control field (in the corresponding material lines) specifies that a requisition should be created, then this is done when the subcontract order is printed. Scheduled issue date for the requisition will then be the current date. When the requisition is created, the requisition reservation replaces the MO reservation. This is all displayed in 'Material Plan. Open' (MMS080).

After the PO is created, it is integrated in the following ways:

For items to be sent to a subcontractor, the product number is printed on the requisition. In this case, if the preceding operation was in-house, then that operation number is also printed on the requisition. However, the requisition line is not affecting inventory. Weight can be entered in the Initial weight field for the subcontract operation in 'Product Structure. Open' (PDS002/E).

The processing described above makes it possible for a complete picking list to be proposed. This includes proposed information about weight.

Subcontract order without an MO

This refers to items with item category 3. For these there is a structure for one or more levels with one or more subcontract operations. Importantly, only subcontract operations are use here. These structures are displayed using option 20=Subcontracting selection from 'Planned Purchase Order. Open' (PPS170/B). A structure is displayed for an indented bill of material with lines for material and operations.