To set up operation subcontracting (manufacturer's side)

Consider the following check boxes in the Implemented Software Components (tccom0500m000) details session:

• Customer Furnished Materials
  If you want to support the flow of subassemblies and components during the subcontracting process, you must select the Customer Furnished Materials check box.
• Demand Pegging
  Demand pegging is required to identify subassemblies uniquely. If the Demand Pegging check box is selected, every subassembly is allocated to a specific SFC order by means of a reference number.

Consider the following check boxes:

• Inventory Management

  If you clear the Inventory Management check box, you indicate that the subcontractor carries out the warehouse's inbound activities, which is a logical choice in case of subcontracting. You must complete the inbound procedure in one of the following ways:

  • Use automatic warehousing procedures. For more information, refer to To handle warehousing orders.
  • Update the inventory based on ReceiveDelivery messages. For more information, refer to Receipt delivery messages.

  If you clear the Inventory Management check box, and select the Manual Inbound Process Allowed check box, inventory management is not carried out, but you can do a manual inbound.

  Note that if you select the Inventory Management check box, you must also use automatic warehousing procedures.

• Include in Enterprise Planning
  Select the Include in Enterprise Planning check box.

• End item

  In the Items - Production (tiipd0101m000) session, find the end item for which you subcontract one or more operations, and for which you want to support the material flow. Select for this item the Subcontracting with Material Flow check box. If you want to subcontract, but you do not want to support the material flow, refer to Operation containing customer furnished materials.

  Calculate the end item's cost price (top-down) in the Calculate Cost and Valuation Prices (ticpr2210m000) session.

• Subassemblies

  In the Items - General (tcibd0501m000) details session, define two items for which the Subassembly check box is selected. These items represent respectively the subassembly sent by the manufacturer to the subcontractor, and the subassembly sent back by the subcontractor after work is done. If you want to leave open the possibility to produce the item yourself instead of sending it to a subcontractor, set the item type of the subassembly that you receive back from the subcontractor to Manufactured.

  If the manufacturer sends no subassembly to the subcontractor but only material, you just need to define an item code for the subassembly created by the subcontractor.

  Define the following data for the subassemblies:

  • Warehouse

    In the Items - Ordering (tcibd2500m000) session, find the defined subassemblies. For the subassembly that you will send to the subcontractor, enter in the Warehouse field the warehouse from which you send the subassembly. For the subassembly that you receive back from the subcontractor, enter the warehouse in which you receive the subassembly.

  • Cost price

    To generate an effective cost component structure, define the assemblies' costing data in the Items - Costing (ticpr0107m000) session. Calculate and actualize the cost price in the Calculate Cost and Valuation Prices (ticpr2210m000) session while the Actualize Standard Cost and Valuation Prices check box is selected.

  • Supply

    Subassemblies are sent to the subcontractor by means of a purchase subcontracting order, which is an order-specific supply. In the Warehouse - Item (whwmd2510m000) details session, you must therefore define the supply system Order Controlled / Single for the correct combination of the subassembly that you will send to the subcontractor and the administrative warehouse. Note that for a subassembly, this is the only supply system you can use.

  • Price

    For the item that is sent back by the subcontractor, you must determine the price you will pay to the subcontractor. In the Items - Purchase (tdipu0101m000) session, use the Source of Price field to choose between Subcontracting Rate and Price Book / Contract to determine the price. Note that if you subcontract the last operation, you must define the price for the end item instead of for the subassembly.

    If the Source of Price field is Subcontracting Rate, you must define subcontracting rates in the Subcontracting Rates (ticpr1160m000) session. Define the rate by task for the correct combination of project, price calculation code, parent item or subcontractor.

    If the Source of Price field is Price Book / Contract, the Subcontracting Rates (ticpr1160m000) session is also relevant, because of the tasks' cost components are defined in this session. You can leave the Project, Parent item, and Subassembly fields empty.

Regulate the supply of components to the subcontractor. There are two ways:

• Order specific supply

  Order specific supply means that supply is linked to the subcontracting purchase order. The supplied quantity is the quantity required for the purchase order. To use order specific supply, the component's supply system in the Warehouse - Item (whwmd2510m000) session must be Order Controlled/Single, for the correct combination of component and administrative warehouse.

  Order specific supply can exist between manufacturer and subcontractor, or directly between supplier and subcontractor:

  Supplier - subcontractor

  • Clear the Supply from Warehouse check box in the Warehouse - Item (whwmd2510m000) details session, for the correct combination of component and administrative warehouse.
  • Enter the supplier in the Ship-from Business Partner field and the Buy-from Business Partner field.
  • Supply takes place by purchase order.

Define terms and conditions in the following cases:

• If components are shipped by sales orders.
• If you, the manufacturer, are responsible for the components' planning.

Perform the following steps:

1. By means of the Terms and Conditions (tctrm1100m000) session, start the Terms and Conditions (tctrm1600m000) session to define a terms and conditions agreement. The Terms and Conditions Type field must be Sales.

2. Define a terms and conditions search level for which the Search Attribute 1 field is Item Group, and the Search Attribute 2 field is Warehouse. Select the Order check box and the Planning check box.

3. Double-click the defined search level to start the Terms and Conditions Search Level - Lines (tctrm1610m000) session. In this session, define the items to which the agreement applies.

4. Double-click the defined items to start the Terms and Conditions Line (tctrm1620m000) session. On the Planning tab or in the Planning Terms and Conditions (tctrm1135m000) session, select the Responsible for Supply Planning check box. On the Order tab or in the Order Terms and Conditions (tctrm1130m000) session, select Sales Order Transfer in the Transfer Type field.

Link the following information to the subcontracting work center:

• In the Subcontractor field, enter the subcontractor code.
• In the Shop Floor Warehouse field, enter the administrative warehouse, which can be a normal warehouse or a shop floor warehouse. This warehouse represents the warehouse at the subcontractor's site, and is used to monitor the subassemblies' and components' inventory levels.

• Link to the operation that precedes the subcontracted operation:
  The subassembly which represents the product that is sent to the subcontractor. The warehouse from which you send the subassembly to the subcontractor is defaulted from the Warehouse field in the Items - Ordering (tcibd2500m000) session. It is recommended that the subassembly warehouse equals the BOM warehouse of the materials sent to the subcontractor.
• Link to the subcontracted operations:
  The applicable subcontracting work center.
• Link to the last subcontracted operation:
  The subassembly which represents the product that is sent back by the subcontractor. The warehouse in which you receive the subassembly after subcontracting is defaulted from the Warehouse field in the Items - Ordering (tcibd2500m000) session.