Overview of subcontracting

Operation subcontracting

Operation subcontracting entails subcontracting one or more operations to the subcontractor. These types of operation subcontracting are available:

• Without material flow support

  The simplest form of subcontracting is to generate a subcontracting purchase order to record the operations outsourced to a subcontractor. The subcontracting purchase order only represents the administrative handling of the subcontracting process.

  When the subcontracted item is received back from the subcontractor, you must close the subcontracting purchase order, which is the signal to continue with the production process. Neither the physical handling of the subcontracted item nor sending material to the subcontractor is supported.

  For more information, refer to Operation subcontracting without material flow support.

• With material flow support

  A more extensive way of subcontracting in LN includes not only outsourcing work, but also the supply and receipt of the required material.

  LN supports the physical and administrative flow of subassemblies as well as the required material. After completing the activities on the subcontracted items, the subcontractor sends the items back to the manufacturer.

  For more information, refer to Operation subcontracting in Procurement.

Product subcontracting

For product subcontracting, an item's entire production process is subcontracted. Therefore, it is always used with material flow support. If you apply product subcontracting, no production order is created.

Subcontracted purchase order lines are generated in Enterprise Planning or created manually. The material supply lines are generated from the bill of material (BOM) lines, which are specified in the Materials tab of the Product Subcontracting Model (tisub1600m000) session.

Unplanned subcontracting

In case of unplanned subcontracting, you take the decision to subcontract work after the creation of a production order. If you choose to subcontract the entire production, you must convert the production order to a purchase order in the Subcontract Production Orders (tisfc2201m000) session. If you want to subcontract a number of operations, you must replace the work centers on those operations with subcontracting work centers in the Subcontract Operations (tisfc2210m000) session.

Service subcontracting

For service subcontracting, work on an item to be maintained or repaired is subcontracted. This work entails the entire repair process, or only a part of it. Service subcontracting can be used with or without material flow support.

To supply material to the subcontractor, supply orders must be generated from the material supply lines in the Purchase Order Material Supply Lines (tdpur4116m000) session, or in the Generate Supply Orders for Subcontracting (tdpur4216m000) session.

Consumed material is issued from inventory and the material consumption is updated by Service. Financial transactions are also generated by Service.

For more information, refer to Service subcontracting in Procurement.

Subcontracting costs and prices

The Source of Price field in the Items - Purchase (tdipu0101m000) session is used to determine the method used to calculate subcontracting purchase prices or subcontracting cost prices.

The method can be:

• Subcontracting Rate This method applies only to operation subcontracting. For more information, refer to Subcontracting rates.
• Price Book / Contract. For more information, refer to Subcontracting in Procurement.