Overview of the operational procedure of operation subcontracting with material flow

The manufacturer sends the materials and subassemblies that the subcontractor needs to complete the subcontracted operation. These components and subassemblies are sent from a warehouse on the internal production site to a warehouse on the subcontractor site. This is done through a warehousing transfer order.

After completing the operation, the subcontractor returns the subassemblies from the warehouse on the subcontractor site to the warehouse on the production site.

This is done through a subcontracting purchase order.

When you start working on an operation that is subcontracted, the first action that you take is creating a subcontracting purchase order for the work that the subcontractor is to do for you. Usually this entails working on a subassembly. In fact, you are buying the work from the subcontractor.

Note that you do not complete the subcontracting purchase order until the subcontractor informs you that the work on the subcontracted operation has been completed.

The next action is completing a supply order. The supply order is set up as a Warehousing transfer order. The supply order for the subassemblies is automatically created. Supply orders for materials are also created automatically, except for supply orders with supply systems other than Order Controlled/Single.

The transfer order transfers the materials and the subassemblies from the manufacturer’s warehouse to the subcontractor’s warehouse.

Upon receipt of the materials and the subassemblies in the subcontractor’s warehouse, the subcontractor can start working on the subcontracted operation.

When the subcontractor informs you that work has started on the subcontracted operation, you issue the materials and the subassemblies from the subcontractor’s warehouse to the subcontractor’s shop floor.

This is an administrative step performed to indicate that the production process is performed by the subcontractor at the subcontractor’s site. The subcontractor’s production process does not need to be monitored. Typically, this step is set up as a fully automatic procedure.

After completing the subcontracted operation, the subcontractor sends back the subassemblies. To receive the subassemblies in the manufacturer’s warehouse, you must complete the subcontracting purchase order.