Overview of the operational procedure of product subcontracting
Product subcontracting is used to subcontract the production of an entire item. This process also supports the transfer of materials from the manufacturer to the subcontractor.
This topics provides an overview of the operational process of product subcontracting. For step-by-step instructions on how to perform product subcontracting, see To perform product subcontracting.
Production orders are not used in this process. To subcontract an item, the manufacturer sends a subcontracting purchase order to the subcontractor. In fact, the manufacturer buys the work from the subcontractor.
The purchase order line of the subcontracting purchase order lists the subcontracted item.
The components, that is, the materials that the manufacturer sends to the subcontractor to complete the item, and the materials supplied by the subcontractor, are listed in the Material Supply Lines tab of the subcontracting purchase order in the Purchase Order (tdpur4100m900) session.
The subcontracting purchase order originates from Enterprise Planning or is manually created. When originating from Enterprise Planning, a planned order is transferred to a subcontracting purchase order based on the subcontracting setup.
The subcontracting purchase order has a purchase order type for which the Subcontracting Order check box is selected in the Purchase Order Type (tdpur0694m000) session.
After approving the purchase order, the activities of the purchase order procedure are carried out. The setup of the order procedure determines whether the activities are carried out manually or automatically.
The first activity, Generate Supply Orders for Subcontracting (tdpur3218m000), entails creating the supply order that transfers the materials to the subcontractor. The supply order is set up as a Warehousing transfer order with supply system order controlled/single. This is done in the Item Data by Warehouse (whwmd2510m000) session for the subcontractor warehouse.
After the components have been transferred to the subcontractor’s warehouse, the subcontractor starts manufacturing the subcontracted item.
When the subcontractor has completed manufacturing the item and sends the item to the manufacturer’s warehouse at the production site, you can perform the receipt of the subcontracted purchase order.