In a manufacturing process, we might have to outsource some or all of the operations. Here, two things are involved-

I. Stock Management

We have to make a stock move from Raw Material location to Contractor (Production) location. To do this, we set Production location on the relevant Routing document.

Production Location- Routing

Production Location- Routing

The production location should be configured with the following data:
Location Type: Supplier,
Location Address: Select an address of the subcontracting partner,
Chained Location Type: Fixed,
Chained Location if Fixed: your Stock,
Chaining Lead Time: number of days before receipt of the finished product.

However, if the Contractor location is different for each Work Center operation, then we have to customize it.

II. Accounting

In order to achieve this we first have to define Analytic Account. It has Customer field where we have to select the Partner to whom this process is going to be outsourced.

Analytic Account

Analytic Account

Next, in Work Center configuration we set the Hour Account (for discrete manufacturing) or Cycle Account (for continuous manufacturing).

Work Center

Work Center

Finally, when manufacturing process is completed system generates Analytic Entries which can be used for invoicing our sub-contractor. Using the “Invoiceable” field, we can either Invoice full 100% or do partial invoicing (90%,80% and so on).

Analytic Journal Item

Analytic Journal Item

Finally, using the More button we can Create Invoice. We can create Invoice for each Analytic item separately or merge multiple items belonging to same Contractor.

Create Invoice- Analytic Account

Create Invoice- Analytic Account

On clicking Create Invoice button, an Invoice gets created which can be validated and followed up for payment.

Here, we have to replace Customer Invoice with Supplier Invoice so that outsourcing cost is booked as expense and not income.

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