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Introduction:
In this blog, I will cover my experience with Subcontracting by explaining this process through various business scenarios that align with specific business needs. The aim is to assist newcomers in grasping the diverse dynamics of subcontracting and understanding how different system components work together.
Business Requirement Overview.
A manufacturing company named ABC, manufactures Iron Doors.
First ABC produces unpainted Iron Doors in-house and than outsources further processes to two different subcontractors for different tasks. Subcontractor X is responsible for painting the Iron Door while subcontractor Y installs Digital Locks on the Painted Doors. Once subcontractor X completes the painting process, the painted doors are sent to subcontractor Y for installation of the Digital Locks. Upon receiving Painted Doors from Subcontractor X, Subcontractor Y installs the Digital Locks and returns the Finished Doors to ABC Company.
In this scenario, ABC Manufacturing Company provides two components to subcontractor X: unpainted Iron Doors from Plant A and Ultra-Paint from Plant B. For subcontractor Y, ABC provides Painted Doors and Digital Locks for installation.
Additionally, ABC Manufacturing Company has an agreement with supplier Locksmith to supply Digital Locks for the doors. Locksmith directly sends the Digital Locks to subcontractor Y upon receiving a purchase order and invoice to ABC Manufacturing Company.
It's important to note that while ABC supplies Iron Door from Plant A and Ultra-Paint from from plant B, it does not maintain a stock of Digital Locks and always relies on third-party supplier, in our scenario, Locksmith.
Required Master Data.
Material Master: Finished-Door, Painted-Door, Digital-lock, IRON-Door and Ultra-Paint.
Supplier Master: Supplier X, Supplier Y and Locksmith.
Production Version. Finished-Door, Painted-Door.
Bill of Material (BOM).
BOM1: Material Codes: PAINTED-DOOR (header material), IRON-DOOR (component1), Ultra-Paint (Compnent2) and Production Version (Required to explode BOM1 in PO).
BOM2: Material Codes: Finished-DOOR (header material), Painted Door (component1), Digital-lock (Compnent2) and Production Version (Required to explode BOM2 in PO).
Following the Master Data and relevant processes are not discussed here as these are self-explanatory.
Infor Record, Source list, MRP, Purchase Requisition, Outbound delivery with shipping process and Invoice process.
The following process is divided into three steps and can be noticed in three different colors as shown below given flow chart.
Step 1 (Tan color), Step 2 (Orange color), Step 3 (Blue color).
Step 01
Master data.
Image 01: Header Material: Painted-Door
Image 02: Maintenance of production version.
Please notice, check box in MRP4 view showing below. It will automatically explode BOM in purchase order.
Image 03: Component 1: IRON_DOOR.
Image 04: Component 2: ULTRA-PAINT
Image 05: Special Procurement.
Special procurement key is a new customized key (31) to cater withdrawal from different plant, (Plant B).
Image 06: Bill of Material.
Image 07: Production Version.
Production Version will help to explode BOM in Sub-con PO, see Image 09.
Image 08: Supplier X.
Image 09: Creation of Purchase Order.
Purchase Order is created for supplier X to provide following components.
Please notice Master Data tab: Explode BOM shown above from two different plants, NJD1 (Plant A) and NJD2(Plant B). This is the result due to the ‘issuing plant’ selection made in image 05.
Image 10: Delivery Address tab.
Subcontracting contractor Y is selected. This check will change the delivery address, and causes Goods Receipt to be posted directly to the "stock with subcontractor" of the subcontractor 600038 (Y).
Image 11: Confirmation tab.
In this tab, inbound delivery is requested. Inbound delivery will notify ABC company when painted door is delivered to sub-contractor 600038 (Y).
Image 12: Subcontracting Cockpit.
Please Note, the components will be issued from two different plants because of the configuration provided in image 05 showing one component is being issued by Plant A (NJD1) and the other component is being issued from plant B (NJD2).
Image 13: Post Goods Issue.
Component IRON-DOOR is issued to Supplier 600030 (X) from plant A (NJD1) using MVT 541.
Image 14: Post Goods Issue.
Component ULTRA-PAINT is issued to Supplier 600030 (X) from plant B (NJD2) using MVT 541.
Image 15: Stock Overview.
Plant A (NJD1) provided “IRON-DOOR” to supplier X.
Image 16: Stock Overview.
Plant B (NJD2) provided “ULTR-PAINT” to supplier X.
Image 17: For the demo purposes, the Inbound delivery 1800000028 is created manually.
Note: Inbound Delivery is created. It will ensure that the delivery of the Painted Door is shipped to the subcontractor 600038 (Y).
Image 18: ABC Corporation will perform the Goods Receipt with reference to PO.
Note: At the time of Goods Receipt, system will update the "stock with subcontractor" of the supplier 600038 (Y). This is due to “SC” check box selection in Image 10.
Image 19: Stock Overview.
Image 20: Process Flow.
Step 2:
Required Master Data for this process.
Image 21: Material Master.
Image 22: Supplier Master.
Image 23: Purchase Order is created for the supplier Locksmith.
Please notice, subcontracting contractor is selected under the Delivery Address tab. This check will change the delivery address, and will cause the Goods Receipt to be posted directly to the "stock with subcontractor" of the subcontractor 600038 (Y).
Image 24: Inbound Delivery.
Please note, the Confirmation tab is requesting for inbound delivery. Inbound delivery will notify ABC company when Digital-lock is delivered to sub-contractor 600038 (Y).
Image 25: Inbound Delivery is created manually.
It will ensure that delivery is shipped to subcontractor 600038 (Y) for the Digital-lock.
Image 26: ABC Corporation will perform the Goods Receipt with reference to PO.
Image 27: Process Flow.
Image 28- Stock Overview.
Step 3: Master Data.
Image 29: Master Data- Finished Door.
Production Version is maintained. Please notice that the check box in MRP4 view showing above.
It will automatically explode BOM in purchase order.
Image 30 - BOM for the required components.
Image 31 - Managed Production Versions using C223.
Image 32: Supplier Y.
Image 33-Purchase Order is created for suppler Y.
Note: Master Data tab showing Exploded BOM above.
Image 34-Subcontracting Cockpit.
Please notice above that the stocks are already provided to the suppler Y. See above.
Image 35- Performed Goods Receipt with reference to PO.
Please note, the finished Door is increased the inventory and components Digital-Lock and Painted-Door consumed using MVT 543 respectively.
Image 36 – Stock Overview.
Image 37- Process Flow.
This concludes the process after finished Door is received by company ABC.
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