MSG Team's other articles

10639 Pharmacy Benefit Managers: The Root Cause of High Healthcare Prices

Healthcare prices in the United States are much higher than compared to the rest of the world. There are many factors which can be held responsible for this high price. However, one of the most important factors is the presence of unscrupulous middlemen. Pharmacy benefit managers (PBMs) are one such class of middlemen which act […]

10781 Project Control and Engineering Change Control in ERP

Project control module is used for organizing long term projects such as building a ship or power plant. The production environment resembles make to order situation where customer order driven purchasing, production, estimating, engineering, planning and control is done. This module also enables in setting up, analyzing and amending the budget for the project undertaken […]

9355 Finland’s Failed Universal Basic Income Experiment

The Scandinavian countries are often seen as role models for welfare states. These countries are known for having very high taxation rates. However, many experts claim that these countries also have mechanisms to ensure that the money collected as taxes is plowed back to the people. Lately, Finland has been in the news for experimenting […]

12492 BPO and the Global Economy – The Powershift to the East

In recent years, the BPO phenomenon has accompanied the increasing globalization of the world economy and has spawned a shift in the way the United States and Europe view the developing countries of the East. For instance, the increasing movement of companies wishing to outsource their back office work to India and Philippines has meant […]

11861 What is FOMO (Fear of Missing out) and how it Impacts all of us in the Digital Age

What is FOMO or the Fear of Missing out and how does it Impact us all The acronym FOMO or Fear of Missing Out refers to the perceived sense of loss and fear of missing out on important updates, whether they are Facebook posts, Tweets, News Items, or even shopping goods and services. To explain, […]

Search with tags

  • No tags available.

Production Order Subcontracting - In the age of production outsourcing and the organizational focus on their core competency, subcontracting of production orders is assuming greater importance. In addition to the business functionality necessary for producing goods in house, sub contraction operations necessitates some additional business process such as generation of sub contracting purchase order.

Sub contracting is normally planned, but sometime may be unplanned to meet exigency of a situation, such as breakdown of a plant. Normally, an ERP system treats subcontracting similar to procurement of a service.

A typical flow chart of subcontracting production order is as follows:

Procedure for subcontracting production orders: A few details of the process (in addition to normal procedure of production order control), as shown in the flow chart, is given below:

  1. Define Subcontracting Data - This is a set up data for subcontracting operation and may consist of following components:

    1. Subcontracting item - which is the outsourced part of the item.
    2. Subcontractor.
    3. Subcontracting workcenter.
    4. Subcontract task.
    5. Workcenter - task relationship.
    6. Subcontracting rate factor in tasks.
    7. Subcontracting rates

  2. Subcontract Operations - This procedure is used for unplanned subcontracting where operation is shifted to a subcontractor’s workstation due to emergency. This step is not needed for planned subcontracting, as the operation is already planned in a subcontractor’s work center in the routing of the item to be manufactured.

  3. Generation of Subcontracting Order - Production module treats subcontracting as buying an operation. Therefore, a purchase order must be created when subcontracting is carried out. For generating a subcontracting order, the order status of the operations must be Released or Active. After generation, subcontracting orders are processed in the Purchase module and a purchase-order line is created for each subcontracted operation.

Materials Issue - When a production order is carried out, required materials from warehouses is needed to be issued. There are various ways of releasing materials for a production order, as detailed below.

  1. Backflushing of Materials: Backflushing is automatic issue of materials from inventory, based on BOM measure and quantity of item manufactured.

  2. Pull Note: Authorizes movement of goods to the shop floor from warehouse and movement of work in progress inventory between work centers. For pull notes to be operational, quantity of item to be moved by each pull note and number of pull note per item, should be specified.

  3. Manual Issue: Normally used for non repetitive production environment such as job shops. This functionality deals with calculating estimated materials, additional materials and return of materials, whereas actual issue of materials is dealt by inventory module

Article Written by

MSG Team

An insightful writer passionate about sharing expertise, trends, and tips, dedicated to inspiring and informing readers through engaging and thoughtful content.

Leave a reply

Your email address will not be published. Required fields are marked *

Related Articles

Cost Estimate and Accounting in ERP

MSG Team

Configuration Control and Setting Up of Base in ERP System

MSG Team

Change and Risk Management in ERP Implementation

MSG Team