MSG Team's other articles

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 […]

11945 Why Companies Living Quarter to Quarter is Both a Good as well as a Bad Idea

Living for the Next Quarter Of late, many publicly listed companies have been living “quarter to quarter” or the practice of setting targets, tracking them for progress, and closing out sales and revenue generating items based on the next quarter which is a short term imperative rather than planning for the longer term. This has […]

10568 What is Pareto Analysis and How it is Applied in Six Sigma Projects

What is the Pareto Principle ? The Pareto Principle was an observation of a famous Italian economist named Vilfredo Pareto. He was trying to analyze the distribution of income amongst the population of Italy. That is when he observed that 80% of the income generated went to 20% of the population. He then began observing […]

12659 Strong Medicine: A Case Study of the Indian Healthcare Sector

The Paradox of the Indian Healthcare Sector For a country that prides itself on being a welfare state that looks after its many poor and underprivileged citizens, India spends surprisingly less on healthcare as a percentage of GDP or Gross Domestic Product than other developing and developed countries. Indeed, India is among the countries with […]

9575 How Central Bankers and Policymakers are Losing Control of the Global Economy

The US Fed and Tapering of Quantitative Easing (QE) The recent announcement that the United States Federal Reserve was thinking of tapering the Quantitative Easing program or QE immediately spooked the stock markets, which went into free fall. Mind you, this was not the actual tapering off the program but just a line of thought. […]

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