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Former Member

Subcontracting with Multiple Vendors and External processes

Greetings Experts,

I know there are a lot of links out here explaining the subcontracting process, both via MM and PP. I fully understand both processes and the requirements for each. Unfortunately we have a unique scenario I would greatly appreciate some input on if anyone has dealt with such a scenario.

Currently, our facility uses the MM subcontracting process where we build one product, send it to the vendor (ME2O) and receive it back into stock as another product with the added cost of the outside process. This is working well for us.

However, we have several items with multiple outside processes and I am struggling to develop a clear process. For example:

Material A is manufactured in-house and received into stock

Material A is then sent out to vendor A for heat treating

After the heat treat is completed, we pick up the material from Vendor A and deliver it to Vendor B for Black Oxide

After Black Oxide is complete, we pick up the finished material and receive it back into stock at our location.

From the MM side, I believe this would take 3 materials, with a GI (ME2O) and GR for each outside process.

From PP side, I can easily see how this could be done with 2 "dummy" materials (one for each outside process), and operations in the production order.

The problem I am encountering is as follows......

With dummy materials, how do you actually complete the necessary movements in the system to accurately show inventory at each vendor while the 2 different outside processes are taking place?

We originally followed this process with a single dummy material for all outside processing and did "fake" movements to basically put an unlimited supply of material at the vendor to complete the outside processes. Audit did not like this and we changed the process to follow the PP model so we have a accurate count of specific materials at each vendor waiting for outside processing.

If anyone has experience with this and has developed a working scenario I would appreciate the input.

Thanks in advance for you time and expertise!

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  • Best Answer
    author's profile photo Former Member
    Former Member
    Posted on Aug 19, 2016 at 10:52 AM

    Hi Jason,

    Is there any issue in the MM model that you are using currently?

    For PP model, what I did before was marked the operation in the Production Order as External Operation. This will create Purchase Order automatically during we create the Production Order. But this Purchase Order doesn't have item category L. It's a non material PO. When you do GR for that PO, the operation will be confirmed automatically.

    I think you can do this way in your case (I haven't try, just an idea):

    - Create 3 operations in the Production Order

    a. Internal operation 10, set the BOM to have By Product : A

    b. External Operation 20 for Vendor 1, set the BOM to consume A and have By Product B

    c. External Operation 30 for Vendor 2, set the BOM to consume B and have FG

    - After finish the in house production, confirm operation 10. GR By Product A

    - After subcontracting for Vendor 1 finished, GR the PO for Operation 20, issue A and GR By Product B

    - After subcontracting for Vendor 2 finished, GR the PO for operation 30, issue B, and GR FG

    To know how many product is sitting in the Vendor 1, you can see the stock for Material A

    To know how many product is sitting in the Vendor 2, you can see the stock for material B

    Best Regards,

    Hengky

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    • Former Member

      Hengky,

      That you for your response. This is a method I have not yet considered, but it would require the creation of another material (material B) for the by-product, so it is very similar to the method proposed by Sandeep. I believe either would work and the actual inventory could be tracked by completing the transfer to vendor stock. Thank you for you input, it is appreciated.

      Jason

  • author's profile photo Former Member
    Former Member
    Posted on Aug 15, 2016 at 07:00 PM

    My mistake in one of the last statements....

    "Audit did not like this and we changed the process to follow the PP model"

    I meant MM. For nearly everything today with an external process we create one material in-house, then send it out for external processing and we receive it back into inventory as a different material.

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    • Former Member sandeep praharaj

      Sandeep,

      Thank you for the suggestion. I have thought about this approach, but I was trying to avoid the creation of multiple dummy materials. I believe this will work and it is definitely an option. I appreciate your time and suggestion.

      Thanks

      Jason

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