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Former Member
Jan 05, 2018 at 03:29 PM

Sub contracting and outright toll manufacturing



I am trying to identify a solution for the requirement wherein a manufacturer receives raw material from the customer and is paid only for the value addition or the manufacturer buys his own raw material and bills the customer for both the value add and the cost of raw materials.

The complication is that the customer begins work on the sub contracting type orders (I.e. Customer supplied RM) with his own stock which is then back- filled or replenished when the customer RM shipment arrives.

Unfortunately there is no way to track the qty issued on an interim basis and to reverse this entry when actual customer RM is received.

This also screws up the order costing because the billing is only for the value add while now the input costs include the RM since we begin manufacturing using our own stock (valuation) with the anticipation of refilling with customer supplied RM stock (non valuated)

Please suggest how this can be handled for:

1) Material Handling and inventory control

2) Valuation

Thank you experts!!