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Send components to a subcontractor and receive the finished item

The client says: "We give the vendor our own material. He makes the finished item and sends it back. We pay him for the work only, but the finished item must carry the cost of our material too." This is a subcontracting Purchase Order line, a transfer of the components, and a receipt that consumes them.

Outcome
Components leave stock when the finished item arrives, the vendor bills only his fee, and the finished item is valued at material plus fee
Screens to fill
Warehouse, Inventory Control Setting, Account Payable Setting
Screens used
Purchase Order, Item Transfer, Item Receipt for Purchase Order, Vendor Invoice
Needs first
An approved subcontracting Formula for the finished item, valid on the order date

Set it up once​

  1. On Warehouse, create a warehouse that holds the material lying with the vendor. Tick Warehouse for Vendor. From then on every transfer into or out of it needs Custodian Indicator Vendor and the vendor as Custodian.
  2. On Inventory Control Setting, fill Subcontracting Consumption Journal and Subcontracting Consumption Movement. They are what the receipt uses to take the components out of stock.
  3. On Account Payable Setting, fill Cost Revaluation Journal. It is what the receipt uses to move the components' cost into the finished item.

Run it​

1. Order the finished item​

On Purchase Order, add a line for the finished item with Special Indicator SC and the vendor's warehouse in Subcontracting Warehouse. The price is the vendor's fee for the work. It may be zero.

Press Bom Lines on the line. The first time, the components are filled from the item's approved subcontracting Formula valid on the posting date. Each component's quantity is multiplied by the ordered quantity, except a fixed one. Required Quantity is kept to three decimals, on the order and on the receipt.

2. Send the components​

On Item Transfer, press Subcontracting Purchase Order on the lines toolbar and pick the order. Its components are copied in with what is still to be sent. Transfer them to the Subcontracting Warehouse, with Custodian Indicator Vendor and the vendor as Custodian.

What can still be sent is the Required Quantity less what was sent, plus what came back with a Transfer Return. Sending more is refused. A Transfer Return keeps the order as its reason, so the returned quantity can be sent again.

These components cannot be issued with Picking List. That is refused: they go by transfer, and the receipt consumes them.

3. Receive the finished item​

On Item Receipt for Purchase Order, take the order line as usual. The line's Bom Lines come with it. Actual Quantity starts at the Required Quantity and can be changed to what was really used.

Save. In the same save:

  • An Inventory Movement takes the components out of the Subcontracting Warehouse. A batch named on the Bom Lines is used, otherwise the oldest batch first. The vendor is filled as custodian.
  • The receipt line is valued at the vendor's fee only.
  • A Cost Revaluation adds the cost of the consumed components to the received item.

If any of this fails, nothing is saved: the receipt, the movement and the revaluation go together.

4. Pay the vendor​

On Vendor Invoice, the SC line is invoiced at the order's price, the fee, and posted like any other line. A line ordered at zero has nothing to invoice and is left out.

Prove it worked​

  1. After the transfer, the Subcontracting Warehouse holds the components.
  2. After the receipt, the finished item is in stock and the components are gone from the Subcontracting Warehouse.
  3. Open the Cost Revaluation made by the receipt. Its amount is the cost of the components used.
  4. The Vendor Invoice line shows the fee only.

If it does not work​

  • "Subcontracting Warehouse cannot be empty" on the Purchase Order - an SC line needs one.
  • Bom Lines stays empty - the item has no approved subcontracting Formula valid on the order's posting date.
  • The transfer is refused for more than the balance - the order's components have already been sent. Return the extra with a Transfer Return first.
  • "Custodian Indicator cannot be Empty" or "Custodian cannot be Empty" on the transfer - the warehouse is a Warehouse for Vendor. Put Vendor and the vendor on the line.
  • The receipt is refused with the quantity available - a component is not all in the Subcontracting Warehouse yet. Send the rest first.
  • The receipt is refused for a missing journal - fill the two Subcontracting Consumption settings on Inventory Control Setting, or Cost Revaluation Journal on Account Payable Setting.