What are the advantages of using a outsourced operation over a Material Part number representative of the labor?
It more closely matches reality. If someone is doing work, and you have an operation to do work it makes sense. If you have a dummy part number, then you have to have a specific business knowledge to know that it’s not really a physical part number. It sounds minor and most of the time isn’t a big deal, but you still have to know about it. Also, with subcon ops you can use the system to ship out material to the vendor, and receive it back into your shop with subcontract operations. As a part number you don’t get that functionality (whether you need it, or even use it is a business decision)
The basic rule for us is, if the vendor is supplying the material, we make it a purchased part and just buy the part. If we supply the material, and they are just working on it, we use a subcontract operation since we need to account for the material usage.
There are pro’s an con’s to both ways, you just have to get everyone on the same page no matter what you do.
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We like using the subcontract operation for all the reasons that Brandon listed as well as being able to link the costs for the subcontract operation directly to the Job through a purchase order.
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Bill I agree with Brandon’s points. Keep in mind that that if you want to see the subcontract costs as opposed to purchased materials in screens such as Project Module or Job Tracker you will need to use one or the other consistently.
Also, if you are tracking individual cost elements such as subcontract or purchased you will be debiting different GL accounts upon receipt, depending on whether it was purchased material versus subcontract.
it is all about reality as other have pointed out… Consider how we used to make “Pins” where I used to work:
- Issue Material (Spool of Wire) to shop
- operation 10: Cut Pins
- Operation 20: Send pins to OUTSIDE PROCESSING for plating
- Operation 30: Inspect pins prior to receiving to stock
There are TWO part numbers involved… the finished part number for the pins, and the WIRE (material). everything else is labor…
in theory, we could also plate the parts in-house… if that was the case, we would change operation 20… we would also need to add the plating material since the supplier normally supplied that material as part of their processing.
Well stated, Brandon.
We have subcontracts that consist of labor and materials which production scheduling wants to separate but accounting probably doesn’t. Production wants visibility into the operational aspect so they can schedule it. Accounting probably would prefer the blended PO with material and labor together but they receive the invoice after most, if not all production is complete.
Thanks Mark, I will see if they have any issues with the outsourced OP posting elsewhere.
Are you paying the same person for the labor and material? Then I would treat it like a purchased part, because that’s what it is (even if it’s a custom to you part). If you are paying 2 different entities (material supplier, and subcontractor), you can’t merge the costs onto 1 PO.
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Evidently we have a lot of subcontract operations however I was unaware because they do not generate a po suggestion. not sure if its a setup issue or 10.0.700 issue… The plan was to create a manufactured part with a material (one vendor) and an outsourced operation (second vendor) so po suggestions would pop for both. I see the material but not the op.
Found another entry on the forum that a material cannot be issued to a subcontract operation. Could this be the issue with PO suggestion for the subcontract op?
They are supposed to. You might have something messed up in your setup.
They may be generating, but they are hidden:
- the BUYER that is used is a default buyer… if noone has access to that buyer, then they will not be seen
- do you actually have them MARKED as Sub-contract Operations? There is a checkbox on the operation in the Engineering workbench… some people “Call” them sub-contract, but they don’t tell the computer about it.
That’s a really good point. Check you MOM and make sure that the subcontract symbol looks like the one below next to subcon. If it looks like the one next to laser, it’s a regular operation and will not generate a PO suggestion (or allow you to attach a PO). Also be careful because you can change the operation on a regular operation to subcontract, but IT’S NOT REALLY CHANGED. I wish they would either really change it, or not let you choose one of those when changing by drop down. (I supposed I could make a BPM for that.)
Edit for additional question:
In my system that check box is not available to change in the engineering workbench. It’s there, but grayed out. I can only change it in the operation master for when I bring the operation in. Is there supposed to be a way to change it without deleting the regular operation and bringing in a whole new subcontract operation?
its marked subcontract on the op default. I am an authorized user on the buyer as well. I thought it may have had something to do with the other post that stated a material could not be issued to a subcontract op. Running this in a test server so maybe I will try adding the assembly to another job and see if po suggestions catches it there.
What is the trigger to generate the PO Suggestion for a Subcontract Operation? Generating PO Suggestions on a part filter didn’t seem to work and there’s no way to filter by job? Does a full MRP need to run? Would a Net Change pick it up? Thanks in Advance.