Before you can track outside processing manufacturing you must set up the following:
Supplier(s) - Set up one supplier for each company that will perform manufacturing work.
Location(s) - There are three methods that you can use to set up locations for outside processing, and you can combine these methods if required. The methods are:
You can set up one location for each manufacturing supplier. This allows you to completely track inventory of components and finished goods for each supplier independently.
You can set up a single location for all manufacturing suppliers to share, and then set up a work center for each supplier. This method is recommended if you have many suppliers, and cannot track each individually. You can set up a primary work order bin for each supplier so that inventory levels are tracked.
You can use your existing warehouse locations if the manufacturing suppliers are located near your warehouses and are integrated into your existing warehouse workflows. You can then set up work centers and a primary work order bin for each supplier to track inventory.
Service Product(s) - Set up service products to represent the manufacturing work for which you will be billed. For example, if a manufacturer will charge you for building Product A, you could set up a service product called Product A Assembly. During the manufacturing process for outside processing, a purchase order is created for the service product.
Purchase Cost(s) - If you use the same suppliers each time a product is built, set up purchase cost matrixes for each service product. This allows the software to calculate the correct costs for the purchase orders that are generated for the service products. However, if you use different suppliers for components and manufacturing work each time a product is built, you do not need to set up purchase cost matrixes because costs are manually entered when manually creating purchase orders.
Purchase Class(es) - Set up purchase classes to use for system-generated purchase orders for service products.
Cost Categorie(s) - Set up cost categories to define manufacturing costs.
Work Center Group(s) - Set up work center groups if cost categories are performed in groups of work centers.
Work Center(s) - Set up work centers to indicate where work is performed. Depending on how you set up locations, you may need to set up a work center for each supplier.
Operation(s) - Set up operation codes to track specific steps in the manufacturing process.
Bill(s) of Material - Set up bills of material for each manufactured product to indicate the work centers (or work center groups) that will build the product, the associated costs, and the associated operations.
Note You must also set up general ledger accounts for outside processing. For more information on the accounts, see Manufacturing Account Resolution.
To set up outside processing:
In Supplier Maintenance, create suppliers for each external company that will perform manufacturing for your company.
If you want to track inventory in one or more locations for the suppliers you set up in step 1, create the locations in Location Maintenance. For each location, select the Outside Process Location check box to indicate the location is for outside processing.
In Product Maintenance, create service products for the manufacturing work for which your company will be charged. Select the Service radio button on the General tab for each service product.
If you are performing a repetitive manufacturing cycle with set costs, create a cost matrix in Purchase Cost Matrix Maintenance for the appropriate supplier you created in step 1 and each service product you created in step 3.
In Purchase Class Maintenance, create one or more purchase classes to use for service products for outside processing purchase orders. Use a name for each purchase class that clearly identifies its purpose.
In Cost Category Maintenance, set up cost categories to track costs for the outside processing. Enter a purchase class you created in step 5 for each cost category. If the cost category is associated with a single service product, enter the service product for the cost category.
In Work Center Maintenance, set up work centers for each manufacturing supplier. You can associate specific cost categories with each work center.
If necessary, in Work Center Group Maintenance, set up groups of work centers. You can associate specific cost categories with each work center group.
In Operation Maintenance, set up operations to track the steps of manufacturing processes.
In Bill of Material Maintenance, set up bills of material for manufactured products and kits.
Note You must also set up general ledger account resolution for outside processing. For more information on where you can set up each account, see Account Resolution Order.
You now can use outside processing to perform manufacturing work. For more information, see Using Outside Processing for Manufacturing.
For a visual representation of the setup, see Outside Processing Setup Diagram.
An outside processing supplier (XYZ) is defined as a single work center (WC-XYZ1) and there is only one assembly operation (Assembly) and one purchase class (Outside). This outside processing supplier assembles three finished products: Product A, Product B, and Product C. It charges $1.00 to assemble Product A or Product B, but $1.50 to assemble Product C.
To set up outside processing for this supplier:
In Supplier Maintenance, create supplier XYZ.
In Location Maintenance, create outside process location XYZ for the supplier.
In Product Maintenance, create two service products: Assembly A and Assembly B.
In Purchase Cost Matrix Maintenance, create a purchase cost matrix for the Assembly A product and supplier XYZ with a cost of $1.00, and create a purchase cost matrix for the Assembly B product and supplier XYZ with a cost of $1.50.
In Purchase Class Maintenance, create a purchase class Outside for outside processing.
In Cost Category Maintenance, create cost category Outside Assembly with Outside as the default purchase class.
In Work Center Maintenance, create work center WC-XYZ1 with XYZ as the default supplier.
In Operation Maintenance, create operation Assembly with Outside Assembly as the default cost category.
In Bill of Material Maintenance, set up bills of material for Product A, Product B, and Product C. For Product A and Product B, when the Assembly operation is defined for work center WC-XYZ1, the software automatically selects cost category Outside Assembly (from the operation definition), and you must manually link service product Assembly A to it. For Product C, when the Assembly operation is defined for work center WC-XYZ1, the software will automatically select cost category Outside Assembly (from the operation definition), and you must manually link service product Assembly B to it.
An outside processing supplier (XYZ) is defined as a single work center (WC-XYZ1) and there is only one assembly operation (Assembly) and one purchase class (Outside). This outside processing supplier assembles five similar finished products, and charges $.50 each regardless of the specific finished product.
To set up outside processing for this supplier:
In Supplier Maintenance, create supplier XYZ.
In Location Maintenance, create outside process location XYZ for the supplier.
In Product Maintenance, create service product Assembly Charge.
In Purchase Cost Matrix Maintenance, create a purchase cost matrix for the Assembly Charge product and supplier XYZ with a cost of $.50.
In Purchase Class Maintenance, create a purchase class Outside for outside processing.
In Cost Category Maintenance, create cost category Outside Assembly with Outside as the default purchase class and Assembly Charge as the default service product.
In Work Center Maintenance, create work center WC-XYZ1 with XYZ as the default supplier and Outside Assembly as the default cost category.
In Operation Maintenance, create operation Assembly with no default cost category.
In Bill of Material Maintenance, create bills of material for all five products. When the Assembly operation is defined for work center WC-XYZ1, the software automatically selects cost category Outside Assembly (from the work center definition) with service product Assembly Charge linked to it.