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To use subcontracting, you must configure several settings. This article describes how to configure the basic subcontracting settings and work centers.
Prerequisites
Make sure that the Subcontracting extension is installed. Install it from the Extension Management page or get it from Microsoft Marketplace. Learn more about installing extensions in Installing and Uninstalling Extensions.
Configure general settings
You can specify which information from a subcontracting order to transfer to your purchase documents.
- Choose the
icon, enter Manufacturing Setup, and then choose the related link. - On the Subcontracting FastTab, in the General section, fill in the fields as described in the following table. Hover over a field to read a short description.
| Field | Description |
|---|---|
| Create Prod. Order Info Line | Specifies whether to create an additional information line with the production order description in the subcontracting purchase order. When turned on, the description from the production order line is automatically added as an extra text line. This helps identify which production order item the subcontracting work relates to. |
| Subcontracting Component Transfer Lead Time | Specifies the lead time for transferring components to the subcontractor. This time is subtracted from the production component due date to calculate the transfer order receipt date. The calculation follows the formula: Receipt Date = Due Date of Production Order Component - Subcontracting Component Transfer Lead Time. This formula enables realistic planning of material provision at the subcontractor. |
| Subcontracting Journal Template Name | Specifies the name of the subcontracting journal template to use for direct creation of subcontracting from a released production order routing line. |
| Subcontracting Journal Batch Name | Specifies the name of the subcontracting journal batch to use for direct creation of subcontracting from a released production order routing line. |
| Component Direct Unit Cost | Specifies which direct unit cost of a production order component to use in the subcontracting purchase order. The following options are available: Standard - Uses normal price finding based on purchase prices and discounts. Prod. Order Component - Uses the calculated direct unit cost from the production order component line. This setting influences cost calculation and should be chosen according to your calculation strategy. |
Set up subcontract work centers
To use a work center for subcontracting, you must assign it to a vendor and set up the vendor with a subcontracting location.
- To assign a vendor to a work center, set the Subcontractor No. field on the work center card. Learn more in the following section.
- To assign a subcontracting location to the vendor, go to Set up locations for subcontracting.
Set up subcontract work center fields
Subcontract work centers are set up the same as regular work centers, but have more fields. They're assigned to routings in the same manner as other work centers.
The Subcontractor No. field designates the work center as a subcontract work center. Enter the number of a subcontractor who supplies the work center. You can use this field to administer work centers that aren't in-house but perform processing under contract.
If you subcontract with the vendor for a different rate for each process, select the Specific Unit Cost field. This setting lets you set up a cost on each routing line and saves the time of reentering each purchase order. The cost on the routing line is used in processing instead of the cost on the work center cost fields. When you select Specific Unit Cost, costs are calculated for the vendor by the routing operation.
If you subcontract at a single rate per vendor, leave the Specific Unit Cost field blank. Instead, set up costs by filling in the Direct Unit Cost, Indirect Cost %, and Overhead Rate fields.
The Direct Unit Cost represents what you pay the subcontractor. The Indirect Cost % and Overhead Rate represent your internal overhead costs (such as administration, logistics, or quality inspection). Business Central combines them into a total Unit Cost on the work center card using the formula:
Unit Cost = Direct Unit Cost × (1 + Indirect Cost % / 100) + Overhead Rate
This total unit cost flows to the routing line as Unit Cost per. The indirect cost fields also flow to the subcontracting purchase order, where they're used to split the posted cost into separate direct cost and indirect cost value entries. To learn more about how these fields interact with subcontractor price lists, see How indirect costs apply to subcontractor prices.
Routings that use subcontract work centers
You can use subcontract work centers for operations on routings in the same way as regular work centers. You can set up a routing that uses a subcontract work center as a standard operational step, or modify the routing for a particular production order to include a subcontracted operation. Learn more in Create Routings.
Important
On routing lines for subcontracting operations, the Type field must be set to Work Center (not Machine Center). Machine centers don't support subcontractor assignments, so automatic location changes, pricing, and purchase order creation don't work for machine center operations.
Configure transfer settings
If you plan to transfer components or WIP items between your warehouse and subcontractor locations, review the following settings:
- Transfer routes: Set up transfer routes with an In-Transit Code between your warehouse locations and each subcontractor location. Without a configured route, Business Central creates direct transfer orders, which have limitations when the source or destination location uses advanced warehouse handling. Learn more in Set up transfer routes.
- Inventory Setup: Review the Direct Transfer Posting field on the Inventory Setup page. This field controls how direct transfers are posted and affects which warehouse configurations are supported. Learn more in Transfer modes and warehouse handling.
Related information
Set up work and machine centers
Set up locations for subcontracting
Manufacturing
Setting Up Manufacturing
Work with Business Central