General Setup

The idea of external production is not different from an operation that has been outsourced to a vendor. Different to the normal purchasing process, however, external production does not purchase a part, but a production service. A differentiation is made between the pure purchase of a service and the provision of material.

Another difference to the standard functionalities in Microsoft Dynamics 365 Business Central is that external production can be invoiced in different units of measure. For example, the coating of an item can be invoiced in pieces or square meters of the coated surface or in any other quantity unit. The setup will be done on the Item Card and the Work Center Card.

Item Card

To allow for flexible usage of subcontracting prices with different units of measure, items can be specified as External Service Items. These external service items, when assigned to subcontracting work centers, will be used in the Purchase Order that is created from the Subcontracting Worksheet instead of the item from the Production Order. This means that different units of measure and special purchase prices can be used because the purchase order is not using the output item from the production order.

In the Item Card, turn on the External Service Item toggle. The value in the Type field automatically changes to Service.

Vendors and purchase prices can be assigned here as in standard Microsoft Dynamics 365 Business Central. This pricing information will be used during the subcontracting process.

Work Center Card

In the Work Center, the External Service Item No. field is linked to the Purchase Prices.

If purchase prices are set up for the vendor/item combination and an item is selected in the External Service Item No. field, the Subcontractor No. field is updated with the corresponding vendor.

Routings

If the Work Center is entered in the Routing line, the External Service Item No. and External Service Item Descr. fields display the external service item related to the subcontracting work center.

Example - General Setup

The following diagram provides an overview of the general setup used with external production. This setup is the same regardless of whether standard Business Central manufacturing is used (production BOM and routing) or COSMO Discrete Manufacturing is used (Master BOM).

In either case, an external service item is created and purchase prices/price lists are set up for the item/subcontractor vendor combination. Then this item and subcontractor vendor are assigned to a subcontracting work center along with a routing link code.

The subcontracting work center is either assigned to the routing or the Master BOM. Items and/or enclosures (supply of material) can be assigned accordingly as well (see Subcontracting with Supply of Material).

Depending on business processes, the production BOM/routing or Master BOM is assigned to the external production item.

The following video shows the setup that will be used in the processing video based on the above diagram.

Processing

In the Production Order, open the Prod. Order Routing page. The External Service Item No. and External Service Item Descr. fields transfer from the routing. Additionally, the item and unit of measure from the production order line are shown in the Item No. Prod. Line and Unit of Measure Prod. Line fields. The item information from the production order line is transferred to the Purchase Order line for informational purposes.

In the Subcontracting Worksheet, run the Calculate Subcontracts function for the Released Production Order. The External Service Item No. and External Service Item Descr. fields are transferred from the routing. Additionally, the unit of measure and price values from the external service item(s) are displayed in the External Service Item UoM Code and External Service Item Direct Cost fields, along with the other information to be included in the purchase order.

After the Carry Out Action Message function is run, a transfer order (if material will be provided to the subcontractor) and purchase order are created. Open and post the Transfer Order (if exists) and then open the Purchase Order.

In the Purchase Order line, the external service item number(s) is used, not the item in the production order. As noted in the Prod. Order routing, the Item No. Prod. Order Line field displays the item number that was used in the source production order.

The values in the Unit of Measure Code and Direct Unit Cost Excl. VAT fields are from the purchase price of the external service item. The quantities can be changed as needed, without affecting the production order.

Example - General Processing

The following video demonstrates this general process of using external production, based on the General Setup example.

Note

As described in the process, the Subcontracting Worksheet is used instead of the Subcontracting Prod. Order, which is described in detail in the Subcontracting Production Order topic. Using the Subcontracting Prod. Order allows you to access most of the subcontracting processes (post-production order creation) in one area.

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