Outside processing without manufacturing mode

  • 1 March 2021
  • 2 replies

Userlevel 1

I would like to ask is it possible and how to set outside process (outsourcing) without manufacturing mode. Till now I found solutions only for manufacturers by creating Production Orders but what if there is no production onside and we ship a purchased item to the Vendor for an outside process (coating etc) and then afterwards we receive it back from Vendor ready to sell. How to organize that case in the system in order to calculate costs correctly and track the item?


Best answer by di93 1 March 2021, 17:50

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2 replies

That’s a pretty good flow, obviously minus the creation of a new item (plain SS screw is now a zinc-plated SS screw)….unless I missed something in the explanation. The cost separation by the location is great.

Userlevel 3

Someone probably has a better solution.  But a way to accomplish this process would be to do the following setups:

  • Setup a Transfer Sales Order Type
  • Setup a “Vendor” Warehouse
  • Setup the vendor as a Landed Cost vendor
  • Setup an Inventory Adjustment Reason Code (this will control where your vendor processing expenses are posted)
  • Setup a Landed Cost Code.

Having all of those items setup, the process you would follow would be as follows:

  1. Create a Transfer Sales Order from your warehouse to the new Vendor warehouse
  2. Ship the product
  3. Once the product has been received at the Vendor’s site, you can process a ‘Transfer Receipt’ thru PO Receipt of Goods.  (if there is no delay, you could do a single step transfer for this process, if you don’t need to shipping process)
  4. Once the vendor has finished the work, generate another SO Transfer shipment and ship the transfer, this is for the inventory going from the vendor back to your warehouse.  (Use “Quick Process Settings” on the order type to speed up the process)
  5. Then receive the Transfer in PO Receipt of Goods (again this is the inventory coming back to your warehouse from the vendor).
  6. Now to add the vendor’s processing costs enter a Landed Cost transaction and apply those costs against the last PO Receipt (the receipt coming back to your warehouse).  This will apply the added cost to your goods and setup a liability to matched in Accounts Payable.
  7. One more step, go to AP Bill and Adjustment entry.  Select your outside processing vendor and then click on the ‘Add LC’ to process and match the Landed Cost expense to the vendor’s AP Bill.

A couple of notes: 

  • You may want to setup a bin location in the “Vendor’s” warehouse and setup bins as “Costed Separate” if you have the same item potentially with different costs, this will keep costs separate.
  • Sort of covered in the previous point, but if you have multiple vendors you could setup multiple bin locations for each vendor, not multiple warehouse for each vendor, although you could.  This is more of a preference depending on your needs.

This is just one option.  there are other ways to accomplish this process, but I think this works best as it provides for a shipping/WMS workflow, tracks where the inventory is at all times (in transit or at a physical location, being yours or the vendor) and allows for the vendor’s process costs to be applied at the end. 


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