I have a part that has one operation and one material. The op is a subcontract operation, and the material will be purchased and paid for by us but sent directly to the subcontractor from the supplier.
On the surface this seems annoying to try and reflect in the system. One bright side is the entire delivery of material will be consumed and turned into the part, so there isn’t any lingering material inventory hanging around in the subcontractors warehouse to worry about after the job op is complete.
We have other parts with subcontract operations, but for all of them, the materials are purchased and received into our own warehouses and they get issued/shipped out accordingly.
My initial thought was to set up this new part the same way and just receive/issue/ship the material in our warehouse when the subcontractor informs us they received the purchased material, but I can’t help but think there is a more accurate/correct/elegant way to handle this in the system.
Wondering if anyone already does this a better way, or if anyone has any ideas on ways to more accurately reflect what is happening in reality in the system.
In my opinion, this is not a Job, it is a purchased part. I would create 2 POs; one to purchase the material and drop at the supplier and the second for the supplier to do the manufacturing.
That does not allow you to correctly get the cost of the part. Consider that YOUR cost is both the cost of the raw material AND what you pay to the subcontract vendor. With the job/subcontract op design, the raw material cost and the subcontract cost are included in the part cost.
With 2 POs, you incorrectly tell Epicor that you ONLY have to pay the subcontract cost to get that part, leading to incorrect COGS.
@Mark_Wonsil, are you saying there should still be 2 POs and a job with a subcontract op to track costs properly? We’re still on 10.2.700, so the Kinetic idea won’t work for us. We’d really appreciate an explanation, this issue just reared it’s ugly head!
It depends on your business case. Like @jkane said above, if you let the suppier who’s adding value to the material buy the material, then you can let them manage that and have one P.O.
If YOU want to manage the material, then you’ll need two POs. One to pay the material supplier and one to pay the subcontract supplier.
If you don’t have a job, then there is no way to manage material. You purchase it, and you’d expense it to COGS since you’re not receiving it anywhere. You won’t know how much was received at the other supplier or how much they have already used or scrapped. You would receive parts from them and they would just have material cost since they look purchased complete. There would be no link between the purchased material and the subcontracted parts.
That Idea above has expired. I would guess the biggest issue with it was it assumed there will only be one subcontract operation like sending a part to heat treat and then plating.
Mark, how do you handle the product purchased and drop shipped to the subcontractor then? Do you “receive” it on the first PO after the subcontractor receives it? We need to somehow indicate the product was received somewhere to generate an AP invoice for the raw material…
You’re exactly right. If you want to manage the material, then yes you have to get a proof of receipt of the dropship from the subcontract supplier (because who pays for things without a receipt ) and receive it to a Supplier bin. Now, you can pay the material supplier.
When we order from the subcontract supplier, then we create a job and issue the material (from the supplier bin) to that Job and send a subcontracted PO. You could (should) ask the supplier to tell you how much material they used, scrapped, or how much is left, to issue to the job. When we receive those parts, you can now pay the subcontract supplier.
You could also have the material shipped to you and then ship it to the subcontractor when you order work from them. This may be appropriate if you have lot/serial control on the materials.
If managing the material is too much work, you can ask the subcontractor to purchase it and just charge you for managing it. It’s all about trade-offs.
agree with 
You won’t know how much was received at the other supplier or how much they have already used or scrapped. You would receive parts from them and they would just have material cost since they look purchased complete. There would be no link between the purchased material and the subcontracted parts.
) and receive it to a Supplier bin. Now, you can pay the material supplier.