Subcontracting

This chapter provides an overview of subcontracting using PeopleSoft Manufacturing and discusses how to:

• Select subcontracted operations for purchase order creation.

• Manage purchase order changes.

• Receive end items from vendors.

• Record completed operations and scrap for subcontracted operations.

• Move completed end items.

• Complete production for subcontracted operations.

• Edit or issue components for subcontracted operations.

• Create reversing entries.

• Record actual labor and machine hours.

Understanding Subcontracting Using PeopleSoft Manufacturing

In the shop floor environment, you may need to send components or end items to outside vendors for end item processing, rework, inspection, or testing. PeopleSoft Manufacturing enables you to track production progress and outside processing vendor costs associated with subcontracting using production IDs.

Although managing production with subcontracted operations is similar to managing production for in-house production, there are some differences:

• Once production has been released or started, you select production IDs with subcontracted operations and send the information to PeopleSoft Purchasing where purchase orders are created.

  You record operation completions for both in-house and, once the end items are received back from the vendor, subcontracted operations. Once the end items are complete at the final operation, they can be sent to stock or routed to another production area. If the completed end items are lot- or serial-controlled, you assign lot and serial numbers.

• You determine how much lead time you need to generate and process a purchase order for the subcontracted operation.

  Using PeopleSoft Manufacturing, you can also optionally define a subcontracted item that is a non-inventory item that represents the outside processing services. When defining this subcontracted item you can specify the purchasing attributes for this item. You can then associate this subcontracted item to the subcontracted operation. The subcontracted purchase order will then be created with this subcontracted item. You can also define a purchasing contract, such as a blanket order, for the subcontracted item to utilize the PeopleSoft Purchasing contract functionality.

  If you are using electronic data collection or enable the subcontract streamline option for purchasing receipts, the system automatically generates the subcontracted completions transactions.

  Note. You cannot perform a production ID split if you have run the Select Subcontract Prdn for PO process.

Manage Production with Subcontracted Operations

To manage production with subcontracted operations:

1. Record completed operations and scrap for in-house production for operation sequences prior to the subcontracted operation.

   See Manage Production Using Discrete Orders.

2. Use the Record Completions/Scrap component to make data entry corrections if required.

3. Use the Select Subcontract Production page to generate the file for subcontracted operations to be used by the Create Purchase Orders process (PO_POCREATE).

4. Generate the purchase order for outside processing, and approve and dispatch the purchase order to the vendor.

   If a subcontracted item is associated with a subcontracted operation, then the purchase order will be generated with the subcontracted item and its purchasing attributes and contract information (if available) during the creation of the purchase order.

   Use the PO Stage Load, PO Calculations, PO Creation, Approve Amounts, Approve ChartFields, and Dispatch POs components in PeopleSoft Purchasing to process the subcontracted purchase order.

5. Send end items to outside vendors for subcontracted processing.

6. Receive end items back from vendors using the Receiving page in PeopleSoft Purchasing.

   See Processing Receipts.

7. Use the Subcontracted Receipt page to record completed subcontracted operations and scrap for the manufactured end item.

8. (Optional) Edit components.

9. Record completions and scrap for any additional in-house operations for the manufactured end item.

   See Recording Completions and Scrap Using Electronic Data Collection.

10. Move completed end items out of production.

11. Run the Completions Update process (SFPDCDRV).

12. Use the Complete Production page to indicate that production for all operations has been completed.

13. (Optional) Record actual labor and machine hours associated with the subcontracted operations.

Prerequisites

Prior to scheduling a subcontracted operation:

• Identify which tasks and operations are subcontracted.

  You cannot subcontract operations for configured items.

• (Optional) Specify the vendor that will be performing the operation or task.

• (Optional) Define a subcontracted item that represents the task to be done on the manufacturing end item.

  Note. If you define a subcontracted item, then you must specify the subcontracted item and vendor relationship using the Purchasing Attributes - Item Vendor page.

  See Defining Purchasing Item Attributes.

• (Optional) Define queue and in-transit planning times for subcontracting tasks and operations.

  You can also define setup, run, fixed run, and post production planning and costing times. These options permit accurate scheduling and costing of the subcontracted operations.

• Designate components as subcontractor supplied on the BOM components page.

• Define nonowned components and locations.

• Define purchase order loader defaults within PeopleSoft Purchasing.

• Release material to the shop floor for end items with subcontracted components and operations.

• Create and release productions IDs for end items with subcontracted components and operations.

• Determine how much lead time you need to generate and process a purchase order for the subcontracted operation.

Common Elements Used in This Chapter

Selecting Subcontracted Operations for Purchase Order Creation

When part or all of the manufacturing process is done at an outside vendor, you need to generate purchase orders for production IDs with subcontracted operations. Use purchase orders to authorize a vendor to add labor or material or both to a partially completed end item.

Using the Select Subcontract Prdn for PO page in PeopleSoft Manufacturing, you select one or more production IDs, production areas, or item IDs for which to generate purchase orders for subcontracted operations. When you run the Select Subcontract Prdn for PO process (SFS5000), the system automatically transfers the subcontracted operations information for purchase order creation to PeopleSoft Purchasing, including production ID and subcontracted information (vendor name and manufactured item or subcontracted item) for which the outside processing must be done as well as the operation sequence associated with the outside operation. Once the subcontracted purchase order is generated, it is processed like any regular purchase order within PeopleSoft Purchasing.

To create purchase orders for subcontracted operations, verify that:

• The production ID has a status of Released or In Process.

• An operation list exists for the production ID.

  Manually create an operation list if the production ID is for rework, you didn't specify a routing, or you choose not to copy the routing to the production ID.

Completing Operations and Scrap for Production Using Count Points

If you're using count points, then all subcontracted operations must be defined as count point.

Pages Used to Generate Subcontracted Purchase Orders

Selecting Production to Generate Purchase Orders

Access the Select Subcontract Production page (Production Control, Process Production, Subcontract Production, Subcontract Prdn for PO, Select Subcontract Production).

Generating, Approving, and Dispatching Purchase Orders for Subcontracted Operations

Once you run the Select Subcontract Prdn for PO process, the purchase orders for the subcontracted services can be generated.

To generate, approve, and dispatch the subcontracted purchase order:

1. Run the PO Stage Load process (PO_POSTAGE).

   This process is run with the PO Stage Load page (Purchasing, Purchase Orders, Stage/Source Requests). This process takes all the requests generated from requisitions, PeopleSoft Supply Planning, and PeopleSoft Manufacturing, and stages them for the actual purchase order creation.

2. Run the PO Calculations process (PO_POCALC).

   This process is run with the PO Calculations - Run Controls page (Purchasing, Purchase Orders, Stage/Source Requests).This is an Application Engine process that does most of the processing to create a purchase order.

3. Run the Create Purchase Orders process (PO_POCREATE).

   This process is run with the Create PO page (Purchasing, Purchase Orders, Stage/Source Requests). This is an Application Engine process that generates the purchase orders that will be staged for approval and dispatching.

   If a recommended vendor was listed on the subcontracted task or operation, the purchase order is created with the vendor specified. If the vendor field was left blank on the routing or operation list for the production ID, the suggested vendor, as defined in PeopleSoft Purchasing, is selected.

   The system-generated purchase order for the subcontracted service contains this data:

   • Business unit and production ID associated with the production.

   • Task description if a task code is associated with the subcontracted operation. Otherwise, the end item description is used, along with the prefix of SERVICE.

   • If the subcontracted item ID is associated to the subcontracted operation: the subcontracted item ID and its description are used

   • Quantity and unit of measure.

   • Operation sequence associated with the subcontracted operation.

   • Purchase order due date based on the due date of the subcontracted operation.

   • Purchase order unit price based on the cost defined for the subcontracted operation if the subcontracted item ID is not associated to the subcontracted operation. Otherwise, the purchase order unit price is based on the subcontracted item's unit price from the valid contract or from the purchasing item and vendor relationship.

4. Once you've created the purchase orders, you must approve and dispatch them before you can send the purchase order to the vendor.

   Use the Amount Approval, ChartField Approval, and Dispatch POs components to approve and dispatch the purchase orders for the subcontracted operations.

See Also

SFS2008 - Subcontracted Purchase Order Report

Managing Purchase Order Changes

Sometimes you may need to change a purchase order to respond to production changes. If a purchase order for subcontracting production has been created and a production change requires a change to the purchase order, PeopleSoft Manufacturing sends a purchase order change request to PeopleSoft Purchasing. This request indicates that a purchase order change is required for the subcontracted purchase, and either a purchase order change request is processed or a new purchase order needs to be generated.

You may also need to change the purchase order when any end items have been returned from the vendor as scrap.

If a subcontracted operation has more than one purchase order, the system will not automatically create change requests. You will need to manually create the change requests.

A purchase order change may be necessary when there is a change to:

• The production quantity.

  A quantity change can result from production maintenance as well as from scrapping end items when you're recording completions.

• The actual start date and time or actual due date and time for the production IDs or subcontracted operation.

The purchase order change request is processed by PeopleSoft Purchasing using the Change Load Application Engine process (PO_CHNGLOAD) and the Change Purchase Order Application Engine process (PO_POCHNG).

After you request a purchase order and run the PO Stage load process, the subcontracted operation has an In Process status, after PeopleSoft Purchasing has received and acknowledged the subcontracted operation information.

If you use the background reschedule process to reschedule production with subcontracted operations, and the purchase order date is no longer valid, the system cannot reschedule an In Process purchase order. When running the background reschedule process, you can request that the system check for any production that has an In Process purchase order for subcontracted operations. In this case, the system displays an error message for each instance, unless you decide to skip further in process messages. You can then contact the purchasing department to reschedule the purchase order.

If multiple subcontracted purchase orders exist for the same subcontracted operation, no change order requests will be created from PeopleSoft Manufacturing.

Canceling or Deleting a Subcontracted Purchase Order

If you cancel or delete the subcontracted PO, line, or schedule, the system resets the subcontracted purchase order status for the associated production ID or operation sequences associated with the purchase order, line, or schedule. Therefore, you need to rerun the process to generate a subcontracted purchase order.

Receiving End Items from Vendors

Receiving the end items back from the vendor is a two-step process, but the process can be streamlined so that it is only one step. The process to receive the end items using the two-step process is:

1. Receiving records the receipt of the end items back from the vendor.

2. Production records the operations completions and scrap for the received end items.

If you setup subcontract streamlining in PeopleSoft Purchasing, then the process to receive end items is that the Receiving functionality records the receipt of the end items back from the vendor. Upon saving the receipt the system will perform the purchase order receipt and the production ID completion in one step by automatically generating electronic data collection transactions for the subcontracted completions data. To specify that you want to use subcontracting streamlining, select the Interface Receipt and Subcontract Streamline check boxes on the Maintain Receipts - Receiving page.

See Managing Receipts.

Once the vendor has completed the subcontracted work, the end items are returned to Receiving. To receive end items back from the subcontractor, use the Maintain Receipts - Receiving page.

During the receiving process, the end items can be inspected and accepted or rejected from the vendor. Receiving assigns one of these indicators to the rejected quantity when recording the receipt:

This table summarizes the receiving reject actions and effects:

Subcontracted receipts to stock are prevented if the end item or a component of the end item is on hold and the order is for regular production. Subcontracted receipts to intermediate operations are allowed for regular production.

The PeopleSoft Purchasing receipt process updates production to indicate that the end items have been received. You cannot record operation completions or scrap until the end items have been received.

In addition, you cannot close production until the quantity of end items sent to the vendor is equal to the quantity of scrapped and completed end items received back from the vendor and recorded complete in production.

PeopleSoft Purchasing can optionally receive end items using electronic data collection. Electronic data collection transactions for manufactured end items automatically record the subcontracted completions data. You do not need to record completions in the Subcontracted Receipt pages for these subcontracted end items. After the transactions are recorded and staged, run the Completions/Scrap Update process to update the production balances.

Recording Completed Operations and Scrap for Subcontracted Operations

Once you've processed the end items through receiving and inspection, you can record the operation as complete in PeopleSoft Manufacturing. If the subcontracted operation is the last operation on the routing, you can also indicate that production is completed.

When you record scrap for the end item, the system optionally sends a workflow notification to selected roles defined by you. These roles might include a quality manager or a production control manager.

If you are integrating with a Manufacturing Execution System (MES), you can receive subcontracted operation completions from the MES to the PeopleSoft system. The end items need to be received in PeopleSoft Purchasing before you can record the completion transaction in PeopleSoft Manufacturing. The MES sends the same information for a subcontracted completion as with completions for regular operations.

Note. If you have set up your environment to perform subcontract streamlining then the recording of subcontracted operations is unnecessary.

See Also

Integrating PeopleSoft Manufacturing with a Third-Party System

Understanding SCM Integration

Pages Used to Record Completions and Scrap for Subcontracted Operations

Recording Completed Subcontracted Operations and Scrapped End Items

Access the Subcontracted Receipt page (Production Control, Process Production, Subcontract Production, Receive Subcontract Assembly, Subcontracted Receipt).

Print at Save	Select this check box if you want to print production documents at save time.
Setup Print Options	Click this link to access the Process/Output Options page to select different print criteria for the production documents.
Completed Qty (completed quantity)	Enter the number of end items being completed.
Quality	Click this link to initiate a data entry session and to access either the Data Entry - Subgroup Method page or the Data Entry - Sample Method page in PeopleSoft Quality, depending on the data entry method that you specified when creating the quality control plan.

Operations Data

View display-only production data such as assembly start quantities, number of assemblies scrapped, expected completed quantities, and yield percentages for each operation sequence.

See Also

Collecting Quality Data

Reviewing Subcontract Receipt Information

Access the Receipt Information page (Production Control, Process Production, Subcontract Production, Receive Subcontract Assembly, Subcontracted Receipt, Receipt Information).

Note. Use the Edit Components page if you want to modify or view the components that will be consumed based on the quantity completed or scrapped, or if you need to select the serial or lot numbers for those serial- or lot-controlled components that were consumed when you recorded the completion.

Moving Completed End Items

The process for moving completed end items for subcontracted operations is the same as for other production.

See Moving Completed End Items and Assigning Serial and Lot Numbers.

Pages Used to Move Completed End Items

Completing Production for Subcontracted Operations

The process for completing production for subcontracted operations is similar to the process for other production.

See Running the Completions Update COBOL/SQR Process (SFPDCDRV).

Pages Used to Complete Production for Subcontracted Operations

Editing or Issuing Components for Subcontracted Operations

The process for editing or issuing components for subcontracted operations is similar to that of other production.

See Editing Component Lists.

Pages Used to Edit or Issue Components for Subcontracted Operations

Creating Reversing Entries

If a data entry error is made when recording end item completions or scrap for a subcontracted operation, input a negative number to reverse the completion or scrap entry. For example, an entry was made to record a completion of eight end items at operation 20, but only six end items were actually completed. Enter a -2 in the Completed Qty field to reverse the original entry of 8. This brings the completed quantity balance for that operation to 6.

This reversing entry:

• Rebalances the completions or scrap count.

• Rolls back the reversing entry only through the subcontracted operation.

• Automatically returns any components that were consumed at the current operation to the appropriate WIP location.

• Creates a reversing entry for earned labor, machine, and overhead costs.

Creating a Reversing Entry for Subcontracted Operations Using Count Points

If you are performing reversing entries for production IDs with subcontracted operations, you can reverse operations and scrap from one count point (or subcontracted operation) to the prior count point (or subcontracted operation).

See Also

Moving Completed End Items and Assigning Serial and Lot Numbers

Pages Used to Create Reversing Entries for Subcontracted Operations

Recording and Viewing Actual Labor and Machine Hours

The process for recording actual labor and machine hours for subcontracted production is similar to that of other production.

See Recording Actual Machine and Labor Hours.

Pages Used to Record and View Actual Labor and Machine Hours