Contract Manufacturing Lifecycle and Features

Contract manufacturing is set into motion either when a customer places an order for manufacturing a product with the original equipment manufacturer (OEM) for back-to-back flow, or from Planning for plan-to-produce flow. The OEM in turn outsources the customer order to the contract manufacturer.

The following figure illustrates the life cycle of contract manufacturing from start to completion:

The following image describes how a contract manufacturing flow works. The customer places a sales order or there is a planned order in place. The manufacturing is outsourced partially to a contract manufacturer. The contract manufacturer manufactures and reports progress to the original equipment manufacturer. The original equipment manufacturer completes the rest of the manufacturing and reports stock to the inventory. The final product is then shipped on the customer's request.

Contract manufacturing consists of the following five features:

• Planning and Promising Contract Manufacturing Orders: Enables automatic scheduling and promising a customer order for a back-to-back contract manufactured item and generates planned orders to a forecast for a plan-to-produce contract manufactured item. Generates replenishment orders for the OEM supplied components which are already positioned at the contract manufacturers' facility, and planned orders for the OEM supplied components which are supplied to the contract manufacturer per order.

• Automatic Supply Creation and Fulfillment: Creates supplies automatically for the OEM supplied components based on the contract manufacturing finished good item demand. It also creates supply for the finished good item and fulfills a customer demand or a planned order demand for a contract manufactured item automatically.

• Track Production Progress: Enables OEMs to track the manufacturing progress in real time and provide visibility to the inventory that they own.

• Automatic Change Management: Manages automatically any change requests coming from the demand side, and exceptions from the supply side.

• Plan and Account Costs: Enables users to compare the costs between outsourced and in-house manufacturing. Cost Accounting enables users to monitor costs at a summary or detail level for each work order using the Review Work Order Costs user interface. This user interface enables users to review costs for in-house manufactured and contract manufactured items.