Business Central subcontracting that tracks every outside operation

How Business Central subcontracting is modeled

A work center with a vendor in its Subcontractor No. field stands for an outside process. The center carries the agreed cost, either per unit or per unit of time. It also has a general product posting group. So the purchase posts to the right account. After that, you use it on routings like any internal operation.

We create one such center per vendor and process. Then we decide whether the vendor charges per piece or per batch. Finally, we set the Unit Cost Calculation and Specific Unit Cost options to match. Where several vendors can perform the same step, alternative routings or routing versions keep the choice open for the planner.

Business Central subcontracting: from released order to purchase order

Once you release a production order with an outside operation, the Subcontracting Worksheet collects what you need to order. The Calculate Subcontracts action lists each operation, quantity and vendor. Then Carry Out Action Message turns the lines into purchase orders. They link to the production order and its routing line.

Buyers then treat these like any purchase: confirm dates, send the order and chase the vendor. We set up the worksheet templates and a purchase order layout that shows the production order reference. We add a simple routine for running the worksheet. So no released operation sits waiting because nobody raised the order.

Keeping track of material sent to the subcontractor

Standard Business Central records the purchased service, but it does not by itself move your components to the vendor's premises. Do you need to know what stock sits outside? The usual approach is a location for each subcontractor. Transfer orders then ship components there before the operation.

We design that flow with you. Which components travel? Which does the vendor supply? How do you post consumption at the vendor location? How do you reconcile counts there? For companies with heavy outside processing, some AppSource add-ons automate the shipments and returns. We help you judge if the volume justifies one.

Business Central subcontracting: receiving work and posting output

When you receive the purchase order, the system posts an output entry for the routing operation. So the production order shows that step as done. Nobody opens an output journal. If the outside step is the last operation, the receipt also brings the finished item into inventory.

We test this with each routing pattern you use. The effect differs for a middle operation and a final one. We also rehearse partial receipts, rejected pieces and rework. We add the quality checks you want at the dock. Only then can the next internal operation begin.

Business Central subcontracting costs on the production order

The invoiced amount for the service posts as a direct cost of the production order. It flows into the cost of the finished item. That happens once you finish the order and cost adjustment runs. Expected cost comes from the work center, and the invoice corrects it to the actual figure.

For standard cost items, the difference appears as a subcontracted variance. It tells you when a vendor's charges move away from the standard. We make sure posting setup holds the variance and work in process accounts you need. Then we show finance how to read the production order statistics page for each job.

Business Central subcontracting questions

Does subcontracting require the Premium license?

Yes. It relies on production orders, routings and work centers, all part of the manufacturing functionality in Premium. Essentials companies can buy outside services on plain purchase orders. They cannot link them to routing operations.

Can an entire item be made by a subcontractor?

Yes. A routing can consist of a single outside operation. The production order then consumes your components. The vendor performs the work. Receiving the purchase order posts the finished output. If the vendor supplies everything, a plain purchased item is simpler.

How do we know which jobs are at the vendor?

Open purchase order lines carry the production order number and operation. So a filtered list shows every outside step in progress with its expected date. With vendor locations in use, inventory at each subcontractor is visible as well.

Can the vendor charge per batch instead of per piece?

The work center cost is a unit cost. So you handle a flat batch charge by editing the purchase line or by using the unit cost calculation settings. We agree a consistent method so expected and actual costs stay comparable.

What if a subcontractor returns faulty parts?

You can receive rejected quantity as scrap on the output. Or you can send the pieces back on a new purchase order for rework. We set up the path you prefer and make sure the extra cost lands on the right order. So costs stay accurate.

Related manufacturing and purchasing pages

Business Central subcontracting touches production, purchasing and stock movements at once. These pages describe the neighboring processes that it relies on, from orders to transfers. Start with the page closest to your own outside process. Then ask our consultants how it fits your routings and vendors. For the product detail, see Microsoft Learn: subcontract manufacturing.