OverviewRootstock‘s “Subcontract” functionality in this context is the process where manufacturing for a given item is done by an outside Vendor and some or all material is supplied to the Vendor from you, the customer.
The price paid to the Vendor is for their “value add”, which can include both labor and material that they may provide themselves.
Key Terms
Subcontract (Parent) Item: An item that is produced by a Vendor where you, the customer, have supplied some or all of the material from your own inventory, and which you still own.
- The Subcontract Item is the part number called out on the PO line.
- It does NOT refer to the components sent to the vendor, unless a component is itself a subcontract item that is manufactured by your vendor using some or all of your material.
Subcontract Bill-of-Material (BOM): Contains a list of items supplied to the Vendor to produce the subcontract item. This BOM does not necessarily reflect all of the components used to produce the item, but must include those supplied to the Vendor.
Subcontract PO Components: The components supplied to the Vendor to produce the Purchased Subcontract Item.
Subcontract Material Cost: Rootstock maintains multiple cost elements that make up an item’s cost.
- The price paid to the Vendor to produce the subcontract item is considered “Subcontract Material Cost”.
- When using a Standard Cost method, this is the cost element that should be established for the “standard” (normal) cost of producing the item.
Subcontract Purchase Order Line (PO Line): A line on a PO where the item being purchased has an Inventory Source = Subcontract.
Backflush: The “auto-issuing” of components is referred to as “backflushing."
- When a Subcontract PO is received, the components identified as backflush items (First Operation or Last Operation, via Inventory Commodity Code or Inventory Item Master) that have been supplied to the Vendor are decremented from the inventory location(s) in the system in which these components are “held” (a virtual location because the components themselves would be physically located at the Vendor).
NOTE Backflushing is only one method Rootstock uses to issue component material to a subcontractor, and cannot be used with serialized components.
Backflush Policy: An attribute defined on the Inventory Commodity Code used for the given component, or overridden on the component’s Inventory Item Master.
Vendor Backflush Location: The inventory location(s) for these components must have specific attributes to allow the material to be backflushed. These inventory locations are referred to as Vendor Backflush Locations, which will be described in more detail below.
PO Issue: A Subcontract Component, whether flagged for backflush or not, can be issued using the PO Issue program under the Purchasing menu.
IMPORTANT Items can be issued when the PO Line status is 5 (approved/submitted to vendor, 7 (partially received) or 8 (fully received).
PO Issue Reversal: A Subcontract Component, whether flagged for backflush or not, can be reverse issued using the PO Issue program under the Purchasing menu.
NOTE Backflush items will “reverse backflush” if a PO Receipt for a Subcontract Parent Item is reversed (but not if RTVd).
Purchase Price Variance (PPV): When using Standard Cost as the cost method, the Purchase Order PO Line price is compared to the ‘Subcontract Material Cost’ cost element and any difference between these two values is booked as PPV.
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