How to Effectively Track Outsourcing in GP Manufacturing

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If your manufacturing process requires one or more outsourced services you may struggle with the complexities of tracking materials and costs through the internal and external supply chain.  Microsoft Dynamics GP offers a streamlined method to move materials, accumulate costs and update vendor records as needed.  GP uses the Manufacturing Bill of Materials, Routing, Manufacturing Order and Purchase Order to capture the transactions with full integration to GL, Inventory and Accounts Payable.

Properly set up, GP can handle multiple outsourcing scenarios including:


  • Recording the shipment of materials with a Bill of Lading
  • Generating linked purchase orders for sequential outsourcing services each provided by different vendors
  • Landed cost capture
  • Include outsourcing into the standard cost of Periodic Valuation Items
  • Consolidate services for multiple MO’s onto a single PO
  • Storage of the materials at the vendor site


What does the process look like?

Fabrikam, Inc. produces telescopes that contain an anodized aluminum clamp.  They machine the clamps in-house but use a local vendor who anodizes the clamps and returns them to Fabrikam’s main warehouse.  Planning determines that it is time to replenish the anodized clamps.  There is ample inventory of the raw, machined clamp so this will be a simple matter of sending the clamps out to the vendor for anodizing.

In GP, the transactions flow as follows:

  1. Create a Manufacturing Order to make the item “Anodized Clamps”.
    1. The MO queries the Routing and finds that the work center is outsourced.
    2. The MO queries the Bill of Materials and puts the raw clamps on the picklist for consumption from the main warehouse into the outsourced work center.
  2. The presence of an outsourced work center allows the planner to easily arrange for the anodizing right from the MO Entry window.
    1. Create a linked Purchase Order for the anodizing service.
    2. Record the shipment of the raw clamps and print a Bill Of Lading referencing the parts, PO and MO for easy tracking.  If the components are backflushed, nothing further needs to be done.
  3. When the anodized clamps return, enter a receipt for anodizing against the linked PO.  This pulls the cost into WIP, updates the MO and creates an unvouchered receipt for invoicing.
  4. When the anodized clamps are ready to enter inventory, record a receipt against the MO.  This pulls the cost of the raw clamps, the vendor charges and any other recorded costs out of WIP and into inventory for a fully costed made item.
How to Effectively Track Outsourcing in GP Manufacturing
How to Effectively Track Outsourcing in GP Manufacturing


How do I set this up?

  1. Update the Manufacturing WIP setup with the proper outsourcing cost bucket.
  2. Enter outsourced work centers with their default vendor and the service being provided e.g. anodizing
  3. Enter Routing sequences that point to the outsourced work centers.  Include a Labor Code or Machine ID that represents the standard outsourced cost and quantity.
  4. Enter internally owned components on the Bill of Materials with the appropriate Issue From and Issue To information


This article was written by Sunny Mattoon and was originally posted on the InterDyn - Remington Consulting Blog, a Las Vegas Microsoft Dynamics Gold Partner


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