Subcontract production to an outside manufacturer

Plenty of businesses make things without owning every machine. You buy the fabric and send it to a stitching unit, or ship components to a coating shop and get finished parts back. The accounting behind that is fiddly: your materials sit in someone else’s building but are still yours, and the finished item’s cost has to include both what you sent and what you paid for the work. ERPClaw runs the whole loop and keeps the books balanced at every step.

Say it the way you would out loud:

“We are sending 200 steel brackets to Apex Coating to be powder coated. Set that up.”

Step 1, raise the subcontracting order

“Create a subcontracting order for Apex Coating: they turn our raw brackets into coated brackets.”

The order names the supplier, the finished item you expect back, and the quantity. Behind it sits the finished item’s recipe, which lists both the materials you will send and the coating service you are paying for. If the recipe does not list the service, the order is refused at submission rather than discovered broken at receiving time.

Step 2, send the materials

“Ship the raw brackets for that order to Apex.”

The materials move out of your warehouse and into a supplier location that is still on your books, because the goods are still yours. Nothing is expensed yet. You can send in parts across several shipments if the truck fills up, and the order keeps track of what is still owed.

Step 3, receive the finished goods

“Apex sent back 200 coated brackets. Their charge is 3 dollars each. Receive them.”

This is where the system earns its keep. One receipt does three things at once: the finished goods arrive into stock, their cost is set to the raw material you sent plus the subcontracting charge, and a draft bill for the charge is created for you to approve and pay through the normal purchasing flow. The materials at the supplier are consumed, the finished item carries the full honest cost, and the books balance without anyone doing journal-entry arithmetic.

Partial deliveries work the same way. The order moves through its life on its own: submitted, partially received, completed. The draft bill flows into the normal purchasing approval loop, and if the raw material itself runs short, item substitutes already know the ranked alternative.

Changing your mind

Plans change before goods do. A subcontracting order can be cancelled outright while nothing has shipped. A materials shipment can be reversed as long as nothing has been received against it. Once finished goods have arrived, the posted receipt is permanent, and a correction is a reversal rather than an edit, which is how an honest ledger behaves.

Common questions

Whose stock is it while it sits at the supplier? Yours. The materials move to a supplier location that stays inside your books, so your stock reports still count them and nothing is written off just because it left the building.

How is the finished item’s cost worked out? Raw material cost plus the subcontracting charge for the quantity received. The receipt posts once, with both parts included, so margin reports on the finished item are real from day one.

What if the supplier delivers in batches? Receive each batch as it lands. The order tracks outstanding quantities for both the materials you send and the goods you get back, and moves to completed only when everything has arrived.

Do I pay the supplier through this flow? The receipt creates a draft bill for the subcontracting charge. You approve and pay it exactly like any other supplier bill, so payment approvals stay in one place.

Can I cancel after sending materials? You can reverse the material shipment while nothing has been received. After a receipt exists, cancellation means posting reversals, so the history stays intact.

What stops me from receiving these goods through a normal purchase receipt by mistake? ERPClaw notices the link to the subcontracting order and routes the receipt through the subcontracting flow, so the finished goods are posted exactly once and never double counted.

Reference: the actions behind this page

You never have to type these. They are what ERPClaw runs when you ask, and they are here for anyone calling the API or MCP surface directly, or reading a log.

add-subcontracting-order
submit-subcontracting-order
transfer-materials-to-subcontractor
receive-subcontracted-items --subcontract-charge-rate <rate>
get-subcontracting-order / list-subcontracting-orders
cancel-subcontracting-order
cancel-subcontract-transfer

The order lifecycle is draft, submitted, partially received, completed. A purchase receipt linked to a subcontracting order defers to receive-subcontracted-items so finished goods post exactly once.