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Subcontracting

Subcontracting outsources a production step to an external vendor — you send out materials, they process them, and you receive the result back into stock. The materials never stop being yours: they leave your available stock but stay traceable to the subcontracting order until they return.

Subcontracting order

:::note Advanced Manufacturing Subcontracting is part of Advanced Manufacturing and appears only when the feature flag is enabled in Settings → Feature flags. :::

When to use it​

Use a subcontracting order when a routing step happens at a vendor rather than on your own shop floor — plating, heat treatment, specialist finishing, or simply overflow capacity you can't cover in-house.

Worked scenario — outsourcing blow-moulding overflow​

WO-2418 needs 2,000 drums but blow moulder BM-1 can only cover 1,500 in the window. The planner subcontracts the blow-moulding step for 500 drums to job-worker Metro Poly-Moulders: extruded material goes out, moulded drums come back, and trimming + packing finish in-house.

FieldValue
AgainstWO-2418 (blow-moulding step, 500 drums)
SubcontractorMetro Poly-Moulders
Send outHDPE Granules 1,200 kg, Masterbatch Blue 20 kg
Receive back500 moulded drums (semi-finished)
Processing charge₹18 / drum

The send-out / receive-back cycle​

  1. Raise a subcontracting order against the work order (or item) being outsourced, and pick the subcontractor account.
  2. Send out materials — the components you supply are issued to the vendor's location, so they leave your available stock but stay traceable to the order.
  3. Vendor processes the materials into the semi-finished or finished item.
  4. Receive back the processed goods. The output is added to stock and the supplied materials are consumed against the order.
  5. Reconcile the vendor's processing charge as a purchase for the service.

Materials sent out​

ComponentQtyRateValue moved to vendor
HDPE Granules Grade A1,200 kg (+ scrap)₹80/kg₹96,000
Masterbatch Blue20 kg₹250/kg₹5,000
Total sent₹1,01,000

Goods received back​

ItemSent-equivalentReceived goodScrap
50 L Drum (moulded, semi-finished)5004946

The 494 good drums land back in stock (routed through QC first); the 6-drum scrap is written off as an Adjustment Decrease, and the vendor is billed only for good output.

Stage-wise stock impact​

StageStock impact
Send outSupplied materials move to the subcontractor location — off available, still yours.
Receive backMoulded drums land in stock; the consumed materials are cleared against the order.
ScrapShort-moulded material posts as an Adjustment Decrease.

Reconciling the processing charge​

Metro Poly-Moulders bills for the service, not the material (which was always yours):

Job-work processing: 494 drums × ₹18   =  ₹8,892
GST @18% (SAC 9988, job-work service)  =  ₹1,600
                                          --------
Vendor bill total                         ₹10,492

Book it as an ordinary purchase of a service (input GST claimable), which adds ₹18/drum of conversion cost to those 494 drums on top of their material.

:::caution Job-work goods move on a challan, not an invoice Under GST, goods you send for job work move on a delivery challan (not a tax invoice) — you are not selling the granules, so no output GST applies on the send-out. The materials must return within the statutory window (one year for inputs) and the movement is reported in ITC-04. Keep the challan reference on the subcontracting order so the send-out and receive-back reconcile. :::

:::tip Inspect on return Route received goods through Quality Control before they hit available stock, so a bad batch from the vendor is caught before it feeds the in-house trimming and packing steps. :::