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Subcontracted Production Using Microsoft Dynamics AX 2012 R3, Part 1

by Scott Hamilton
Consultant and Author, The Manufacturing Guild

Editor's Note: The following represents the first of a 2-part article. Much of the information is drawn from Dr. Hamilton's recent book about Warehouse Management using Microsoft Dynamics AX 2012 R3.

There are many possible scenarios for subcontracted production, and different ERP systems provide different approaches for modeling subcontracted production. Several different approaches are even supported by Microsoft Dynamics AX, such as the differences in using production orders versus kanban orders. This article focuses on the use of production orders to support subcontracted production, although the explanation also applies to the use of batch orders in process-oriented operations. The article covers AX 2012 R3 functionality, which provides an additional option for picking supplied material using the Advanced WMS approach, but most of the explanation applies to previous software versions such as AX 2012 and AX 2009.

The different scenarios in subcontracted production typically reflect variations of the supplied material and handling of finished quantities, and how these are modeled and reported within AX. As a baseline for explaining these variations, it is easiest to start with a basic model of production order processing for subcontracted production. Key considerations include the visibility of inventory at the subcontractor site and in transit, and the dual constructs of a production order and its related purchase order for the subcontracted service. These considerations are reflected in the following sections within the article, where the sections have been segmented into two parts.

Part 1 of the Article:

  1. Variations of Subcontracted Production
  2. Basic Model of Production Order Processing for Subcontracted Production

Part 2 of the Article:

  1. Define an Item representing a Subcontracted Service
  2. BOM Information for Subcontracted Production
  3. ...

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About Scott Hamilton

Scott Hamilton has consulted globally with several hundred manufacturing/distribution companies on SCM and ERP issues. His publications include multiple books about SCM using Dynamics 365FO/AX, two textbooks about SCM/ERP, and 100+ articles in Scott has been a frequent speaker at Microsoft and user group conferences around the world, and a 10-time winner of the rarely given Microsoft MVP award.

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