1. Setup and Demo in D365
Subcontracting in AX

2. Agenda Subcontracting Scenarios Required Setup Process
Financial Review
Scenarios – Wont go into details for all, but will talk to some of the more common scenarios we’ve successfully done with clients.
Required Setup – Talk through Items, BOM’s, Routes, Production Parms, Warheouses that need to be set for this to work.
Process – We’ll walk through a scenario using an offsite vendor, lots of automation and the mobile device portal.
Financial Review – We’ll talk through how the transactions flow through the ledger and review the production postings / variances.

3. Subcontracting Scenarios
-This is some of the more frequent scenarios we see for subcontracting.
-Vendor does one operation of many in a route.
-Vendor does one operation for many orders at one time, on one PO (Heat treat, sterilization, etc)
-Vendor makes complete using material we supply and returns to us or ships to our customer.
-There are MANY ways to configure this so it meets your needs, not limited to this setup.
-We will go over item 3b today.
-What you see to day is in D365 for Operations, but outside of the mobile client functionality, all of this will work back to 2009, we did this at XTEK.

4. Subcontract Scenario Note: We are using Standard Cost SUB001 RM001
SV001
Our scenario for today. On the left is our simple BOM. On the right is our process flow.
You should have a copy of the process map in front of you, we’ll go through it in more detail in a bit.
Conceptually:
Send RM001 to vendor physically and transfer in AX.
Vendor works on it
We receive a PO for SV001 into the vendor warehouse and SUB001 is realized into inventory.
Then we transfer SUB001 back to our warehouse physically and in AX.
Some processes running in background:
-release transfer orders to warehouse
-auto confirmation of PO’s.
Note: We are using Standard Cost

5. Subcontracting in AX
Required Setup

6. Product Setup RM001 - Component / Raw Material Item supplied to Vendor
How to get to vendor
Transfer Order to vendor warehouse
Purchase Order to vendor warehouse
Pick to subcontract production order
Transfer Order –
Create Warehouse for each vendor, flag as refilling from main
Item Coverage over-rides
Purchase Order –
DOS to always buy into vendor – Good if you want to substock components there.
Manually change on PO as needed
Pick to production Order
In Print Settings when starting production order, use “Delivery Note Layout” and ship against that.
Our example transferring to vendor.
Using Item Coverage over-ride to transfer from our warehouse to the vendor warehouse.
Assumption is we use it a lot in our facility more than theirs, so we’ll just transfer what they need.

7. Product Setup SV001 - Service Item - The fee you pay to the vendor
Item Type: Service
Item model group:
Stocked Product
Can’t be Standard cost *
Create & activate a cost price record
Flushing Principle: Finish
Storage dimension group of Site / Warehouse
This is what you actually cut a purchase order to the vendor for. How this is linked to the BOM & Route will cause things to happen automatically in AX.
Item Model Group:
Stocked product – This is so you can actually put it on the BOM / Formula lines.
“Fixed Item Receipt Price” will get you Standard Cost like functionality.
Create cost price record so it’s included in the BOM roll of SUB001 / higher level items.
Flushing principle: Finish will keep you from trying to front flush it on accident.
This can’t be in a storage dimension group that uses WHS processes, it should be stocked at the Site / Warehouse level of granularity.

8. Product Setup
SUB001 - BOM / Formula Item – What you get back from vendor
Default Order Type – Production
DOS – Inventory - Vendor Warehouse
Coverage Group: Production Orders to status Started, Auto Firm.
Item Coverage – Transfer from Vendor Warehouse
BOM / Formula Version
Service Item
Line Type: Vendor
Vendor Account
Operation No.
Route Version
Queue Time Before to get lead time.
Resource Requirements: Vendor / Capability
This item must be default order type of Production.
Default Order Settings – Inventory – we will set default warehouse to vendor’s, this will cause production order to create there.
Coverage Group – set to something that firms to status Started so you don’t have to start the production order and auto firms as well.
Item Coverage – Override to order type to call out transfer order from vendor warehouse. Optionally set this to auto firm as well.
BOM / Formula Version:
-Optionally call out the Operation # that vendor does, this will affect what the PO receipt does.
-If you don’t call out line type vendor, you’ll have lots of problems.
Route Version:
-Put queue time before in or actual run time to get a lead time.

9. Warehouse Setup 22 - Non Warehouse Management enabled Warehouse (WMS)
For Vendor Production of SUB001 , set default locations
24 - Warehouse Management enabled Warehouse (WHS)
Our Distribution warehouse, stocks RM001 and SUB001
Transit Warehouse
For moving items between warehouses, WHS is optional.
22 – Set default locations on the warehouse master
24 – Do all the warehouse management setup. There’s a lot, not a discussion for here.
Transit Warehouse – WHS is optional for this.

10. Production Setup Production Parameters Journals Automatic Update
Automatic Report as Finished = Yes.
Automatic Update
Automatic Execution – Auto Route Consumption = Never (This is for if you auto firm productions to status started).
Receive Purchase Order -
These should be defaults.
Show info to get full info log at PO receipt.

11. Production Setup Route Group
Estimate / costing on run time to get costing beyond service item.
Auto consume Run time & Qty
Report Op as finished.
Queue time to get lead time.

12. Production Setup Resource Type: Vendor or Machine
Resource Group - Input Warehouse
Cost Categories
Calendar, Capacity Management or not
Default times (Queue Before, Run, Process Qty, Hours / Time)
Route - Simple one operation, approve & activate
Resource setup can make creating route versions easier. Define your defaults here and they will populate the route when you select this resource.
Applicable resources is a good button to click to ensure you set everything up correctly.

13. Financial Setup
Review of Inventory postings associated with Service items
Purchase order Posting accounts
Production Posting accounts
Item group
Unique group for Service items to handle different account postings
Cost group
Provides appropriate cost breakdown for Services separately from other material costs on Costing sheet

14. Subcontracting in AX
Process

15. Subcontract Scenario
You should have a copy of the process map in front of you, we’ll go through it in more detail in a bit.
Rows on left – who is doing what / swimlanes.
Column headings – Where, white is 24 / distribution / WHS, grey is 22 / vendor / WMS.
Blue boxes w/ square corners – user actions in AX / mobile device.
Rounded corners – AX parms or batch jobs (release TO to warehouse, PO confirmations).
Conceptually:
Send RM001 to vendor physically and transfer in AX.
Vendor works on it
We receive a PO for SV001 into the vendor warehouse and SUB001 is realized into inventory.
Then we transfer SUB001 back to our warehouse physically and in AX.

16. Subcontracting in AX
Financial Review

17. View calculation details
Provides an overview of cost estimation based on Approved and Activated BOM/Formula, Route, and Indirect costs
Provides cost comparisons between estimated and realized consumptions and cost against actuals
Costing sheet view of Production order estimates and actual costs

18. Production postings
Provides a summarized view of all physical and financial postings for a production order, with drill down to Voucher available
Includes Reported as finished quantities and amounts

19. Purchase order receipt and Invoice – Service item
Product receipt journal
DR Cost of purchased materials received
CR Purchase, accrual
DR/CR Purchase expenditure, un-invoiced (Variance)
Invoice journal
Reversal of Product receipt voucher (above)
CR Vendor balance
DR/CR Purchase, fixed receipt profit/loss and offset (Variance)

20. Useful Financial Reports
Production control > Inquiries and reports > Cost analysis reports
Cost estimates and costings
Provides a comparison between Production order estimates and actuals
Cost management > Inquiries and reports > Inventory accounting – analysis reports
Variance analysis statement
Provides variance details for all standard cost variances
Production control > Inquiries and reports > Work in process reports
Materials in process
Represents Material consumption in WIP
Work in process
Represents Route consumption in WIP
Indirect costs in process
Represents Indirect costs in WIP

21. Questions?
Contact information:
Agility Business Solutions: (440)
Colby Gallagher
Chris Tofil