Independent IFS Cloud practice · Manufacturing and purchasing design
Design subcontracting so the system knows where the material is
An IFS Cloud outside operation represents work performed by a supplier as part of a shop order routing. Production and purchasing therefore each own a piece of one flow. If the work center, the purchasing object and the reporting step are not designed together, material is shipped out and the system does not know where it is. The stake is work in progress outside the building that no record follows.
Key takeaways
- An outside operation is performed in an outside work center, a work center the company does not own. The material sent to and received from the supplier is tracked by an outside operation item registered on the operation.
- When the outside operation or the shop order is released, a purchase requisition or a purchase order is created for the outside operation item, so purchasing must know it exists.
- The outside operation supply type decides what release creates: Purchase Requisition, Planned Purchase Order or Released Purchase Order. The Outside Operation Rpt Level decides how much of the reporting is automatic (Disallowed, Ship WIP to Supplier or Purchase Order Arrival) and has to be set before the operation is released.
- The WIP has to be reported as shipped to the supplier before the purchase order arrival can be reported. Where the outside operation is the last one, the shop order can be received at purchase order arrival if the outside work center allows it.
- The test table has one row per step of the flow: release, shipment, arrival, receipt of the finished part, and cost and posting. Repeat it for each supply type option the business uses.
1.What is an outside operation in IFS Cloud?
An outside operation is a routing step on a shop order that a supplier performs instead of the company. The IFS documentation on outside operations describes the concept, and the page on work centers describes the work center that the operation uses. The operation is connected to an outside work center, which is a work center not owned by the company at which the manufacturing occurs.
The material sent to and received from the supplier is tracked by an outside operation item registered on the outside operation. The item is the thread through the whole flow, because it is the record that follows the material to and from the supplier. That is why it has to be designed with the work center and not afterwards. The shop order itself, with its statuses and blocks, is described in the shop order lifecycle in IFS Cloud.
2.How does releasing a shop order create purchasing work?
When the outside operation or the shop order is released, IFS Cloud creates a purchase requisition or a purchase order for the outside operation item. The page on the purchase requisition describes the purchasing object the buyer works with.
The design consequence is about visibility. A production planner who releases a shop order has started work in the buyer’s area, and the buyer needs to know where to see it and what to do with it. Agree who sees the purchasing work, how quickly it is handled and who answers when the supplier is not yet agreed. The purchasing set-up that these records enter is described in mastering centralized purchasing in IFS Cloud, and the question of where supply comes from, for the alternative of buying instead of making, in IFS Cloud sourcing rules.
3.How does the setting on the operation change the flow?
The outside operation supply type on the shop order operation decides what release creates for the outside operation item. The documentation lists three options, and each creates a different purchasing object for the buyer:
- Purchase Requisition: a purchase requisition is created for the outside operation item.
- Planned Purchase Order: a planned purchase order is created.
- Released Purchase Order: a released purchase order is created.
The decision belongs to purchasing and production together, because it determines who touches the supplier relationship first. Write the chosen option into the design record with its reason, and test each option that the business intends to use.
4.How do you report that material left and came back?
The WIP has to be reported as shipped to the supplier after the outside operation is released and before the purchase order arrival of the outside operation item can be reported. The sequence matters because the records have to show the events in the order in which they physically happened.
The Outside Operation Rpt Level controls how much of this reporting is automatic, and it has to be set before the operation is released. The three settings are Disallowed, Ship WIP to Supplier and Purchase Order Arrival. Where reporting is manual, name the person who reports the shipment and the moment they do it, for example when the goods leave the warehouse. Where it is automatic, test that the automatic step does not hide a shipment that never physically left.
5.How does the finished result reach inventory?
When the outside operation is the last operation on the shop order, the shop order can be received with the arrived outside operation purchase order line, provided the Receive into Inventory on Last Operation option is enabled on the outside work center. The page on receiving a shop order describes the function, including receipt of a shop order with the arrived outside operation purchase order line.
Cost and accounting follow the receipt. How the cost of subcontracted work enters the part’s value is described in inventory valuation methods and cost levels in IFS Cloud, and the accounting entries that the events create in posting control in IFS Cloud. Neither is repeated here.
6.Which design decisions need purchasing and production in one room?
Six decisions cross the line between purchasing and production and need both in the room: the work center set-up, the item that carries the material, the supplier, the lead time, the cost, and the person who reports shipment. A decision taken by one side alone leaves the other side with a record it did not design.
The work center and the item belong to the master data owner of manufacturing. The supplier, the lead time and the cost belong to purchasing, which also holds the commercial agreement. The reporting person belongs to whoever physically ships the material. Ownership of the flow as a whole is a separate decision: name one role who answers when the material is somewhere and the system says otherwise. Configure-to-order purchasing is a neighbouring topic, covered in the article on CTO purchasing.
7.How do you test the subcontract flow before go-live?
Test the subcontract flow with one scenario per step, run with purchasing and production together, and repeat the table for each supply type option that the business will use.
| Step | What to do | Expected record | Owner |
|---|---|---|---|
| Release | Release a shop order that contains an outside operation | Purchasing work created for the supplier operation, visible to the buyer | Production planner and buyer |
| Shipment | Report the material as shipped to the supplier | Material recorded as out of the building against the operation | Warehouse lead |
| Arrival | Report arrival from the supplier | Arrival accepted only after the WIP shipment to the supplier is reported | Receiving clerk |
| Finished part | Receive the shop order, at purchase order arrival where the outside operation is the last one | Finished part in the intended location | Production lead |
| Cost and posting | Compare the cost and the ledger entry with the expectation | Cost of the subcontracted work in the part value, with its entry | Finance and purchasing |
8.What does a subcontracting design checklist contain?
A subcontracting design is ready for go-live when each of the checks below has a record behind it.
- The work center and the item that carries the material are defined together.
- The buyer knows where purchasing work from a released shop order appears.
- The outside operation supply type is chosen and written down with its reason.
- The Outside Operation Rpt Level is set before the operation is released.
- One person is named to report shipment, with the moment at which they do it.
- The Receive into Inventory on Last Operation option on the outside work center is decided and tested.
- Cost and posting are compared with the expectation.
- One role owns the flow as a whole.
9.Frequently asked questions
What is an outside operation in IFS Cloud?
An outside operation in IFS Cloud represents work performed by a supplier as a step of a shop order routing. It is connected to an outside work center, a work center not owned by the company at which the manufacturing occurs, and the material sent to and received from the supplier is tracked by an outside operation item registered on the operation.
How is a purchase order connected to a shop order operation?
When the outside operation or the shop order is released in IFS Cloud, a purchase requisition or a purchase order is created for the outside operation item. The outside operation supply type on the shop order operation decides which: Purchase Requisition, Planned Purchase Order or Released Purchase Order.
How do I report material sent to a subcontractor?
In IFS Cloud, the WIP is reported as shipped to the supplier before the purchase order arrival of the outside operation item can be reported. The Outside Operation Rpt Level, set before the operation is released, decides whether these steps are reported automatically, with the options Disallowed, Ship WIP to Supplier and Purchase Order Arrival. Where reporting is manual, name the person who reports the shipment.
How is the finished part received into inventory?
The finished part is received through the Receive Shop Order function in IFS Cloud. When the outside operation is the last operation on the shop order, the shop order can be received with the arrived outside operation purchase order line, provided the Receive into Inventory on Last Operation option is enabled on the outside work center.
Who owns the subcontract flow, purchasing or production?
Name one role that owns the subcontract flow as a whole in IFS Cloud, with purchasing owning the supplier, lead time and cost, and production owning the work center, the material item and the shipment report. The owning role answers when the material is at the supplier and the system says otherwise.
10.About the author
Dariusz Myśliwiec: 18 years hands-on with IFS, including IFS Cloud. Based in Kraków, delivering remotely across Europe and globally through an independent practice. You talk to the consultant who does the work, not a sales layer.
IFS is a registered trademark of IFS AB; this practice is not affiliated with IFS AB.
Do you know what is at the subcontractor?
A subcontracting flow review follows one shop order from release to receipt and cost, with purchasing and production in the room. It shows where the record stops following the material.
Book a subcontracting flow review Read about the shop order lifecycle