How to Manage Sub-Contracting in ERPNext?

You can send items for sub contracting, also issue materials required to do the job to your sub contractors and receive the finished/semi finished product and also track the material lying with the supplier.

To manage sub contracting you need to
1. Make the item as a "sub contracting item".
2. Create a Bill of Material for the item.
3. Create a purchase order to receive the sub contracted item.
4. Issue the raw material to you sub contractor.
5. Create a Purchase Receipt for the Sub Contracted item.


1. Make the item as a "sub contracting item"


Go to the item master and in "Manufacturing" section and select "Is Sub Contracted" as "Yes".

2. Create a Bill of Material for the item

Go to Production Module and Create a New Bill of Material for the item.


3. Create a purchase order to receive the sub contracted item.

Refer How to create purchase orders?

In purchase order select the "Sub Contractor" as your "Supplier". Once you save a Purchase Order with the required item the raw material you need to issue to the sub contractor will get fetched in the "Raw Material Details" section as shown below.

In the rate field mention the "rate" charged by the "Sub Contractor"

4. Issue the raw material to the sub contractor


Go to Stock Module-->Stock Entry-->New Stock Entry
Select the purpose as "SubContracting as shown below

Select the "Source Warehouse" from where the material is issued and "Target Warehouse" which is your Sub Contractor's warehouse as shown below

Select the items to be issued as per the Bill of Materials of the Sub Contracted item.

Now "Save" and "Submit" the stock entry. This will transfer the raw materials to the Sub Contractor's warehouse.


5. Create a Purchase Receipt for the Sub Contracted item.

When the Sub Contractor sends you the item you need to create a purchase receipt which will increase the qty of the sub contracted item and decrease the qty of the raw materials from the sub contractor's warehouse.

To create a purchase receipt check How to create purchase receipts?

In the Purchase Receipt select "Is Subcontracted" as "Yes" and the Sub Contractor's warehouse and click the "Pull Purchase Order" button as shown below

Now "Save" the Purchase Receipt.  On saving the items issued to the sub contractor (as per the BOM) will be fetched in the "Raw Materials Details" section as shown below.

Now "Submit" the the Purchase Receipt. This will increase inventory level of the received item and   decrease the inventory level of the raw materials from the "Sub Contractor's" warehouse.


Hope this helps to manage the "Sub Contracting" process in ERPNext.