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    Raamjee Mani
    Component shipment for sub contracting
    Topic posted December 30, 2018 by Raamjee Mani, tagged Production Execution, Work Execution, Work Request Management 
    135 Views, 3 Comments
    Component shipment for sub contracting


    Client is purchasing a specific sub assembly from supplier technically its not a full purchase of sub assembly. Because to complete the manufacturing of sub assembly, client has to procure/manufacture one or more components and shipping out  those to the specific supplier. Supplier uses the shipped out item by client and add few more components to complete the sub assembly. Supplier is paid for the component added by himself and service charge.



    1) If there is a demand to procure sub assembly from supplier, then demand for the component which are procured/manufactured should flow in supply planning

    2) Notification to warehouse for shipment of component to the supplier and visibility of on-hand with supplier

    3) Once the sub assembly is received by client, auto backflush of  material shipped to the supplier should happen.





    • Aravindan Sankaramurthy

      Hi Raamjee,

      In order to better understand the business problem you are trying to address, I have a few follow up questions - 

      1. Are you trying to model this scenario as 'Contract Manufacturing' or 'Outside processing' in Oracle SCM Cloud? 

      2. If it is a pure contract manufacturing flow, is it a buy/sell subcontracting flow?

      3. Answer to (1) may result in different responses to what you term as expectations


    • VJ

      We have a similar requirement

      Company 'C' creates a PO to procure item 'X' from Supplier A

      Supplier A ships item X to another supplier B (Note: Inventory valuation at this point is with Company 'C')

      Supplier B adds value to this item and the FG is received into warehouse.

      --- We are contemplating on using either

      > Contract Mfg or

      > OSP or

      > using PO for supplier A, Receiving into supplier B (assuming B will be setup as a logical org) and then finally create Tr. Order to ship from supplier B to warehouse

      Need to understand if there are pros/ cons on these options.


      • Venkata Ramana Malluri

        Based on the business use case provided, Contract Manufacturing seem to be the right fit. Following are the details on how the solution can be modeled and couple of options on how OEM supplied Item (Company C supplied item to Supplier B) can be handled.

        • Define Supplier B as one of the Inventory Org within Company C and mark it as Contract Manufacturing enabled
        • Define Item A as planned Buy Item that needs to be procured from Supplier A
        • Define Item B as planned Make Item which is the finished goods delivered by Supplier B (Contract Manufacturer)
        • Define Item BS a service item to pay the service (value addition) charges to Supplier B
        • Make Item A as Company C supplied item to Supplier B
        • Include Item A in the BOM for Item B and also Item BS (service Item). Standard CM setup steps recommended for CM flow need to be followed.
        • Based on the customer business model, enter a sales order or upload forecast for Item B and run the supply chain plan to generate planned orders
        • There will be supply recommendation to create a CM work order in Org Supplier B. This in turn will generate a planned order for Item A by Planning in Org Supplier B. There are couple of options on how Company C can deliver Item A to Supplier B

                  Option 1:

        • The PO created for Item A will have the delivery location as Org Supplier B (which is a logical Org) and will be delivered to Supplier B. But, the receipt of this PO needs to be initiated either manually by Company C or via a ASN by Supplier A. We may need to work out more details if required with Procurement team as this is not a tested use case with our existing Contract Manufacturing solution.

                  Option 2:

        • The PO created for Item A can be received into Company C’s internal warehouse first and then transfer the same to Supplier B using Transfer Order. This is already a supported flow in the current Contract Manufacturing flow.

                  Option 3:​

        • If the customer do not want to create PO for Item A every time a demand  is received for Item B, they can even pre-position Item A with Supplier B by means of Min-Max Planning which will procure from Supplier A and will stock it in bulk with Supplier B and they will report the consumption to Company C as and when they consume Item A. This is also a supported flow in the current Contract Manufacturing flow.