For many businesses this functionality is very effective as the outside operation is manufacturing’s vehicle to send your item(s) out for service via a purchase order generated from a specific routing step. The purchase order specifies a type of labor service to be rendered to your item(s) so that the manufacturing work order may be completed. When the goods are sent to the vendor with a labor purchase order, the system can track and trace the purchase order receipt back to the manufacturing floor and the vendor can send its invoice for the service rendered to be voucher matched and proceed with the payment. A labor purchase order interfaces with inventory, procurement, accounts payable and accounting.
From a manufacturing stand point, it is important to remember that an outside operation is nothing more than the payment for services rendered and not an inventoried item. When the receipt into shop Floor is recorded in the Cardex, it can give the impression that you are receiving an item, but the IM record is for memo purposes, so workers can confirm that the outside service has been completed by the vendor and delivered, so manufacturing can continue. The unique stock and line type X is what drives this type of operation and labor.
The setup of an outside operation is not complicated but you must follow each step exactly or you will not produce the desired results. Other considerations to take into account are:
- Purchase Orders can be generated interactively or by batch using Order Processing (P31410).
- Purchase Orders can be submitted to Approvals.
- Purchase Orders can be consolidated by Branch and Supplier.
- Purchase Orders can be processed with Receipt Routing.
- Work Order routing can include more than one outside operation step for different suppliers.
- Outside operations can be backscheduled.
- Standard or Actual costing methodology can be used in manufacturing for cost extras or add-ons when costing an outside operation item.
- As of A9.3 release, the *OP purchasing information linked to the related manufacturing work order and inventory ledger (Cardex) transactions can be displayed using PO/ Receipt/ Voucher Summary (P43260).
- Open receipt information linked to WO details and receipt transaction recorded in Cardex can be printed with (P43560) - PO/Receipt/Voucher Summary).
For more and detailed information, you can review Knowledge Documentation available in My Oracle Support.