Jobwork Inward - Subcontracting

[sanjay141986]

JOB WORK INWARD

What? In the manufacturing industry, "Job Work Inward" refers to a process where a manufacturing unit undertakes the production or processing of semi-finished or finished goods on behalf of a customer. The customer provides the raw materials, and the manufacturing unit performs the required operations, such as machining, assembly, or finishing, to produce the desired goods. The finished or semi-finished products are then returned to the customer. This process is commonly used when customers do not have the necessary facilities or expertise to complete certain manufacturing processes and outsource these tasks to specialized units. The arrangement can help optimize costs, enhance efficiency, and focus on core business activities We have the process for Job Work Inward in our ERPNext system, but it is not structured properly.

Why? Currently, We do not have the direct process to make the Jobwork inward process in ERPNext. We do have the process for Subcontracting outward currently. But, we need to enable this feature in the system which helps the manufacturing Industry to make the Job work inward process within ERPNext and they can track the Customer items from the Customer warehouse.

There's a need to enable a Job Work Inward feature in ERPNext to cater to the manufacturing industry's requirements. The system should be able to track items received from customers, process them, and maintain inventory accurately, including customer-specific warehouses

How?

This is a flowchart that shows how we can achieve this in ERPNext

Pre-requisite

Item: The user needs to create the Raw material/semi-finished/Finished goods item list in the Item document. So that they can easily use these items in the transactions.

Operations: To accommodate customer-specific processes in the Job Work Inward workflow, you can create operations in ERPNext. Operations represent specific tasks or activities that need to be carried out during the manufacturing or processing of items

BOM: The User needs to create a Bill of Materials (BOM) for processing jobs against Work Orders or Job Cards in the ERPNext, The BOM should include all necessary materials (raw materials, semi-finished goods, finished goods, and consumables) and mapped operations to ensure smooth production planning and execution.

Warehouse: The user needs to set up a dedicated customer warehouse, where they can effectively manage and segregate inventory, ensuring that customer-specific materials are tracked and handled separately from our stock. This setup enhances transparency and helps in maintaining accurate inventory records while receiving and issuing the materials.

Transaction Process

Sales Order: To manage Job Work Inward processes from the beginning, starting with a Sales Order in ERPNext, the below option needs to be enabled in the Sales Order

1. Option needed for “Is Job work”
2. In the Sales Order Item table. The user needs to select the service item for which they are going to charge to the customer
3. In the Sales Order Item Table again need a new field for Finished Item where the user will select the actual item based on which the Job Work Inward Order will be made and this item will have BOM mapped for Job work.
4. The quantity needs to be mentioned for how much output quantity is needed.
5. The Rate to be entered for the Service Charge.
6. The user can also enter the Taxes as applicable.

Job Work Order Inward: The user will make the Job Work Order from the Sales Order and here the Actual Item will be fetched to make the further processing.

This doctype will be as similar to a Subcontracting Order where based on the Finished good item the system will show the Raw material item required.

Jobwork Material Inward: Here the user will be able to make the Jobwork inward based on the Jobwork Order. The details of the Raw material will be fetched here as per the BOM. The user can receive this item at the 0.00 value in the customer warehouse so that they can maintain the customer material inventory.

Work Order The user needs to create the Work Order based on the “Jobwork Order” So that we can proceed with the Manufacturing as per our standard process. If there is any operation involved then the Job Card will be created on submission of the Work Order and We can Proceed further for the Consumption of the material and Manufacture of the Finished Goods. This work order will have the reference of “Jobwork Order no” This will help us to track the work order made against which Jobwork order or Sales Order.

Stock Entry: In the Stock Entry, the transaction will be recorded for Material Consumption and Manufacture. Once the Material is Manufactured then it will be sent to the Customer's warehouse so that they can easily send the finished good material to the Customer.

Jobwork Material Delivery: Let’s say with the above process the Finished good is manufactured by us and is ready to be delivered to the customer. We need to make the Jobwork Material Delivery Note so that we can send the material and the Inventory will be out from the customer warehouse and we can also issue the E-waybill from this document.

After the Delivery is done to the customer then we can book the Service Invoice for the Jobwork From the Actual Sales Order

Sales Order ⇒ Delivery Note ⇒ Sales Invoice.

Here we can take the Accounting effect as

Jobwork revenue Account → Credit Customer Account → Debit

This will help us to know about the Revenue generated from the Jobwork process.

[mrkeshwani]

Thank you Sanjay for bringing this up. It is an essential feature for the manufacturing industry.

Secondly, there is GST compliance (ITC-04) for subcontracting, with this feature this compliance also can be automated.

[mrkeshwani]

@rohitwaghchaure This is an essential feature. Please give it the necessary priority.