Co-manufacturing procurement settings
Co-manufacturing procurement settings control how components are procured for the co-manufacturer and affects how costs of components are included in cost of the finished goods. You can find these in your production process customization settings.
This will be the default procurement setting applied to co-manufacturers, but you can set different procurement settings for each co-manufacturer. There are three options:
Sell components - Buy finished products: Select when components and semi-finished products listed in a co-manufacturing production operation are sold to co-manufacturer. The finished or semi-finished product is then bought from the co-manufacturer. In this procurement mode, co-manufacturing suppliers also require a customer entry which Cin7 Core will generate automatically. The co-manufacturer is the owner of the components, not you, and the cost of the finished product does not include the cost of the components.
Transfer components - Buy finished products: Select when components are transferred to co-manufacturer for production of a finished product. You own the components, not the co-manufacturer, and the cost of the finished product includes the cost of the components.
These two modes work well if you have your own warehouse and shop floor. However, if you don't have these facilities these modes are unnecessarily complex.
The third procurement mode is for when production is fully outsourced and components are not stored in your own location.
Purchase components - Buy finished products. Components can be drop-shipped from supplier to co-manufacturer but you keep ownership of the components. The cost of the components is included in the cost of the finished products.
You can edit a co-manufacturing supplier's procurement mode from your work centers if it has not yet been used in a production BOM.
Sell components - Buy finished products
Sell components - Buy finished products co-manufacturing is a business practice where all components listed in co-manufacturing operations are sold to the co-manufacturer.
Type:Input cannot be added to a co-manufacturing operation of a production BOM. If a component produced in the previous operations should be sold as component in a co-manufacturing operation, the component should be listed as Finished Product in the non co-manufacturing operation.
Sale Price tier must be selected for Buy/Sell co-manufacturing operations in a production BOM.
When a co-manufacturing operation is started, a sales order is automatically generated, the co-manufacturer is the Customer. Sales order is created in authorized status unless there is missing mandatory information (e.g. Sales Rep) in which case it will be created in draft status.
The required components for the co-manufacturing operation are added to the sales order. Components sales prices are retrieved from price tiers in Cin7 Core. The price tier for co-manfacturing components is set from the Production BOM of the finished product.
COGS for the product are calculated up until the point where the product is sold to the co-manufacturer.
A purchase order for the finished or semi-finished product is automatically generated, the co-manufacturer is the Supplier. Any services are added to the purchase order as additional costs.
Received product’s cost base will contain full amounts mentioned on the purchase invoice. Any additional costs from manufacturing will be added as manual journals to the finished product/s sale and distributed accordingly to the finished product.
With this method, costs are calculated for the product at the point where it is sold to the manufacturer. For example, the manufacturer produces butter which is then sent to the co-manufacturer for packaging. All production costs will be assigned to the raw butter, and only the costs associated with packaging are then distributed to packaged butter.
Cin7 Core will complete the co-manufacturing operation automatically if all expected finished products and outputs have been received. If no other operations require completion in the production run, Cin7 Core will complete the production run and calculate product’s cost base, distributing the amounts accumulated on WIP account.
COGS are calculated based on what is spent and allocated to production of this product if this sold product was produced within previous operations. If the product is not produced in the previous operations, then based on purchase costs.
The co-manufacturing operation can be completed when the stock is received. No Invoice authorization is needed to complete co-manufacturing operation, but costs will be 0 until the invoice is authorized. Once the invoice has been authorized, the cost for finished product will be updated. If this finished product has already been sold, COGS for the finished product will be updated with the calculated production costs.
Transfer components - Buy finished products
Transfer of components is a business practice where any components and inputs for a co-manufacturing production operation are transferred from manufacturer to the co-manufacturer. This mode is also suitable for transferring inputs/outputs of an operation from one co-manufacturer to another.
When a co-manufacturing operation is started, an authorized transfer order is automatically generated to the co-manufacturing location.
Cin7 Core checks the quantity of existing components at the co-manufacturer's location in this procurement mode and modifies the stock transfer quantities accordingly. If the available component quantity is greater or equal to the required quantity, no new transfer order is generated.
The required components and inputs are added to the transfer order. Costs are recorded to In Transit account when components are sent, then moved to WIP when components are received, then distributed to the product cost base when co-man operation is completed.
If a component has Always Dropship, a purchase order will be created from the supplier of this product (set up in Product) to the co-manufacturing location. If a component has Optional Dropship enabled, the purchase order will be created only if there is no stock at the components location connected to shopfloor in logistics path. See Dropship components to co-manufacturer for more information
A purchase order for the finished or semi-finished product is automatically generated, the co-manufacturer is the Supplier. Any services are added to the purchase order as additional costs.
Received product's cost base will only contain amounts defined on the purchase invoice for services provided by the co-manufacturer. No component costs will be distributed at this moment.
The co-manufacturing operation can be completed when the stock is received. No Invoice authorization is needed to complete co-manufacturing operation, but costs will be 0 until the invoice is authorized. Once the invoice has been authorized, the cost for finished product will be updated. If this finished product has already been sold, COGS for the finished product will be updated with the calculated production costs.
Purchase components - Buy finished products
Purchase of components is a business practice where any components for a co-manufacturing production operation are purchased by the merchant, but sent from the supplier directly to the co-manufacturer. This mode is also suitable for transferring inputs/outputs of an operation from one co-manufacturer to another.
Configure component suppliers before using this procurement mode.
When a co-manufacturing operation is started, an authorized purchase order is automatically generated from the supplier to the co-manufacturing location.
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The required components are added to the purchase order. Co-manufacturing can contain many components which should be purchased from different suppliers. In this case several purchase orders for components will be generated.
Products are grouped into one purchase order if they have one common supplier.
If products have several common suppliers, the supplier which is the common for the highest number of products is selected.
If products have several common suppliers, they are grouped by the supplier alphabetically.
If no suppliers are configured for a component, an error will occur and no purchase order will be generated.
When Purchase Order for components is completed, the cost for components is not allocated to WIP account, although the stock is added to the co-manufacturing location.
A purchase order for the finished product is automatically generated, the co-manufacturer is the supplier. Any services are added to the purchase order as additional costs.
All costs are allocated at the moment when the finished product is marked as received by the merchant.
When the purchase order for finished product is received and invoice is added, the cost is allocated via manual journal and the co-manufacturing operation is completed.