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Partially outsourced manufacturing

Manage complex manufacturing with partial outsourcing in Katana for enhanced flexibility.

Siim Sirel avatar
Written by Siim Sirel
Updated over a week ago

Katana facilitates partially outsourced manufacturing, allowing integration of in-house and third-party processes. This guide explains how to manage semi-finished goods, combining internal production with outsourced operations to optimize resource use and production timelines. It includes setting up outsourced purchase orders (OPOs) and tracking subassemblies, crucial for maintaining continuity and quality.

Partially outsourced manufacturing is a business model where a company mostly manufactures in-house and uses a contracting partner for part of the manufacturing process.

Katana can also support a fully outsourced manufacturing workflow where all the manufacturing process is done by the contractor and the brand owner is responsible for purchasing raw materials and tracking their stock for the contract manufacturer.

A general workflow for partially outsourced manufacturing would look something like this:

  1. Purchase raw materials from your supplier

  2. Receive materials

  3. Manufacture at your location

  4. Send semi-finished goods to your contracting partner

  5. Work operations done by the contractor

  6. Receive (semi)finished goods from the contractor

  7. Sales order fulfillment

There are two ways to track partially outsourced manufacturing in Katana, depending on whether you need to track the location of the goods (e.g. semi-finished goods need to be transported to the contractor and back) or not (e.g. contractor carries out the work operations at your location).

Partial outsourcing at a contractor's location

Track the location of semi-finished goods from partially outsourced manufacturing by using subassemblies and outsourced purchase orders (OPO).

Schema of a partial outsourcing workflow

Creating the product and subassembly

You'll first want to create a multilevel product, where one of the subassemblies is sent to your contractor, and another is returned from a contractor.

  1. Create a subassembly that will be transferred from your location to your contracting partner. Open the Product recipe / BOM tab and add all the ingredients that will be used before the operation is outsourced.

    Product recipe tab for a product

    In the Production operations tab, add all the operations that need to be done before the outsourced operation.

    Production operations tab of a product

  2. Create a subassembly that will be returned from the contracting partner. Make sure to enable both I make this product and I buy this product. If you have a default contracting partner for a specific operation, choose it from the Default supplier field. You can also add a service price of the operation in the Default purchase price column.

    A product card highlighting the sourcing option, default suppliers, and default purchase prices

    Head back to the Product recipe / BOM tab to confirm the subassembly is there.

    Product recipe tab of a product

    The Production operations can be left empty as this will be done by your contracting partner.

    Production operations tab of a product. Left empty in this case

  3. Create a finished product that will be sold to your customers. In the Product recipe / BOM tab, add the subassembly that was created earlier as well as the other ingredients that will be used to finish the product.

    Adding a subassembly to a product

    In the Production operations tab, add all the steps that are needed to finish the product.

    Production operations steps in a product

Completing the workflow for partial outsourcing

  1. Create a manufacturing order (MO) for the final product created earlier. Checkmark Create MOs for the subassemblies.

    New manufacturing order popup with "Create MOs for subassemblies checkmarked

  2. Delete the MO that was automatically created for the outsourced subassembly.

    Make screen

  3. Create an OPO in place of the previously deleted MO. Update the Expected arrival date and add a fee for the contracting service as a Price per unit .

    Outsourcing purchase order card

    Note: Setting up your contracting partner as a Default supplier on the item card will trigger a pop-up after choosing the supplier on the OPO so that you can add the subassembly in the required quantity to the order

    Popup for adding missing items from a supplier

    1. Email the order documents to your contractor to receive a quote or to inform them about the incoming order.

  4. Finish the MO for the subassembly you are making. Items are now ready at your manufacturing location to be delivered to your contractor.

  5. Create a Stock transfer from you location to the contractor's location when the subassemblies are picked up by the delivery.

    Stock transfer card

    Note: OPO will now show the ingredient availability as In stock.

    Inventory intel box for an item

  6. Once the contractor's work is finished and the products are returned, receive the OPO.

  7. Finish the MO for the final product. The Cost of the final product includes all the ingredients used, the work operations completed in your own manufacturing, and the service fee for the outsourced operation.

    Highlights certain costs on a manufacturing order

Partial outsourcing at your location

If the partially outsourced operations are carried out at your location (or you don't need to track the location of the semi-finished goods), you can handle partially outsourced manufacturing by using Production operations steps on manufacturing orders (MO).

Schema for partial outsourcing at your location workflow
  1. Go to the Production operations tab of the product card and add the outsourced operation as an Operation directly from the table.

    Production operations tab on a product

  2. Add the contracting partner as a Resource from the table.

    Production operations tab on a product

  3. Add the default cost per piece for contracting the operation by filling in the Cost per hour and Time fields.

  4. Create a MO for the product.

  5. Track the operation statuses on the MO card or through the Shop Floor App.

    Operations table on a manufacturing order

    Tip: Use the Tasks tab to see which orders and products are currently at a contractor.

    Tasks tab

  6. Adjust the operation cost if the service fee for an outsourced operation is different from the default amount after receiving an invoice.

    Operations table

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