Katana helps you manage hybrid workflows where part of your product is made in-house and part is outsourced to a contractor. This guide walks you through how to set up and track partially outsourced manufacturing, including setup, inventory tracking, and production cost visibility.
You can also use Katana to handle fully outsourced production, where the contractor handles all manufacturing, and you only manage raw materials and inventory tracking
Workflow overview
Here’s a typical partially outsourced flow:
Purchase raw materials from suppliers
Receive materials at your location
Begin in-house production
Send semi-finished goods to a contractor
Contractor completes remaining operations
Receive finished goods back
Fulfill sales orders
You can manage this process in two ways:
At the contractor’s location (track physical transfers of goods)
At your location (contractor uses your facility)
Option 1: Outsourcing at a contractor’s location
This method lets you track goods that leave and return to your facility using subassemblies and outsourced purchase orders (OPOs).
Step 1: Create Product Structure
Set up a subassembly that will be made partially in-house and then outsourced.
Go to the Product recipe / BOM tab and add the materials used before outsourcing.
In the Production operations tab, add the operations performed at your site.
Create a second subassembly for the product returned from the contractor.
On the General info tab, enable both “Make” and “Buy”.
From the Supply details tab, set your contractor as the Default supplier and add their service fee in Default purchase price.
Create the final product that will be sold.
Add the outsourced subassembly + remaining ingredients to the BOM.
Define all final operations under Production operations.
Step 2: Execute Production
Create an MO for the finished product and check “Create MOs for subassemblies.”
Delete the auto-generated MO for the outsourced subassembly.
Create an OPO instead:
Add the subassembly item.
Set expected arrival date and contractor's fee as Price per unit.
If a default supplier is set, Katana will suggest missing items to add.
Email the order to the contractor for confirmation.
When subassemblies are ready:
Finish the MO for the in-house portion.
Create a Stock Transfer to move goods to the contractor.
Once the contractor returns the product:
Receive the OPO.
Finish the MO for the final product — Katana will include all costs: materials, internal operations, and contractor fees.
Option 2: Outsourcing at your own location
If the contractor performs their operations at your site (or if tracking movement isn’t needed), use Production operations to represent outsourced steps.
Setup:
On the product card, go to Production operations tab.
Add a new operation and name it after the outsourced task.
Assign your contractor as the Resource.
Enter their fee using Cost per hour and set Time to 1 hour (or however long the task takes).
Execution:
Create an MO for the product.
Track the operation via the MO or Shop Floor App.
Use the Tasks tab to monitor which orders are currently with the contractor.
Adjust costs as needed after receiving an invoice.
Tips
Setting the contractor as Default supplier helps automate subassembly and OPO workflows.
Katana will auto-update ingredient availability once the stock transfer is done.
If you make changes to outsourced operations or pricing, always check for open MOs that may need to be updated manually.
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