Walkthrough: Subcontracting with Advanced Warehouse Management

Advanced Warehouse Management for Drink-IT • Article • 10/21/2026 •

Our company produces item 1056, a finished beverage product that requires a specialised processing step we cannot perform in-house. We have partnered with an external vendor who handles this operation for us — this is what we call subcontracting.

Here is what the full process looks like:

We start by releasing a production order for item 1056. Because one of the routing operations is subcontracted, we use the Subcontracting Worksheet to automatically generate a purchase order to the vendor. Before the vendor can start their work, they need specific components from us. We ship these components directly from our warehouse to the vendor's location using a transfer order — the system calculates the right quantities and locations automatically.

Once the vendor has completed their work, we receive the finished goods back into our warehouse on a warehouse receipt. Because item 1056 is License Plate tracked, we first assign the lot numbers provided by the vendor, and then assign the license plate numbers to each pallet. After posting the receipt, we register the warehouse put-away to move the goods to their final bin.

The result: item 1056 is now in stock, fully traced by lot and license plate, and the production order can be finished.

When receiving subcontracted goods with License Plate tracking enabled, you must assign item tracking (lot number) before assigning the license plate number. Skipping this order results in the error: "Please enter the item tracking before assigning the license plate tracking!"

Check Setup

Before processing a subcontracting order, verify that the routing (Bill of Operations) and the production BOM (Bill of Materials) are correctly configured to allow subcontracting with component transfer.

Check the Item

1. Select the Search icon , enter Items, and then choose the related link. 2. Select item 1055. 3. Choose the Copy Item action below FastTab Home and create item 1056 which will be a copy of Item 1055. 4. Select item 1056. 5. On FastTab Advanced Warehouse Management specify the Field License Plate Tracking Code with the value ALL. 6. On FastTab Replenishment check if the fields Routing No. and Production Bom No. are filled with value 1055. 7. On FastTab Item Tracking specify the field value Item Tracking Code.

Check the Routing (Bill of Operations)

The routing must contain a subcontracting operation with a work center that is linked to a vendor.

1. Select the Search icon , enter Routings, and then choose the related link.
2. Open the routing value 1055.
3. Find the subcontracting operation line. In the Type field, verify it is set to Work Center. Machine centers do not support subcontracting.
4. Note the value in the Routing Link Code field. This code must match the routing link code on the BOM component, if not set create a new routing link code which will be used in Routing and BOM. 5. Select the work center on that operation line to open the Work Center Card.
6. In the Subcontractor No. field, verify that a vendor number is entered. This designates the work center as a subcontract work center and determines which vendor will receive the purchase order. Open the vendor card and check if the field Subcontracting Location Code is specified below the FastTab Receiving on the Vendor Card.

For more information, see Set up subcontracting.

To make any changes on the Routings don't forget to change the status to Under Development and after the change put status back to Certified.

Check the Production BOM (Bill of Materials)

The production BOM must link the component to the subcontracting operation using the same routing link code, and specify how the component will be supplied.

7. Select the Search icon , enter Production BOMs, and then choose the related link.
8. Open the production BOM 1055.
9. Find the component line that must be provided to the subcontractor.
10. In the Routing Link Code field, verify it contains the same routing link code as the subcontracting operation in the routing. This links the component to that specific operation.
11. In the Component Supply Me.thod field, verify it is set to Transfer to Vendor. This means Business Central will create a transfer order to ship the component from your warehouse to the subcontractor for each production order.

For more information, see Manage components in subcontracting.

To make any changes on the Production Boms don't forget to change the status to Under Development and after the change put status back to Certified. [!NOTE] The three available component supply methods are:

Vendor-Supplied: The subcontractor procures the component directly. Business Central adds a purchase line for it on the subcontracting purchase order.

Consignment at Vendor: The component is already at the subcontractor's location. No transfer is created.

Transfer to Vendor: You ship the exact quantity to the subcontractor per production order. Business Central creates a transfer order. This is the method used in this walkthrough.

Production Order

Create and release a production order for item 1056.

12. Select the Search icon , enter Released Production Orders, and then choose the related link.
13. On the Released Production Orders page, choose the New action.
14. In the Source No. field, enter 1056.
15. In the Quantity field, enter the quantity to produce.
16. In the Location Code field, enter the production location SILVER and Bin Code DOCKR1-BOND.
17. Choose the Refresh Production Order action to populate the routing and components from the BOM.
18. On the Lines FastTab, select the production order line and choose Components to review the component lines.
19. Verify that the component linked to the subcontracting operation shows Component Supply Method = Transfer to Vendor.
20. On the Lines FastTab, choose Routing to review the routing. Confirm that the subcontracting operation shows the correct work center with the vendor.

Subcontracting Worksheet

Use the subcontracting worksheet to generate the subcontracting purchase order for the released production order.

21. Select the Search icon , enter Subcontracting Worksheets, and then choose the related link.
22. Choose the Calculate Subcontracts action. The worksheet populates with the subcontracting operations from the released production order.
23. Review the lines and verify that the correct production order and operation appear.
24. Enable the field Accept Action Message to execute the next step. 25. Choose the Carry Out Action Message action to create the subcontracting purchase order.

For more information, see Order subcontracting.

Transfer Order to Subcontractor

Because the component supply method is Transfer to Vendor, create a transfer order from the subcontracting purchase order to send the components to the subcontractor.

26. Select the Search icon , enter Purchase Orders, and then choose the related link.
27. Open the subcontracting purchase order created from the worksheet.
28. Choose the Create Transf. Ord. to Subcontractor action below Actions>Functions>Subcontracting in the ribbon. 29. Business Central opens the Transfer Order page. On the General FastTab, the Transfer-from location (your warehouse) and the Transfer-to location (the subcontractor's location from the vendor card) are filled in automatically.

When Business Central creates the transfer order, it saves each component's original location code and bin code. If you later delete the transfer order before posting, Business Central restores the original location code and bin code on the production order component.

30. On the Subcontracting Details FactBox, verify the related production order, routing operation, and component quantities.
31. Choose the Release action to release the transfer order.
32. Post the transfer shipment according to your standard warehouse procedure to physically send the components to the subcontractor. If not enough inventory of the components available use the Item Journal to create the correct inventory on the location code applicable.

Warehouse Receipt

When the subcontractor returns the finished goods, receive them using a warehouse receipt on the subcontracting purchase order.

33. Open the subcontracting purchase order.
34. Choose the Create Whse. Receipt action. The Warehouse Receipt page opens with a line for item 1056.

For more information, see Receive items.

Item Tracking

Assign lot number tracking to the receipt line before assigning the license plate number.

Item tracking (lot number) must be entered before License Plate tracking is assigned. If you attempt to assign a license plate number without first entering the lot number, Business Central will display the error: "Please enter the item tracking before assigning the license plate tracking!"

35. On the Warehouse Receipt page, select the line for item 1056.
36. In the lines, choose the Item Tracking Lines action. The Item Tracking Lines page opens.
37. Fill in the tracking information provided by the subcontractor:

Lot No.	Expiration Date	Quantity (Base)
Enter the lot number from the subcontractor	Enter the expiration date	Enter the received quantity

38. Choose Close to close the Item Tracking Lines page.

License Plate Tracking

After item tracking is assigned, assign license plate numbers to the receipt line.

39. On the Warehouse Receipt page, select the line for item 1056.
40. In the lines, choose the License Plate Tracking action. The License Plate Tracking Entries page opens.
41. Select the first tracking line.
42. Select the Open Plate Numbers action. The License Plate Reservation Entries page opens.
43. Select the Assign Plate Numbers action. The Assign License Plate Numbers page opens.
44. Select OK. License plates are assigned according to the default pallet quantity of the item.
45. Repeat for each remaining tracking line.
46. Close the License Plate Tracking Entries page. The Warehouse Receipt page opens.

Post Receipt

Post the warehouse receipt to register the inbound inventory.

47. On the Warehouse Receipt page, verify that item tracking and license plate numbers are correctly assigned on all lines.
48. Choose the Post Receipt action.

The receipt is posted. A put-away activity is created automatically.

Warehouse Put-Away

Complete the put-away to move the received goods to their storage bin.

For more information, see Warehouse Put-aways.

49. Select the Search icon , enter Warehouse Put-away, and then choose the related link.
50. Select the put-away document created from the receipt. The Warehouse Put-away page opens.
51. Check the License Plate No. fields to verify the correct license plates are assigned.
52. In the take lines, update the Bin Code to the bins where you want to place the items.
53. Choose the Register Put-away action.

The put-away is registered. Check Warehouse Entries and Detailed Warehouse Entries to verify inventory is correctly posted with lot number and license plate tracking.

Complete the Production Order

After receiving the subcontracted output, finish the production order.

54. Select the Search icon , enter Released Production Orders, and then choose the related link.
55. Open the production order for item 1056.
56. To review all posted subcontracting transfer entries, choose the Subcontracting Transfer Entries action.
57. Post output and consumption as required, then change the status to Finished when all operations are complete.