When a manufacturer subcontracts production, the subcontractor's work is part of what the product costs. Tracking that cost properly keeps product costing honest. This piece is about tracking subcontracting costs in Odoo.
The subcontracting cost
When production, or a stage of it, is subcontracted, the subcontractor charges for their work. That charge is a real cost of producing the product, just as the cost of an in-house operation is. If a sub-assembly is subcontracted, the cost of that subcontracted production is part of the cost of the sub-assembly, and so part of the cost of any product that uses it. Tracking subcontracting costs is making sure the subcontractor's charge reaches product cost properly, rather than being lost or handled separately.
Why it matters: complete costing
Tracking subcontracting costs matters for the same reason tracking any production cost matters: complete, honest product costing. The cost of a manufactured product is built up from everything that goes into making it. For a product whose production involves subcontracting, the subcontractor's work is one of those things. If the subcontracting cost is not tracked into product cost, the product is undercosted: its costed figure is missing the subcontracted work. And, as with any costing gap, that understatement leads to pricing and margin decisions made on figures that are too low. A manufacturer that subcontracts significantly and does not track the cost into its products does not really know what those products cost. Tracking subcontracting costs closes that gap.
How it works in Odoo
Because Odoo manages subcontracting within the connected system, the subcontracting cost can be tracked into product cost as part of how subcontracting is set up. A subcontracted product, set up properly in Odoo, has its subcontracting arrangement and its bill of materials defined, and the cost of the subcontracting can be part of the costed picture of that product, alongside the cost of the components the manufacturer provides. So the subcontracted product's cost reflects both the components that went into it and the subcontractor's charge for the work. From there, that cost flows on into any higher-level product that uses the subcontracted item, just as any component cost flows up a BOM.
Subcontracting and where production happens
A useful way to see it: subcontracting cost is, in effect, the cost of an operation that happens to be performed outside the plant. An in-house operation has a cost, the time at a work center's rate, that goes into product cost. A subcontracted operation has a cost, the subcontractor's charge, that should equally go into product cost. The fact that the work happened at a subcontractor rather than in the manufacturer's own plant does not change the principle: it is a cost of producing the product, and it belongs in the product's cost. Tracking subcontracting costs is applying that principle, making sure outsourced work is costed into the product as in-house work is.
The connected advantage
Tracking subcontracting costs well is much easier because Odoo manages subcontracting within the connected system. If subcontracting were handled outside the system, the subcontractor's costs would have to be gathered and worked into product cost by hand, a manual exercise that is rarely done well. Because Odoo manages the subcontracting, the cost can be part of the connected costing picture. This is one more instance of the value of a connected system: outsourced production, like everything else, is costed within the one system rather than being a cost handled separately.
The takeaway
Tracking subcontracting costs in Odoo means getting the cost of the subcontractor's work into product cost, so costing stays complete and honest. The subcontracting cost is a real cost of producing the product, like the cost of an in-house operation, and if it is not tracked into product cost, the product is undercosted. Because Odoo manages subcontracting within the connected system, the subcontracting cost can be part of the costed picture of the subcontracted product and flow up into the products that use it. For how we approach Odoo for manufacturers, see our manufacturing work.