Sub-contracting Costs

Subcontracting relates to manufacturing operations that are carried out externally by another company. It invoices its services from an hourly rate and according to the time needed.

The setup time and the run time that are indicated for a subcontracted operation are auxiliary data, exclusively used to estimate the sub-contracting costs. Clearly, they are not used in the scheduling process. The operation time for subcontracted operations is assumed to be constant and is defined as the transfer time (fixed time expressed in days).

The subcontracting costs are estimated by multiplying the hourly rate (which is specified in the subcontracting work center) by the time which appears in the routing operation that is subcontracted.