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In order to meet the several demands of the markets the manufacturing industry usually outsources part or whole of manufacturing process to another person namely job worker for the addition of the value of goods (such as designing, coating on circuits, testing of the product etc) and after the process is completed such goods would be returned back/sold directly to customers of principal. The process involved is termed as ‘job work process’ as per industry norms. Job work can be under taken by person for conversion of raw materials into finished goods, including re-work, testing and its report etc.
The importance of job work to principal is to reduce the capital cost/cost of the activity rather than doing by self which may increase the burden of maintenance, reduce the time frame gap between the productions and selling, it helps the principal to focus on the market rather than in the internal set-up of machinery process etc.
The blog focuses on the procedure to be followed in Sage X3 when principal sent their material to Job worker for treatment or processes such as cutting, assembly, packing, coating the goods etc. we will cover below transactions to fulfill the requirement of this process in Sage X3-
1. Sales order: Principle release the Purchase order for the job work and job worker books the order in their system called as Sales Order in which they mention the material/product which will be returned back to principle after job work process and a service item as job work service product (non-inventory) with the quantity and rate of service work.
2. Material Receipt: When principle send the material to job worker, job worker need to take their material in his inventory to maintain the principle stock until they reprocess or return back to principle with zero cost as it is not job worker’s inventory.
3. Delivery: When the job work is done with the service process then it should be returned back to principle. There is required a challan under GST norms. Job worker generates a document called as Material Transfer Challan to move the material from job worker’s location to Principle’s location. Below detail needs to be mentioned-
4. Service tax invoice: When service work is done then Job worker raises the invoice to Principle for the service work in which Job work amount define with GST taxes.
So we have now understood how to handle Job Work process in Sage X3. We can also take a printout or report from system on respective screen for Challan or other documents. Hope this help you.
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