Job work · India

Job work costing, back onto the part

Plating, machining, heat treatment, powder coating. Sending work out is normal in India. So is this: the part comes back, and nobody can say what it cost, because the job work charge went into a general expense account weeks later.

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Why it goes wrong

Why job work cost goes missing

Most systems have nowhere to put material that is yours but is not on your floor. So it gets issued out, written off, or parked in a warehouse that does not exist. Three things follow. All three cost money.

The stock figure stops being true: You own the material. It is on somebody else's floor. If the system cannot say that, then either your stock is overstated or the material has vanished from it.
The job worker's bill lands nowhere useful: It arrives weeks later, gets coded to an expense account, and stops being connected to the parts it was for.
The part costs less than it did: Every quotation, every margin and every stock valuation using that part is wrong by the amount you paid the job worker.

What changes

Three links that keep job work costed

It is still your stock

Material at a job worker is held as a job order quantity against the warehouse structure. It is visible, it is yours, and it is not confused with what is on your own racks.

The bill ties to the movement

The job worker's invoice carries the job work document and the line it relates to, so the charge and the material that caused it stay joined.

The cost reaches the part

From there it goes into the cost of the item, the same way material and labour do. Not into a monthly expense account nobody can take apart later.

That is the whole mechanism, and it is deliberately dull. The value is not a clever screen. It is that the link exists at all, so the number at the end of it can be trusted.

Where you see it

Job work as its own line on the production order

On a production order, job work sits beside material, labour and machine time rather than hiding inside overhead. That is what lets you answer a question most plants cannot.

Production order · cost sheet

Materialplan vs actual

Labourplan vs actual

Machine and overheadplan vs actual

Job workplan vs actual

Total production costvariance

The question is whether sending that operation out is cheaper than doing it inside. With job work as its own line, across enough orders, that stops being an argument and becomes arithmetic. Without it, the honest answer is that nobody knows.

Manufacturing and job costing ›

The people you send it to

Job workers are vendors too, and get rated like them

Rated on what came back

A job worker sits on the vendor record like any other supplier, with quality and delivery ratings built from receipts rather than impressions.

Checked on return

Work coming back can be inspected against the quality plan held on the item, with accepted and rejected kept as separate numbers.

Paid on agreed rates

Rates held against the job worker, so the bill is checked against what was agreed rather than what was remembered.

Bring one part you send out.

The part, the job worker, what they charge, and what your system currently thinks that part costs. The gap between the last two is usually the conversation.

Book a demo Manufacturing and MRP

Useful to have ready

One part that goes out for processing, and to whom
What that processing costs per piece
How the charge is booked today, and by whom
Whether that cost currently reaches the part