Customer Provided Items in Contract Manufacturing
In contract manufacturing, customers may supply some or all of the raw materials required to manufacture a product. These materials become part of the Bill of Materials (BOM), but since they are owned by the customer, they should not be procured through the standard buying process.
ERPNext supports this scenario through the Customer Provided Item feature. Instead of following the Buying Cycle, these materials are received directly through a Stock Entry with the purpose Material Receipt, which is created from a Material Request of type Customer Provided.
This functionality is particularly useful when a customer outsources the manufacturing process while supplying the required raw materials to the manufacturer.
Why Use Customer Provided Items?
Normally, materials are received through the Buying Cycle by creating Purchase Orders and Purchase Receipts from suppliers. However, when the materials are supplied by the customer, using the Buying Cycle would require the customer to also be maintained as a supplier, resulting in an unnecessary procurement workflow.
Customer Provided Items bypass the standard Buying Cycle. Instead, they are received directly through a Material Receipt Stock Entry created from a Customer Provided Material Request.
Setting Up a Customer Provided Item
Before customer-supplied materials can be received, the item must be configured appropriately in the Item master.
Step 1: Create the Item
Navigate to:
Home → Stock → Items and Pricing → Item
Create a new Item or open an existing item that will be supplied by the customer.
Step 2: Configure Purchase Settings
In the Purchase, Replenishment Details section:
- Enable Is Customer Provided.
- Select the default customer who will supply the material.
- Disable the Is Purchase Item option.
Disabling Is Purchase Item ensures that the item is not treated as a procured material through the purchasing workflow.
Receiving Customer Provided Items
Customer Provided Items are received through Material Requests and Stock Entries rather than Purchase Receipts.
Step 1: Generate Material Request from Production Plan
If production is planned using a Production Plan, ERPNext can automatically create Material Requests for customer-provided components.
The process involves:
- Selecting the item to be manufactured from a Sales Order or Material Request.
- Using Get Items for Work Order to fetch manufacturing items.
- Clicking Get Raw Materials for Production to generate the required Material Requests.
Step 2: Create Customer Provided Material Request
When a BOM contains components marked as Customer Provided, ERPNext automatically creates separate Material Requests during Production Plan generation.
The system creates:
- A Purchase Material Request for regular purchased components.
- A Customer Provided Material Request for customer-supplied components.
This separation allows purchased and customer-owned materials to be managed independently.
Step 3: Receive the Materials
From the Customer Provided Material Request, create a Stock Entry with the purpose Material Receipt.
This Stock Entry records the receipt of customer-owned materials into inventory without initiating the purchasing process.
Multiple Material Receipts
A single Customer Provided Material Request can be fulfilled through multiple Material Receipt Stock Entries.
This is useful when customers deliver raw materials in multiple shipments instead of a single delivery.
ERPNext automatically updates the Material Request status based on the quantity received through one or more Material Receipt Stock Entries.
Customer Portal Tracking
Customers can monitor the status of their supplied materials through the Material Requests section available in the Web Portal.
The portal automatically filters Material Requests so that each customer can view only the requests associated with their account.
Business Benefits
- Supports contract manufacturing where customers supply raw materials.
- Eliminates the need to treat customers as suppliers.
- Bypasses the standard Buying Cycle for customer-owned materials.
- Automatically separates purchased and customer-provided components during production planning.
- Allows multiple material receipts against a single Material Request.
- Provides customers with visibility into material requests through the Web Portal.
Key Summary
The Customer Provided Item feature enables manufacturers to efficiently manage customer-owned raw materials in contract manufacturing. By receiving these materials through Customer Provided Material Requests and Material Receipt Stock Entries instead of the Buying Cycle, ERPNext simplifies inventory management, maintains clear ownership of materials, and supports seamless production planning.
