Managing Subcontracting in Business Central Manufacturing

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I’ve been implementing NAV and Business Central for 15 years (and ERP for 30), and if I had a euro for every time a subcontracting setup went sideways, I’d have retired long ago.

I still remember a project in a factory outside Birmingham where we spent three weeks trying to reconcile inventory because their lot-tracked raw materials “disappeared” the moment they hit the subcontractor’s gate. In the old days we had to invent all sorts of dummy workarounds just to make it work.

With 2026 Wave 1, Microsoft finally listened and delivered something genuinely useful for manufacturing. Here’s how I’m setting this up now.

The Subcontractor Work Center

Everything starts with a proper Work Center flagged as Subcontractor and linked to the correct vendor.

In this wave the real improvement is how well it now handles Vendor Locations and bins. My advice is to map out the bins and zones at the subcontractor’s site properly. The new logic actually respects them, giving you a clean audit trail of where your stock really is.

Native Lot Tracking, The Game Changer

This is the part I’m most excited about.

Previously, tracking a specific lot number from your warehouse to the subcontractor and back again was a manual nightmare. Now item tracking flows correctly in both directions. When you receive the subcontracting purchase order, Business Central understands that the lot coming back is tied to the lot that went out.

Just remember to enable this in Feature Management. It doesn’t turn on automatically.

Warehouse Picks & Receipts

Another practical improvement is the way warehouse handling now works with subcontracting.

You can now use proper warehouse picks to move components to the To-Production bin for the subcontractor. It might sound like a small detail, but for anyone running a high-volume plant, this is the difference between accurate WIP and a complete mess.

The Costing Side (Still Needs Care)

Even with the new features, the old costing rules still apply.

Always match the vendor invoice to the subcontracting purchase order, then run Adjust Cost – Item Entries. I’ll keep repeating this until I’m blue in the face: if you skip this job, your production costs are just a guess. After that, check the Production Order Statistics. Wave 1 has cleaned these pages up nicely, making variances much easier to spot before they hit your P&L.

Final Thoughts from the Field

Manufacturing has felt like the neglected child of Business Central for a while, but this update finally gives us some proper attention. We’re getting the traceability that specialist MES systems have had for years.

A quick heads-up for partners with Italian clients: the old Italian subcontracting logic is officially being deprecated. If you’ve built custom AL around it, start planning your migration now.

If you’re wrestling with a tricky subcontracting scenario or just want to chat about how Wave 1 handles your specific lot-tracking setup, feel free to reach out. I’ve seen most of the disasters already, and I’m always happy to help you avoid them.