Multi-company setup with Manufacturing and Trade companies

We have two companies: one for Manufacturing and local orders, and the other for international Trade. Both companies should share the same base information, including items, BOMs, partners, etc., making it a typical case for a Multi-Company setup.

Operational Flow:

  • When the Trade company receives a sales order, it orders some components from international partners and supplies them to the Manufacturing company for subcontract manufacturing (without selling).
  • The Manufacturing company orders some basic components locally.


  1. ERPNext Configuration: Is it possible to set up such a configuration in ERPNext?
  2. Item Setup: What should be set up for Items? Should “Supply Raw Materials for Purchase” be checked?
  • For the Trade company, it should be checked.
  • For the Manufacturing company, it should not be checked.
  1. Order Transfer: How can we transfer a Purchase Order from the Trade company to a Sales Order for the Manufacturing company without manually entering the same order twice (once as a PO and once as an SO)?
  2. Subcontracting: Regarding the “Is Subcontracted” field:
  • For the Trade company, this field should be true.
  • For the Manufacturing company, it should be false.We need both companies to manage their own components from the same BOMs.
  1. Production Planning: How should Production Planning and Work Orders be managed?

Thanks, everyone!

It seems to me you may have more joy with accounting dimensions vs multi company.
It’s easy to change the accounting dimension in many docTypes.

As far as I understand, accounting dimensions are tags within accounting.
I don’t really care about acounting at all, for me the material goods MRP/movements/ordering/… is most important.

I’m surprised that accounting doesn’t need to be tracked.

If you don’t care about accounting, I fail to see why it matters which name the Purchase order is in, vs the sales order (you asked: “How can we transfer a Purchase Order from the Trade company to a Sales Order for the Manufacturing company without manually entering the same order twice”).

Are there different warehouses for the Trade Company?

I assumed all manufacturing was done by the local company, and they “wholesale finished goods” to the Trade Co.

I think my manufacturing expertise is too week to provide a better answer.

I’m not saying that accounting doesn’t need to be tracked, but it’s not the first priority.

The Trade company is located in another country, so it has different accounting rules, partners, currencies, etc.
Both the Manufacturing and Trade companies accept sales orders, but some sales order for the Trade company should generate a sub-contract order between the Trade and Manufacturing companies. Other Sales orders bypass the Manufacturing. And vice versa: the Manufacturing company could take local orders bypassing the Trade company.

The Trade company needs to purchase some components and deliver them to the Manufacturing company. The Manufacturing company should track tolling components and purchase other missing components.

The warehouses are different; the warehouse of the Manufacturing company is local, but the warehouse of the Trade company is a customs warehouse.

Therefore, the transactions between companies are much more complicated, and I see no chance to unite them under one company with different accounting tags/dimensions.

Trading company will need to track its purchases and inventory. However this inventory will be consumed by the manufacturing company - which will need to have that item in inventory per the BOM to manufacture the finished product which it then it sells back to the Trading co. What happens to excess raw material loss due to fault of Mfg co?

You are better off managing this via accounts. ERPNext allows you to have Supplier who is also customer. Trading co to sell Mfg Co the raw material - with invoice at a value of your choice. Mfg co to sell the finished product back to Trading co - invoiced at value of your choice. You can offset the payments due - and then just have one net payment to Mfg co. Trading co purchase of raw material from third party remains unaffected. Accomplishes your desired outcome - I think!

Yes, it sounds better. Is it possible to share or sync some data between the two accounts? For example, product master or BOMs? The Manufacturing company manages BOMs, but the Trading company should calculate and order some components. Well, it’s possible through redirected purchase orders, but I’d prefer to do it directly.

>> What happens to excess raw material loss due to the fault of the Manufacturing company?
Usually, the Trade company orders some spare supply, and the Manufacturing company doesn’t produce big losses.

Nobody sells raw materials between the Trade and Manufacturing companies. The Trade company gives raw materials to the Manufacturing company for tolling, it stays the owner of raw materials.

In multicompany setup, items, customers, suppliers, etc are share between companies. Inventory and warehouses of two companies are separated - and ERPNext rightly does not allow you to transfer goods between 2 separate companies. The issue you will encounter - is when you purchase a stock item - you will need to do a purchase receipt and put in inventory of Trading Co. How will you remove this stock from inventory? How will mfg co receive raw material into stock? Is easy to do an internal invoice between 2 co - even if of zero value…subject to your accountant approval.

You can try one workaround… in ERPnext - even trading co can setup a psuedo “mfg process” which consumes the purchased raw material along with the “semi finished” goods it purchased from mfg co - to produce the end finished product… Dont know how mfg will produce the finished goods without having the raw material on BOM.

We had a situation where we were purchasing and supplying our brand printed bags to our finished goods supplier. At first - they would issue us a credit equal to the cost of each printed bag consumed and we would remove as many bags from our inventory. Got really complicated for both companies to track consumption etc. Later - with our trust - the mfg co started to buy our bags directly from printer. We had to ensure there was transparency on number of bags produced, etc…

For me, subcontracting is the most logical choice. ERPNext Subcontracting Documentation
It aligns perfectly with our process, as the only invoicing between companies is for the cost of manufacturing. This approach reflects reality: we remove raw materials from stock, receive the finished product, and pay only for the labor.