Key Takeaways

✓Install "India - Accounting" module first for correct GST and Chart of Accounts

✓Set HSN codes on all raw materials and finished goods for automatic GST calculation

✓Track real labor costs with Work Centers (₹/hour for labor + overhead)

✓Job Work subcontracting with automatic Delivery Challan for GST compliance

✓Use Master Production Schedule (MPS) to forecast demand and avoid overproduction

Quick Answer

Setting up Odoo Manufacturing for Indian companies requires four phases: (1) India Localization—install the India Accounting module and configure GST/HSN codes on all products, (2) Work Centers—define labor and overhead costs per hour for accurate costing, (3) Subcontracting—set up Job Work workflow with automatic Delivery Challan for GST compliance, (4) MPS—use Master Production Schedule for demand forecasting. This ensures GST Input Tax Credit (ITC) flows correctly from raw materials to finished goods.

Why Indian Manufacturing Needs a Different Approach

Indian manufacturers face unique challenges:

Job Work Compliance: Sending goods to third-party processors requires GST challans and proper documentation

Complex GST Rules: Different rates on raw materials, Input Tax Credit (ITC) tracking, HSN code requirements

Variable Labor Costs: Shift-based wages, overtime calculations, contractor vs. employee distinctions

Most generic ERP guides miss these nuances. They tell you how to create a Bill of Materials (BoM), but they don't tell you how to handle the GST challan when sending goods to a job worker.

This guide is specifically designed for Indian manufacturers. We'll walk you through the end-to-end setup of Odoo Manufacturing (MRP), ensuring you are compliant with local laws while optimizing your factory floor.

Phase 1: The Basics (Indian Localization)

Compliance First. Before you produce a single unit, you must set up the tax structure.

Install India Localization

Ensure the "India - Accounting" module is installed. This gives you the correct Chart of Accounts and GST tax structures.

GST on Manufacturing

Raw Materials

Ensure all your raw materials have the correct HSN Code and GST Rate set in the Product tab.

Finished Goods

Set the HSN code for the item you produce.

Why it matters: When you sell the finished good, Odoo automatically calculates the GST liability minus the Input Tax Credit (ITC) from your raw materials.

Phase 2: Work Centers & Labor Costs

Tracking the real cost of production. In India, labor is often a significant part of the cost. Odoo allows you to track this down to the minute.

Define Work Centers

Go to Manufacturing → Configuration → Work Centers

Create centers like "Cutting Station," "Assembly Line," or "Packaging."

Set Cost per Hour

Labor Cost

Enter the average hourly wage of the operator (e.g., ₹200/hr)

Overhead Cost

Enter the electricity/machine depreciation cost (e.g., ₹500/hr)

Result: When a worker spends 2 hours on a job, Odoo automatically adds ₹1,400 (₹400 labor + ₹1,000 overhead) to the cost of the finished product. Real-time accurate costing.

Phase 3: Subcontracting (The "Job Work" Workflow)

Sending goods out for processing. This is the most critical part for Indian SMEs. You send raw material to a vendor (Job Worker) and get a finished/semi-finished product back.

The Setup

Enable Subcontracting

Go to Manufacturing → Configuration → Settings and check "Subcontracting"

Configure the BoM

→ Create a Bill of Materials for the product you receive back

→ Set BoM Type to "Subcontracting"

→ Add the Subcontractor (Vendor) to the BoM

The Workflow

Raise a Purchase Order to the Job Worker for the "Service Charge"

Odoo automatically creates a "Resupply" Delivery Order to send raw materials to the vendor

When you receive the finished goods, Odoo consumes the raw materials from your stock automatically

📜 GST Compliance: Odoo tracks the movement of goods under "Delivery Challan" for Job Work compliance. All documentation automatically generated.

Phase 4: Master Production Schedule (MPS)

Planning for the future. Don't produce blindly. Use MPS to forecast demand.

The Setup

Go to Manufacturing → Planning → Master Production Schedule

Add your finished products and enter your Forecasted Demand for the next 3 months (based on sales trends)

Result: Odoo will tell you exactly how many units to produce each week to meet that demand without overstocking

Frequently Asked Questions

How do I handle scrap in Odoo Manufacturing?

If a worker damages a raw material, click the "Scrap" button on the Manufacturing Order. This moves the item to a "Scrap Location" and posts a journal entry to the "Loss Inventory" account, ensuring your stock valuation remains accurate.

Can Odoo track Batch Numbers for Quality Control?

Yes. Enable "Lots & Serial Numbers" in Inventory settings. You can force workers to scan the Batch Number of every raw material used. This provides full traceability—if a customer complains, you know exactly which batch of raw material caused the issue.

Does Odoo support "By-Products"?

Yes. If your process produces a main product (e.g., Furniture) and a by-product (e.g., Wood Chips), you can add the by-product to the BoM. Odoo will add the wood chips to your inventory automatically upon completion.

How is GST handled for Job Work in Odoo?

Odoo generates Delivery Challans for goods sent to job workers, complying with GST rules for job work. The system tracks goods movement, and when finished goods are received, it properly accounts for input materials and job work charges for ITC calculation.

Can I track worker efficiency (OEE) in Odoo?

Yes. Odoo tracks time spent at each Work Center. Combined with expected vs. actual production quantities, you can calculate Overall Equipment Effectiveness (OEE). Reports show which stations are underperforming and need optimization.

Conclusion: From Chaos to Control

Manufacturing in India is complex, but your ERP doesn't have to be.

By correctly setting up Subcontracting, Work Centers, and GST rules, Odoo becomes the central brain of your factory, giving you real-time visibility into costs and efficiency.

Ready to digitize your factory floor? Let Braincuber's manufacturing experts audit your current process.

Schedule a Manufacturing Assessment

Get a customized Odoo setup roadmap for your factory—with GST compliance, Job Work workflows, and real costing visibility.

Optimize your production line today.

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