Outsourced manufacturing has become a popular strategy for businesses aiming to optimize their operations.

With NetSuite’s comprehensive suite of features, managing outsourced manufacturing processes has never been easier.

Here’s a straightforward guide to navigating these essential steps.

Make sure your NetSuite account has the required features enabled

  • Purchase Orders
  • Advanced Receiving
  • Multi-Location Inventory
  • Assembly Items
  • Advanced Bill of Materials
  • Work Orders
  • Outsourced Manufacturing

Setting Up Locations and Vendors

  • Create a manufacturing location in NetSuite where the items will be produced.
  • Establish a new vendor record for the manufacturing partner, ensuring to link the manufacturing location under the Outsourced Manufacturing tab of the vendor record.

Item and Bill of Materials (BOM) Setup

  • Create a Service for Purchase item in NetSuite, specifying the cost charged by the vendor for manufacturing.
  • Add a new Assembly Item, BOM, and BOM revision with required components. Include the “Service for Purchase” item as a component in the BOM Revision.

Purchase Order Management

  • Initiate the procurement process by creating purchase orders to procure raw materials required for production. Ship these items to the vendor and receive them under the manufacturing location.
  • With the raw materials shipped to the manufacturing location, create a purchase order for the finished goods utilizing the “Outsourced Purchase Order” form. This will create a special purchase order connecting the Assembly Item and the Service for Purchase item on the purchase order line. NetSuite will automatically generate the work orders required to build the assembly items.

Production, Receipt, and Payment

  • Send the purchase order to the vendor, authorizing them to commence manufacturing.
  • Upon completion, the vendor ships the items.
  • Receive the items by creating an item receipt from the purchase order. Receiving the purchase order automatically builds the work orders, increasing the Assembly Item inventory
  • Finally, bill the purchase order to pay the vendor for their manufacturing services. In case the vendor requires partial or full payments before the finished goods are shipped, we can take advantage of the NetSuite vendor prepayment feature.

By following these steps and leveraging NetSuite’s robust functionalities, businesses can efficiently manage outsourced manufacturing processes, streamline workflows, and drive sustainable growth.

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