NetSuite Outsourced Manufacturing

May 23, 2024

NetSuite Outsourced Manufacturing

NetSuite Outsourced manufacturing is a strategic business approach where companies entrust the production of goods or components to external partners, rather than managing it internally. NetSuite’s Outsourced Manufacturing feature enables businesses to monitor the production process of their final products when carried out by external manufacturers. This function, also known as Contract Manufacturing, involves sending components or raw materials owned by the company to an external vendor’s site for assembly.Significance of Outsourced manufacturing NetSuite Outsourced manufacturing involves purchasing assembly services from external vendors to streamline production processes.The significance of Outsourced Manufacturing in NetSuite lies in its ability to manage the subcontracted manufacturing processes efficiently.

Process Management: It helps manage the entire process of purchasing outsourced assembly production from vendors, ensuring that all steps from procurement to production are tracked.

Component Consumption: NetSuite automatically consumes production components during the manufacturing process, which simplifies the tracking of materials and costs.

Automation: Automating the Outsourced Manufacturing process synchronizes procurement and production transactions within NetSuite, reducing manual work and the potential for errors.

Visibility and Control: Companies can proactively manage third-party manufacturing with the same level of visibility and control as if the products were being manufactured in House.

Efficiency: The feature streamlines operations across multiple locations, leveraging automation, visibility, and tracking to enhance processes and operational efficiency.

Outsourced Manufacturing automates the following features:

Creating subcontracting orders for assemblies
Managing ordering components for subcontracted production
Simulating the manufacturing subcontractor production
Transferring half finished assemblies to other sub-contractors
Drop-shipping the assembly to the customer, or shipping it to the brand-owner’s warehouses

Let’s explore the process of configuring and utilizing NetSuite Outsourced Manufacturing.

Enabling the Outsourced Manufacturing feature

To enable, Navigate to Setup > Company > Enable Features > & click on Item/Inventory Subtab. Scroll down to the Inventory Section and check the Outsourced Manufacturing checkbox as shown below.

After enabling, NetSuite provides an option to designate an outsourcing site for the vendor who will handle manufacturing on your behalf.

To create outsourcing work orders, we need to complete the following steps :

Creation/ Editing of Vendor/Supplier.
Creation of Outsourcing Item(other charge items).
Creation of Assembly Item & Bill Of Materials.
Creation of Work Order.

Creation of Vendor/Supplier :

Create a supplier or edit an existing one as per your business and make sure to specify contractors manufacturing locations in the outsourced manufacturing subtab. Here, users can enter more than one location.
Outsourced Manufacturing Subtab :

Creation of Outsourcing Item :

On creation of an outsourcing item,please enter the basic info & make sure to fill up the Cost Category field as Outsourcing Charge .

Creation Of Assembly & Bill Of Materials :

Create an Assembly Item corresponding with Bill of Material and Revision. While creating the BOM Revision, select the Outsourcing charge item.

Go to the Manufacturing subtab and select the Bill of Materials in the Assembly item record

After selecting the Bill Of Materials, the current revision is auto-populated.
The user has to check the Master Default checkbox for this item to be available for all locations. Save the record.

Creation Of Work Order :

Navigate to Transactions > Manufacturing > Enter Work Orders > New. Enter the Work Order details and click the Outsourcing subtab. Depending on the outsourcing BOM, NetSuite automatically checks the Outsourced box. Users need to select the Outsourcing Charge and vendor under Outsourcing Subtab.

Next to, click on the create PO button available under Outsourcing subtab from linked purchase order field. By clicking on it, the system will automatically create a Purchase Order record.

Please click on the Receive & Build button & configure the Inventory Detail. After providing all the necessary information, the work order record will automatically change to built Status. This indicates that the assembly item has been successfully built and is ready to use for further processing.