Outsourced Manufacturing

Outsourced Manufacturing helps customers to manage their subcontracted manufacturing processes by purchasing outsourced assembly production from vendors. 

This feature enables NetSuite to automatically consume production components and then, after production, transfer them to a specified location. Automating Outsourced Manufacturing synchronizes NetSuite procurement and production transactions.

Features

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

Pre-Requisites

You must enable the features below:

• Multi-location Inventory
• Assembly Items(Light Manufacturing Module)
• Work Orders
• Purchase Orders
• Advanced Receiving
• Advanced Bill of Materials

*Note: Manufacturing Work in Process feature must not be enabled.*

You must create the elements below:

• Define Cost Categories for outsourcing charges
• Define Other Charge for Purchase or Service For Purchase Items
• Create Bill of Material (BOM) Revisions for each Assembly Item for each step of your contract manufacturing process
• Identify Vendors to be Outsourced Manufactures at a particular location on their vendor records
• Customers can outsource either by using a Standard Outsourced Purchase Order or from a Work Order.

Basic Flow

Example,

1. Enable the feature : Outsourced Manufacturing

Enable Features > Items & Inventory > Inventory> OUTSOURCED MANUFACTURING

2. Setup Outsourced Location

3.  Tie the Outsourced Location with the Vendor

4. Create Cost Category with type: Outsourcing Charge

5. Create Manufacturing Charge item for Outsourcing. Also, select the cost category ‘Outsourcing Charge’ (this is the cost you pay for the outsourcing process) for the system to recognize that this item is an outsourcing related charge item.

6. Next, define BOM for Outsourcing and Create New Revision

7. ‘Use Outsourcing Charge’ for Outsourcing

8. The last step needed is to assign the new BOM to the final assembly and set the Outsourcing Location. Now we have all setups required for this to work properly.

9. Create a Purchase Order. Note warning when you select an Outsourced vendor. Also, select the  form ‘Standard Outsourced Purchase Order’

10. There is a new checkbox ‘Create Work Order’. If checked, the system will automatically create a WO upon saving.

11. A Work Order is created and a hyperlink is shown. Click to see the related Work Order

12. On the Work Order, there is a new tab called Outsourcing. Data in the Outsourcing Tab can be helpful for you to do better analytics on the outsourced Production

13. After clicking receive and save the item receipt.

14. The related assembly build is created.

15. We received into Outsourcing Location. Basically, the production was stocked into the outsourcing location

16. The resulting assembly build still shows the location because it records the production in the same location where the product is actually built.

As like starting from PO, it is also possible to start from WORK ORDER

1. Create WO (Transaction> Manufacturing> Create Work Orders)

2. Based on location, the system fills in the Outsourcing Vendor because we have a linkage between the Outsourcing Location and the Vendor

3. You have outsourced the work order created in the system. You can wait for the automated batch processing job, but if you need the PO asap, there is an option to create the PO manually. There is a link to create a PO directly.

The automated job that is consolidating the Work orders that are not yet linked to a PO runs once a day. Currently, there is a hard limit.

4. If you trigger manually, the PO contains the relevant outsourced details. You can see the assembly that was outsourced, the charge item and all relevant information for the outsourcing process. You can trigger the receipt from PO of from WO

5. If trigger Receive from WO, Click Receive & Build

6. You can decide whether you want the inventory to be transferred automatically by the system or you want to stock it in the outsourcing location and then transfer it manually

7. Now the quantities are completely built.

Landed Cost to the items

Once the items are received in the Outsourcing location

• Select items to be received
• For tracking landed costs, use the Landed Cost subtab (or line item landed cost checkbox) to enter the shipping costs
• Select the desired cost allocation method (weight, value, or quantity)
• For the Landed Cost Categories applicable from your Vendor Bill (in this example, Freight) under “Source” choose “Other Transaction” and in the drop-down menu that appears, search for the Vendor Bill containing the freight charges.

* Note that your Vendor Bill must have a Reference Number or Memo or the vendor bill will not be clickable in the list that appears