How NetSuite Handles Outsourced Products with Outsourced Manufacturing

By: Aidan Lavoie-Whittall

 

Today, more than ever, manufacturers are becoming heavily reliant on third-party entities to help complete portions of their business processes.

Outsourcing product development provides many businesses with the opportunity to refocus their main resources on their main practices. For small to medium-sized businesses relying on a third party for outsourced production is sometimes essential due to financial constraints.

As a NetSuite user, what options do you have to handle outsourced product development? What are some of the benefits of implementing NetSuite’s Outsourced Manufacturing features? And how do these changes minimize risk, all while positively impacting demand planning and forecasting?

Continue reading to learn more about NetSuite’s Outsourcing Manufacturing for your pressing outsourcing needs.

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NetSuite Manufacturing, What you Should Know

Still deciding on which Enterprise Resource Planning (ERP) software is right for you? Currently with NetSuite, but just getting started? You should know that NetSuite offers a complete Manufacturing solution for your business. 

But what does that mean? 

By providing vertical-specific solutions right out of the box you can get the most out of your ERP. All without having to overcomplicate your implementation. NetSuite for Manufacturing (MRP) enables you to:

Streamline Your Day-to-Day Operations and Simplify Your Resource Planning with next level Supply Chain Management

Leverage Automation for Better Work Order Management & Scheduling & Ensure Product Quality with improved production control

Streamline Your Finances for Everything from Intercompany Accounting to Costing, Managing Payments, and More with better financial management

Despite all of these benefits, outsourcing manufacturing is where processes start to become more complicated and potentially risky.

When manufacturers outsource assembly to subcontractors, they lose visibility and control over the process, which can create significant liability issues. 

To successfully manage third-party manufacturing, businesses must have visibility and control from start to finish.

That’s where NetSuite’s Outsourced Manufacturing comes in.

Shopping for the Right Solution?

 

Are you still deciding on NetSuite, or looking for the right partner? Find out why GURUS Solutions has been the partner of choice for NetSuite and Boomi implementation across North America. Whatever your industry or the size of your business, we leverage our experience to develop a solution that fits your needs.

What is NetSuite Outsourced Manufacturing?

With NetSuite 2020.1 came the release and introduction of Outsourced Manufacturing. A solution specifically designed for businesses that outsource their manufacturing to third-party firms.

Outsourced Manufacturing assists customers in managing their subcontracted manufacturing processes. With the help of this feature, NetSuite can automatically consume production components and transfer them to a designated location after production.

Outsourced Manufacturing automates the following features:

Creating subcontracting orders for assemblies

Managing ordering components for sub-contracted production to maintain inventory levels

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

NetSuite procurement and production transactions are synchronized by automating outsourced manufacturing. You can automate these activities directly from a purchase order (PO) or work order (WO) in NetSuite.

How to Minimize Risk with Oracle NetSuite’s Outsourced Manufacturing

 

What are some of the benefits of implementing NetSuite Outsourced Manufacturing? Let’s explore in detail some of the many benefits you can get and how these benefits help to minimize risk:

Maintain Visibility

Every manufacturing process depends on maintaining inventory visibility. This becomes more challenging as business processes become more intricate and you add more manufacturing facilities, warehouses, and sales channels. The process becomes even more difficult when a subcontractor is involved. Proper inventory visibility becomes even more crucial for running your company profitably and successfully. 

With NetSuite's new Outsourced Manufacturing functionality, businesses can proactively manage products made by third parties just as they would in-house products. This ensures transparency and accuracy at every stage of the process.

Track the assembly production process as it is outsourced to a third party from a PO or a WO. You can even do so along with build instructions and specific attributes. You can better control the subcontracted manufacturing processes by including thorough build instructions within the PO itself. 

NetSuite can automatically keep track of parts in your warehouse and those that have been sent to a third party. A feature that will help with overall demand forecasting.

Communicate Build Specifications

Products and manufacturing are frequently modified. Whether it's to streamline a procedure or switch out a part to lower the Cost of Goods Sold (COGS). Production must understand these changes for items to be produced appropriately. This is vital to avoid items having to be redesigned as a result of version control problems. 

When working with a production subcontractor, this is much more crucial.

In standard outsourced POs, manufacturers can include additional specifications, attributes, and construction instructions. This can help standardize manufacturing processes, costs, and quality no matter what product is manufactured in-house or not. 
Assemblers make sure that the purchase order to the subcontractor includes the manufacturing process details, like the expected completion time and waste.

Understand Cost of Goods

When manufacturing is contracted out to a third party, the manufacturer frequently retains ownership of the components. But, the subcontractor is responsible for paying for labor, the assembly site, and possibly some building materials. 

To determine a selling price, it is crucial to add up all of these expenses to understand a true COGS. The price of the production charge is what the contract manufacturer is charging to complete the build. 

The charge listed on the purchase order is used for each production run. The final assembly costs are then recorded in a bill of materials. This includes the costs for the necessary parts and the production fees for the outsourced work.

Reduce Risk

When you have visibility into the outsourced manufacturing process, you have visibility into production. This allows you to forecast completion dates and inform pending orders of your availability.

Finally, you can easily filter and report on production that is done in-house and out. This is thanks to the "outsourced manufacturing" location that has been created for each contract manufacturing supplier. This enables accurate planning for inventory transfers, drop shipments, and work orders and also gives visibility into current inventory positions.

Standardizing internal and external manufacturing procedures boosts productivity and lowers overhead expenses. Utilizing an effective system to manage your third-party manufacturers will allow you to reap the rewards of outsourcing while lowering your risks.

Want to learn more about NetSuite’s industry solutions for Manufacturing? Contact a Manufacturing implementation specialist from GURUS Solutions today.

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About Aidan Lavoie-Whittall

With a background in English literature and Theatre history, Aidan can confidently say that he knows his way around pen and paper. From news articles in local papers, poetry, screenplays and scripts, essays, to blog posts - Aidan has tried it all.

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