The quick answer
Put the contract manufacturer's labor fee on the assembly's bill of materials as a non-inventory Other Charge item flagged as a special order item, with the manufacturer as its vendor. Enter a work order for the assembly and save it as Planned. No purchase order exists yet. When the plan is final, click Edit, change Status to Released (NetSuite checks Firmed for you) and save. A Processed Orders page lists the purchase order NetSuite just created for the charge. Its quantity is the work order quantity and its total is that quantity times the charge item's rate.
The screenshots show sample data. Person and company names are fictional. Use your own assembly, vendor and amounts when following the steps.
Before you start
In this example, Alex Morgan at Example Supply Co. has Tallgrass Precision Machining machine and finish HV-310 Hydraulic Valve Bodies. Tallgrass charges only for labor, which is called tolling. Example Supply Co. keeps the parts in its own stock. The alternative, turnkey manufacturing, has the manufacturer buy the materials and charge one price for materials and labor.
Two pieces of setup have to be in place first:
- The charge item. An Other Charge item flagged as a special order item, with the contract manufacturer as its vendor and a purchase price. Here that's MACH-310 Contract Machining Charge at 17.50.
- The bill of materials. The assembly's bill of materials revision lists the stock components and the charge item. Here HV-310 uses one HV-311 Valve Casting, two HV-312 Spool and Seal Kits and one MACH-310 per assembly.
The purchase order comes only from the special order flag and the item's vendor, so check both on the item before you rely on it. It covers the service charge only. You still have to get the components to the manufacturer, usually with a transfer order. This is a different setup from the Outsourced Manufacturing feature, where the work order has a Create PO link.
01. Enter the work order
Go to Transactions > Manufacturing > Enter Work Orders. Select Penhallow US as the Subsidiary, Cleveland Plant as the Location (it's required) and HV-310 Hydraulic Valve Body as the Assembly. Status is Planned and Firmed is cleared. Set Quantity to 8.
On the Items subtab the bill of materials fills in: 8 castings, 16 spool and seal kits and 8 of the machining charge. The charge is one per assembly, so it scales with the quantity.
Click Save.
02. Review the planned work order
Work order WO2217 opens with the status Planned, Firmed cleared, Quantity 8 and Built 0. Nothing is committed, so you can still change the quantity or other settings, and no purchase order has been created.
On the Items subtab, Committed is 0 for HV-311 Valve Casting and HV-312 Spool and Seal Kit. A Planned work order reserves no stock.
03. Release the work order
When the plan is final, click Edit and change Status from Planned to Released. Firmed is checked automatically. Click Save.
04. Check the purchase order
NetSuite doesn't go straight back to the work order. A Processed Orders page lists Work Order WO2217 as the original transaction and Purchase Order PO7316 as the processed transaction, with Status Succeeded and no error message. Click PO7316.
The purchase order is to Tallgrass Precision Machining, Pending Receipt, with a total of 140.00. In your account an approval routing can start it at a different status, and its location can follow the work order's location, so check its header.
The one line is the charge: MACH-310 Contract Machining Charge, Quantity 8, Rate 17.50, Amount 140.00. Quantity is the work order quantity and the amount is that quantity times the rate.
Check the result
- WO2217 saved as Planned created no purchase order.
- Saving it as Released, with Firmed checked, listed PO7316 as Succeeded on Processed Orders.
- PO7316 is to Tallgrass Precision Machining, Pending Receipt, total 140.00.
- Its single line is 8 of MACH-310 Contract Machining Charge at 17.50.
Common questions
How do I make NetSuite create the contract manufacturer's purchase order from a work order?
Add a non-inventory Other Charge item for the manufacturer's labor fee to the assembly's bill of materials. Flag it as a special order item and give it the manufacturer as its vendor. Then release a work order for that assembly. Saving it as Released creates the purchase order for the charge.
Why was no purchase order created when I saved my work order?
In the example, a work order saved as Planned created no purchase order. The order was created when the work order was saved as Released. If a released work order still produces nothing, check that the charge item is flagged as a special order item and has a vendor.
What does the Firmed box do when I change a work order to Released?
NetSuite checks Firmed for you when Status changes to Released. A Planned, unfirmed work order commits no components and can still be re-planned. Releasing makes the stock components eligible for commitment, subject to availability and the commit settings, and makes the order ready for the contract manufacturer.
What is the difference between turnkey and tolling contract manufacturing?
In turnkey manufacturing the contract manufacturer buys all the materials and charges one price for materials and labor. In tolling, you supply the components and the manufacturer charges only for labor. You can mix the two.
Does the purchase order include the components I send to the manufacturer?
No. The purchase order covers only the service charge item. The components stay in your inventory until you move them to the manufacturer's location, usually with a transfer order.
What does the Processed Orders page show?
It lists each work order that was processed and the purchase order created for it, with the status and any error message. The purchase order number links to the new record.