The quick answer
Open the saved, firmed outsourced work order, go to its Outsourcing subtab and click Create PO in Linked Purchase Order. NetSuite saves the purchase order to the vendor right away. Its line is the outsourcing charge item, and it carries the assembly and a link back to the work order. When the vendor finishes, click Receive on the purchase order, set To Location and save. Saving the item receipt creates an assembly build at the vendor's location, which consumes the components you sent there and values the finished goods at component cost plus the outsourcing charge. If To Location is your own warehouse, NetSuite also creates an inventory transfer that moves the finished assemblies there. The work order then shows them as built.
The screenshots show sample data. Person and company names are fictional. Use your own vendor, items and amounts when following the steps.
Before you start
In this example, Alex Morgan at Example Supply Co. sends 40 KR-400 Canvas Jacket Blanks to Stitchline Embroidery Co., which embroiders a chest logo and returns 40 KR-410 Embroidered Work Jackets. Stitchline charges 6.25 a jacket.
You need the Outsourced Manufacturing feature, along with Purchase Orders, Advanced Receiving, Multi-Location Inventory, Assembly Items, Advanced Bill of Materials and Work Orders. Then four pieces of setup have to be in place:
- Vendor and location. On the vendor record, link the vendor to its manufacturing location, here Contract Manufacturer : Stitchline. The location has to exist first. A vendor can have several manufacturing locations, but each location belongs to one vendor. It's an inventory location for your own stock sitting at the vendor's site.
- Charge item. The vendor's fee is an Other Charge for Purchase or Service for Purchase item with Cost Category set to Outsourcing Charge, a purchase price and an account. Here that's EMB-410 Embroidery Charge at 6.25, posting to 6150 Outside Services.
- Bill of materials. The assembly's bill of materials revision, effective for the production date, lists the components you supply plus the charge item, one charge per jacket in this example.
- Components at the vendor. The blanks are already at the vendor location, usually moved there by a transfer. Here 40 are on hand at an average cost of 18.40.
With the vendor, its location and the bill of materials set up, a work order whose location is that manufacturing location is treated as outsourced, and its vendor and charge fill in. This walkthrough uses a non-WIP work order. If you haven't built one before, see how to record production from a non-WIP work order.
01. Review the outsourced work order
Open work order WO1284. Its Location is Contract Manufacturer : Stitchline, the vendor's site. Quantity is 40, Status is Released, Firmed is checked and Built is 0.
On the Items subtab, KR-400 Canvas Jacket Blank shows Quantity 40, Committed 40 and On Hand 40 at that location, with Average Cost 18.40. The blanks are already at Stitchline. Last Purchase Price shows 18.75, but the build in step 5 uses the 18.40 average cost.
02. Create the purchase order
Open the Outsourcing subtab. Outsourced is checked, Vendor is Stitchline Embroidery Co. and Outsourcing Charge is EMB-410 Embroidery Charge. Linked Purchase Order shows Create PO because the order is firmed and doesn't have a purchase order yet. On a work order that isn't firmed, the field reads "Purchase Order can be created only for firmed Work Orders."
Click Create PO. There's no entry form to fill in. NetSuite saves purchase order PO5127 to Stitchline Embroidery Co. with location Contract Manufacturer : Stitchline and a Total of 250.00. Here its status is Pending Receipt. An approval workflow in your account can start it at Pending Approval instead. Depending on your account, the new purchase order may open in a separate browser tab. Back on the work order, Linked Purchase Order now links to it.
The purchase order has one line, and it's the charge, not the jacket: EMB-410 Embroidery Charge, Quantity 40, Rate 6.25, Amount 250.00. The Assembly column shows KR-410 Embroidered Work Jacket, and Create WO links back to WO1284. The line also carries the bill of materials and its revision.
03. Receive the purchase order
When Stitchline finishes the jackets, open PO5127 and click Receive. The item receipt opens with Created From set to Purchase Order #PO5127. On the line, Receive is checked, Quantity is 40, Remaining is 40, the Assembly is KR-410 Embroidered Work Jacket, and To Location starts at the vendor location, Contract Manufacturer : Stitchline.
Receive is normally unavailable while the work order is still Planned, so release it first. Purchase order approval and your role's permissions can also keep the button from showing.
To receive only part of the order, lower Quantity. If the assembly or its components are lot-numbered, serialized or in bins, enter that inventory detail before saving. The link in the line's Assembly Build Helper column, Inventory Detail here, opens the build details for that.
To Location decides where the finished jackets end up. Stitchline is delivering them, so change To Location to Reno Warehouse. If you'll collect them from the vendor, leave it on the vendor location and the jackets stay in stock there. Click Save.
04. Check what the receipt created
Item receipt IR6038 is saved. On its line, To Location is Reno Warehouse and Quantity is 40. The line now links two new records: Assembly Build shows Assembly Build #ASSYB871 and Inventory Transfer shows Inventory Transfer #IT342.
The build is the production record. It was posted at the vendor location. The transfer exists only because To Location is different from the vendor location. It's a system inventory transfer that moves the finished jackets to Reno Warehouse, not a transfer order, and it doesn't move the blanks.
05. Review the assembly build
Click Assembly Build #ASSYB871. Location is Contract Manufacturer : Stitchline, Quantity to Build is 40 and Created From is Work Order #WO1284. The Components subtab lists 40 KR-400 Canvas Jacket Blank, consumed at the vendor location.
Projected Value is 986.00. That's 40 blanks at 18.40, which is 736.00, plus the 250.00 embroidery charge. The cost of the finished jackets includes what you pay Stitchline.
Open GL Impact. 1330 Inventory : Finished Goods is debited 986.00. 1320 Inventory : Raw Materials is credited 736.00, and 6150 Outside Services is credited 250.00 with Stitchline Embroidery Co. as the Name. Your accounts come from your own item setup, and actual costs depend on your costing method and cost layers, so check the saved build rather than the projected value.
The receipt doesn't create the vendor bill. You enter that separately against PO5127, subject to whatever approval or matching your account uses. Check its GL Impact to see how the charge clears in your account. For more on reading a build's postings, see how to check Assembly Build GL Impact.
06. Confirm the work order is built
Click Work Order #WO1284 in Created From. Status is Built and Built is 40, because the whole quantity was received. After a partial receipt, Built only goes up by what you received, and the rest stays open on the purchase order for another receipt.
Check the result
- PO5127 is for 40 of EMB-410 Embroidery Charge at 6.25, 250.00 in total, and Create WO links to WO1284.
- IR6038 received 40 into Reno Warehouse and links Assembly Build #ASSYB871 and Inventory Transfer #IT342.
- ASSYB871 is at Contract Manufacturer : Stitchline, consumed 40 blanks and shows Projected Value 986.00.
- On GL Impact, the 986.00 Finished Goods debit equals the 736.00 Raw Materials credit plus the 250.00 Outside Services credit.
- WO1284 shows Built 40, status Built, and ASSYB871 under Related Records.
Common questions
How do I create a purchase order from an outsourced work order in NetSuite?
Open the saved outsourced work order, go to the Outsourcing subtab and click Create PO in Linked Purchase Order. NetSuite saves the purchase order to the vendor straight away, with the outsourcing charge item on the line and the assembly and work order linked to it. In this example that's PO5127 for 40 of the embroidery charge at 6.25.
Why is Create PO missing from my outsourced work order?
The work order isn't firmed. Until Firmed is checked, Linked Purchase Order reads "Purchase Order can be created only for firmed Work Orders." Check Firmed and save. If the Outsourcing subtab has no vendor or charge at all, the vendor, its manufacturing location or the bill of materials isn't set up for outsourcing.
Does receiving the outsourced purchase order create the assembly build?
Yes. Saving the item receipt creates an assembly build for the quantity received, at the vendor's location, and consumes the components there. Here, receiving PO5127 created IR6038 and Assembly Build ASSYB871, and WO1284 went to Built 40.
Why did an inventory transfer show up when I received the purchase order?
To Location on the receipt was different from the vendor's location. The build still happens at the vendor location, and NetSuite creates an inventory transfer to move the finished assemblies to the location you picked. In this example, setting To Location to Reno Warehouse created IT342. Leave To Location on the vendor location and there's no transfer.
How does the outsourcing charge get into the cost of the finished assembly?
The charge item is on the bill of materials revision, so the build values the assembly at component cost plus the charge for the quantity received. Here that's 40 blanks at 18.40, or 736.00, plus 250.00, for 986.00. GL Impact debits Finished Goods 986.00 and credits Raw Materials 736.00 and Outside Services 250.00, with the vendor as the Name on the charge line.
Why is the Receive button unavailable on my outsourced purchase order?
Usually the work order is still Planned. Release it and Receive should show up. Purchase order approval and your role's permissions can also hide it.
Can I receive part of the quantity from the subcontractor?
Yes. Lower Quantity on the receipt line. NetSuite builds only what you received, raises the work order's Built quantity by that amount and leaves the rest open on the purchase order. The next receipt creates another build.
What do I need to set up before outsourced work orders work?
Turn on Outsourced Manufacturing and the manufacturing features it depends on. Link the vendor to a manufacturing location on the vendor record, where each location belongs to one vendor. Create a charge item with Cost Category set to Outsourcing Charge, add it to the assembly's bill of materials revision, and move the components you supply to the vendor location before the build.