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Posted on December 21, 2021 at 7:53 PM
Written by Plumb
Many companies use third-party manufacturing companies to build their finished goods from raw materials owned by the company. With the use of the NetSuite manufacturing module (that includes features such as Assembly Items and Work Orders), your organization can achieve proper inventory control and costing even when an outside organization creates the finished good.
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1. Establish Raw Material (Component) Item “On Hand” Quantities
Use a Purchase Order –> Item Receipt or a Vendor Bill to bring in inventory of the Raw Materials into the physical inventory location
2. Create Assembly Item/Bill of Materials (BOM) for the Finished Good
Include all component items with quantities and unit of measure
3. Create a Vendor Bill for the Transfer Shipping Charges (HQ to Manufacturer)
When creating the vendor bill, if you use Landed Costs (recommended), make sure on the line items of the bill to call out the Landed Cost Category so that those costs can be allocated to the item properly.
* Note that when using Transfer Orders when you want to items costs to be included in the Transfer Order, the preference to “Use Item Cost as Transfer Cost” must be enabled. This feature is enabled via Setup –> Accounting –> Accounting Preferences –> Order Management –> Transfer Orders.
4. Transfer Components to Vendor (Consignment) Warehouse
5. Perform Assembly Build
Create and process the assembly build within the “Vendor Consigned Inventory” location
6. Enter Vendor PO and Bill for Manufacturing and return freight
When the manufacturer send the finished goods back to your company, you will at the same time receive their bill. Their bill can include freight, or you may have used your own account within the shipping company, in which you will get a separate bill for the freight. On the Item Receipt (or the subsequent Vendor Bill) you will want to apply any service, shipping, or tax vendor bills as Landed Costs on the receipt so that the landed costs can be allocated to the received goods.
7. Transfer Finished Goods back to the Physical Inventory Fulfillment Location
At this point you have finished goods still in the “Vendor Consigned Inventory” location however you should move this inventory over to the fulfillment location which is where you will be fulfilling orders from. You will use a Transfer Order to perform this.
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