Now that you have a product that can define your company, it’s time to focus on what it takes to transform your company into a thriving enterprise.
Companies with great products need to invest in marketing, sales, and staying innovative in a competitive landscape.
So they often don’t have the time to think about all the complexity that underlies the machinery, production scheduling, manufacturing space, expertise, and overhead associated with building those products.
That is why a whole ecosystem exists today to outsource manufacturing and support, manage and monitor every facet of product production.
Here’s where outsourced manufacturing steps in as an advantageous strategy to help bolster your core strengths and maintain control over products and quality.
Because beyond optimizing contractual negotiations and integrating key logistics such as inbound and outbound shipping to consumers and businesses, outsourced manufacturing also limits overhead through a multitude of controls that expertly manage resource pools, insurance, and storage capacity.
So, with that, let’s define outsourced manufacturing in its simplest terms.
What is Outsourced Manufacturing?
Outsourced manufacturing is the process of hiring resources outside of your organization to fully, or partially, build your products or a component. Generally speaking, in the consumer packaged goods (CPG) model, outsourced manufacturing is not a new concept — especially considering how packaging is also a component of the finished product.
Consider the wellness and skincare boutique, OSEA Malibu. To mix and fill its popular line of seaweed-infused skincare products, it hired an outsourced manufacturer, which allowed them to accentuate sales, marketing and product branding.
While clearly advantageous, outsourced manufacturing does not come without its challenges.
Overcoming the Challenges of Outsourced Manufacturing
Typically, much or sometimes all of the inventory used at the outsourced manufacturer’s site needs to be provided by the company contracting their services.
That makes maintaining visibility into material requirements, inventory levels, and account accuracy for product costs the responsibility of the contractor — or in our example above, the health and beauty boutique.
NetSuite's Outsourced Manufacturing
So with these varying factors at play, NetSuite has a solution for manufacturers: Netsuite's OutSourced Manufacturing.
Benefits of NetSuite's Outsourced Manufacturing
Leveraging NetSuite’s Outsourced Manufacturing capabilities to effectively work with contract manufacturers becomes efficient and seamless — and provides you with a host of core benefits:
- Inventory balance visibility at the contract manufacturer
- Accurate product costing which incorporates outsourcing manufacturing charges
- Efficient communication of production requirements to outsource manufacturers direct from ERP
Here's How NetSuite's Outsourced Manufacturing Helps You Scale
Maintaining Bill-of-Materials
Starting with a finished product, the bill-of-materials is maintained in NetSuite and lists exactly which item(s) are to be supplied by the contracting company to the outsourced manufacturer.
It also includes the “tolling” or “outsourcing charge” item that is paid to the outsourced manufacturer for their services.
Determine Material and Component Requirements
These factors enable NetSuite’s Inventory Management capabilities to determine material and component requirements. And, when demand for finished products is recognized, simultaneously provide purchase messages to your outsourced manufacturer.
Maintain Visibility Over Inventory
NetSuite’s Outsourced Manufacturing functionality also provides both physical and financial visibility into your remote inventory balances.
Further, as materials and components are procured into the outsourced manufacturing location, NetSuite monitors product inventory levels and values. Later, as these components are used, NetSuite automatically consumes them from inventory and transfers their value, along with the charge paid to the outsourced manufacturer, into the value of the built product.
The result is persistent surveillance of physical and financial inventory values, along with the payable to your outsourced manufacturer.
Easily Communicate With Manufacturers
Governing the inventory and financial data related to your outsourced manufacturing operations is just one integral feature. You can also communicate and relay orders within NetSuite by using the platform’s email capabilities.
You can send Purchase Orders directly to your outsourced manufacturers and monitor every response — all without leaving the platform!
Working with outsourced manufacturers is perhaps the best way to manage your product assembly and maintain focus on product development, market expansion, and other operations needed to support growth and profitability.
The efficient tracking of inventory and costs associated with outsourcing production operations helps improve the reporting of product margins and stabilize your supply chain.
Revolutionize Your Manufacturing Business
Combining the sophisticated performance of NetSuite’s Outsourced Manufacturing functionality with SCS Cloud’s unparalleled expertise as a leading Solution Provider will help launch your operations to the next level.
Lastly, it can also help keep your business's core strengths as the focal point while getting the most out of industry experts, best-in-class ERP software and built-in support for your production operations.
Ready to revolutionize how your business does manufacturing?
About the author: Bobby Coffin, CPIM, is the VP of Operations at SCS Cloud. He is a certified NetSuite Consultant with extensive expertise in Manufacturing and Supply Chain operations. He has successfully implemented NetSuite for multiple clients with complex manufacturing processes and supply chains.