NetSuite Outsourced Manufacturing to Forecast Product Demand

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Using NetSuite Outsourced Manufacturing to Forecast Product Demand

Almost all manufacturers today entrust a portion of their business processes to a third party. The utilization of third-party producers varies widely between industries and companies.

Relying on a third party for subcontracted manufacturing processes is often necessary for small and midsized organizations. They are unable to invest in more equipment or upkeep due to a lack of cash flow. By using a third-party contract, businesses may put their resources to work where they are most productive since cash is not tethered to unnecessary overhead costs.

But despite the benefits, outsourcing production has its drawbacks. Raw materials, or components, are frequently owned by manufacturers, who subsequently send them to a contract manufacturer for outsourced production or assembly.

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Businesses face limited visibility and severe responsibility if they don't have a system in place to oversee the subcontracted manufacturing process. That's where NetSuite comes in.

NetSuite 2020.1 comes with the release and introduction of Outsourced Manufacturing, a solution for businesses that outsource their manufacturing to a third-party contract manufacturing firm.

NetSuite purchase and production transactions are automatically synchronized with Outsourced Manufacturing. You can outsource manufacturing activities from a purchase order or a work order in NetSuite 2020.1 release.

How Applicable is NetSuite Demand for Outsourced Products?

Consumer products aimed at life sciences are among the industries that outsource at least a portion of their manufacturing process. 

Businesses in these industries who want to automate manufacturing processes and reduce overhead would benefit from NetSuite's Outsourced Manufacturing. 

Manufacturing costs and any raw materials used in the manufacturing process can be bundled, and bill of materials version control helps to streamline the system's process flow.

The new capabilities and features in the Outsourced Manufacturing version are designed to make it easier for businesses across a variety of sectors and verticals to use NetSuite for their manufacturing needs; particularly, for making a standard outsourced purchase order.

Benefits to Your Business Processes

Given NetSuite Outsourced Manufacturing's applicability, various businesses can gain by integrating it into their system. Let's go into more detail about the benefits you can potentially get:


Every manufacturing process requires inventory visibility, which becomes increasingly difficult as business operations get more complicated. Adding contract manufacturers complicates the process even more, emphasizing the importance of inventory visibility in running a successful firm.

Demand planning and forecasting degrade into a roll of the dice without inventory insight, leaving you with too much or too little inventory.

Through the linking of work orders, assembly builds, and the item reception process, outsourced manufacturing gives enhanced tracking and visibility throughout the production process.

Increased efficiency

When a company outsources production to a third party, the manufacturer typically owns the components, but the subcontractor bears the expense of labor and assembly. 

Outsourced Manufacturing allows you to have visibility into the outsourced manufacturing process, which allows you to estimate completion dates and convey availability to outstanding orders or make materials revision.

Automation and lower overhead

The new NetSuite update binds procurement and manufacturing transactions. Integrated procurement and manufacturing transactions boost automation and efficiency while lowering end-user effort and costs.

Your physical line can automatically consume production components without your system being left behind.

Better communication

Products and manufacturing processes are always evolving. It's critical that these modifications are communicated to production so that products are manufactured appropriately. This is especially true when following outsourcing details and working with a production subcontractor.

NetSuite OM provides increased version control, ensuring that changes in raw materials, selling price, or vendor costs may be seamlessly updated over time, and the cost of goods can be simply calculated.

Using NetSuite Outsourced Manufacturing to Forecast Product Demand

In the manufacturing industry, demand forecasting is crucial. In a manufacturing setting, managers must frequently predict the amount of inventory and supplies required to meet demand, while simultaneously maintaining quality and control of finished goods. 

Forecasting predicts that historical trends will repeat themselves with little deviations in the future. Seasonal production trends may exist in various industries. 

Even these altering tendencies must, however, be consistent over time for forecasting to be effective. Anticipated waste, outsourcing details, new release schedule, and other details must be accurate. To understand how we can use Outsourced Manufacturing to forecast product demand, we must first understand the basics.

Different types of forecasting

In order to plan production, manufacturers might employ a variety of forecasting methodologies:

Push-based system

Push-based inventory management tries to estimate how much inventory will be needed during a particular period based on demand. The organization uses this information to create a manufacturing schedule that allocates resources like people, parts, and raw materials.

Unfortunately, the output of a production plan is only as good as the inputs, and demand might be unpredictable at times.

Sales-based forecasting

A sales-driven projection considers how much business the sales team expects to close in a certain period of time. This should be based on the existing pipeline of prospects and a prediction of how likely they are to close the projected sales figures within the expected completion time.

However, the projection that arises from utilizing sales as a basis is frequently off the mark. Location production finds it challenging to estimate and plan production based on what sales management hopes will happen. Intuition does not lead to a strong inventory management strategy, as any inventory planning expert will tell you.

Production-based forecasting

This method is based on comparing production requirements from year to year and then making reasonable assumptions about what would be needed. Production frequently lacks visibility into the sales funnel and any dynamic changes in market conditions, which is a problem.

Because sales managers are eager to meet quotas, it frequently reintroduces political tensions. It's usual for salespeople to overstate procurement and production transactions in order to ensure that they'll have enough supplies on hand to meet a deadline. Inventory levels rise when sales do not materialize.

Pull-based system

Pull-based manufacturing systems concentrate on inventory needs and only produce according to purchase orders and sales order. Pull-based systems provide various advantages when properly implemented, including reduced inventory, improved cash flow, and improved customer experience.

However, the consequences of attempting to execute a pull-based approach without the necessary discipline, planning, and system support can be disastrous. 

Because you've already sold everything you've made, this can have a negative influence on consumer satisfaction and the company's reputation.

Push and pull, fortunately, are not mutually exclusive. Both tactics are used by many manufacturers.

How do These Apply to Outsourced Manufacturing?

As mentioned earlier, NetSuite OM improves visibility by linking work orders, assembly, and item transactions. It also integrates procurement and manufacturing orders.

This allows you a nearly 360-degree view of your entire manufacturing work process in areas that previous versions of NetSuite were lacking. 

This increased potential for insight means you can utilize the appropriate method of forecasting based on the date and trend you see from utilizing NetSuite OM. 

You can appropriately implement and adjust strategies with data driven insights and data integrity. This will result in a product demand forecast fundamentally built on solid data-driven evidence.

How Forecasting Product Demand With Outsourced Manufacturing can Help you

The most impressive product demand forecast can utilize statistical approaches to investigate the impact of economic trends on your company. Even the most basic prediction, though, will provide you with crucial information.

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Reconciled cash flow

Your previous balance sheet will show you how sales revenue and costs of products sold are aligned. This can assist you in figuring out when you'll have enough cash on hand to buy inventory. It can also help you track down procurement and true cost of production transactions if need be.

Optimized supplies

Demand forecasting using NetSuite OM will assist you in planning ahead of time to ensure that you have enough inventory and production components on hand when client demand surges. As you hurry to fulfill orders, this will prevent you from incurring rush fees and placing finished good on backorder.

Scalability of manufacturing processes

Every company must be prepared to deal with the unexpected. A natural disaster or a new competitor eating away at your market share are two examples. Demand forecasting aids in the preparation of your supply chain and business for unforeseen events, allowing you to control the flow of finished good.


Demand forecasting aids in making informed business decisions. It makes no difference whether you use simple or advanced procedures, insourcing or outsourcing manufacturing. Demand forecasting based on sales data, market research, and economic considerations will aid your company's survival.

NetSuite Outsourced Manufacturing can provide you with the automation, visibility, and tracking necessary to keep your manufacturing process smooth over different manufacturing locations. However, it is still up to you to gather and interpret the data to form a coherent and factual forecast.

If you are unsure of how to proceed, you can always get a trusted NetSuite partner to help you with integration or implementation.

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