How to Configure Supply Chain Preferences in NetSuite for Optimized Operations

Key Takeaways

• Properly configured demand planning significantly reduces stockouts while improving fulfillment accuracy
• Organizations implementing automated planning reduce manual purchase order creation while improving order accuracy
• Inventory issues often stem from incorrect lead time or safety stock configurations
• Multi-location businesses experience substantial improvement in inventory turnover after optimization
• Implementation timelines vary by scope, typically requiring focused effort over several weeks

Understanding NetSuite Supply Chain Management Fundamentals

NetSuite supply chain preferences are the configurable settings that determine how your inventory, demand, and supply planning functions operate throughout your ERP system. These preferences govern everything from reorder point calculations to safety stock levels, lead time management, and inventory allocation across multiple locations.

Think of these preferences as the operating system for your supply chain. They're constantly working behind the scenes to:

• Calculate when to reorder inventory based on demand patterns
• Determine appropriate safety stock levels for each location
• Generate automated purchase order suggestions
• Allocate available inventory across sales channels
• Track lead times for vendor performance
• Manage multi-location transfer requirements

The foundation of effective supply chain management in NetSuite starts with enabling Multi-Location Inventory and Advanced Inventory features. These aren't just nice-to-have features—they're the prerequisites that unlock location-specific inventory controls, safety stock configurations, and lead time management capabilities critical for businesses operating across multiple warehouses or sales channels.

Core Supply Chain Modules in NetSuite

NetSuite's supply chain architecture integrates several modules that work together:

• Inventory Management: Real-time tracking, multi-location visibility, lot/serial tracking
• Demand Planning: Forecasting based on historical data and seasonal patterns
• Procurement: Automated purchase order generation and vendor management
• Warehouse Management: Bin putaway, picking strategies, and cycle counting
• Order Fulfillment: Pick-pack-ship workflows and shipping integration
• Supply Planning: Replenishment calculations and safety stock optimization

When properly configured, these modules create a seamless flow from demand detection through procurement to fulfillment. Businesses with properly configured systems report fewer rush orders and higher inventory accuracy.

Configuring NetSuite Inventory Management Preferences

The inventory management preferences screen is where supply chain optimization truly begins. This is where you'll set the foundational parameters that affect every inventory transaction in your system.

Essential Inventory Preference Settings

Start by configuring these critical preferences:

Costing Method Selection:

• FIFO (First In, First Out): Best for perishable goods or items with expiration dates
• Average Cost: Ideal for commoditized items where specific unit costs don't matter
• Standard Cost: Manufacturing environments with consistent production costs

Your costing method choice has permanent implications—changing it after going live requires revaluing all inventory and can create significant accounting complications. In our client engagements, safety stock configuration errors frequently contribute to excess inventory situations, making this foundational decision critical.

Multi-Location Inventory Tracking:

• Enable location-specific inventory visibility
• Configure transfer order preferences between locations
• Set location hierarchies for reporting and allocation
• Define default fulfillment locations by item or customer

For wholesale distributors, multi-location capabilities are essential for managing inventory across regional warehouses and distribution centers.

Lot and Serial Number Tracking:

• Enable lot tracking for date-sensitive inventory
• Configure serial number requirements for high-value items
• Set up expiration date tracking and FEFO allocation
• Define lot/serial assignment rules at receipt and fulfillment

Advanced Inventory Preference Configuration

Once you've enabled Advanced Inventory Management, additional preference options become available:

• Demand Planning Horizon: Set historical window to reflect seasonality (often 6-12 months) and a forward planning horizon aligned to cumulative lead time plus buffer (typically 3-6 months or more)
• Supply Planning Frequency: Determine how often the system recalculates (daily recommended)
• Allocation Method: Choose how inventory is allocated when demand exceeds supply

The demand planning process follows three critical steps: calculating expected demand based on historical patterns, determining required supply considering lead times, and generating suggested purchase orders. Organizations that automate this process achieve significant reductions in manual PO creation while improving order accuracy.

Setting Up Supply Chain Locations and Warehouses

Location configuration goes beyond simply creating warehouse records—it establishes the physical and logical structure for your entire inventory operation.

Creating Location Records in NetSuite

Navigate to Setup > Company > Locations to create comprehensive location records:

Essential Location Details:

• Location name and subsidiary assignment
• Physical address and contact information
• Location type (warehouse, distribution center, retail, etc.)
• Make Inventory Available checkbox
• Include in Supply Planning checkbox

Location-Specific Inventory Settings:

• Default bin assignments for receiving
• Picking priority rules
• Cycle counting schedules
• Physical inventory procedures

Companies with multiple inventory locations see substantial improvement in inventory turnover after optimizing these location-specific configurations.

Configuring Transfer Order Preferences

Transfer orders move inventory between locations, requiring specific preference configuration:

• Auto-generate transfer orders: Based on demand planning results
• Transfer lead times: Between specific location pairs
• Transfer order approval workflows: For high-value movements
• Shipping integration: Connect carrier systems for in-transit visibility

The landed cost feature becomes particularly important for multi-location operations, ensuring accurate inventory valuation as products move between facilities.

Setting Location-Specific Inventory Rules

Advanced configurations allow different rules per location:

• Preferred bin putaway strategies: Random, fixed, or directed
• Picking priorities: FIFO, LIFO, or expiration date
• Replenishment thresholds: Minimum and maximum levels per location
• Allocation rules: Customer priority, proximity, or inventory age

Optimizing Procurement and Vendor Management Settings

Your vendor relationships directly impact supply chain performance, making procurement preference configuration critical for operational success.

Configuring Preferred Vendor Relationships

NetSuite allows sophisticated vendor management at the item level:

Vendor Item Setup:

• Navigate to item records and access the Purchasing subtab
• Add preferred vendors with specific pricing
• Configure vendor-specific lead times
• Set minimum order quantities per vendor
• Define purchase unit of measure conversions

Lead Time Configuration: Lead time accuracy is paramount—many inventory errors trace back to lead time misconfiguration. Set realistic lead times based on historical vendor performance, not optimistic promises.

Setting Up Automated Purchase Order Generation

The real power emerges when demand planning automatically creates purchase orders:

Supply Planning Preferences (Setup > Accounting > Inventory Management Preferences):

• Generate Purchase Orders: Enable automatic PO creation
• Group by Vendor: Consolidate multiple items into single POs
• Respect MOQs: Honor vendor minimum order quantities
• Order Policies: Configure Lot-for-Lot, Fixed Order Quantity, or Periodic Order Quantity policies; set order multiples and MOQs in item and vendor settings

Vendor-Specific Settings:

• Payment terms and discount structures
• Blanket purchase order capabilities
• Drop shipment authorization
• EDI integration for automated order transmission

Organizations implementing NetSuite automation for procurement report significant reductions in manual order processing time.

Managing Vendor Lead Times and MOQs

Accurate vendor data drives effective supply planning:

• Standard Lead Time: Average days from order to receipt
• Safety Lead Time: Additional buffer for variability
• Minimum Order Quantity: Smallest acceptable order
• Order Multiple: Incremental quantities (cases, pallets, etc.)
• Maximum Order Quantity: Capacity or agreement constraints

For manufacturers, component lead times become critical for production scheduling and work order management.

Configuring Fulfillment and Order Management Workflows

Outbound fulfillment preferences determine how efficiently you convert sales orders into shipped products.

Setting Up Automated Fulfillment Rules

Navigate to Setup > Accounting > Order Management to configure:

Order Processing Preferences:

• Auto-pick orders: Generate pick tickets automatically
• Auto-allocate inventory: Reserve stock when orders are created
• Partial fulfillment rules: Ship available quantities or wait for complete orders
• Backorder handling: Create backorders automatically or require manual review

Fulfillment Location Logic:

• Customer-specific locations: Assign customers to specific warehouses
• Proximity-based allocation: Ship from nearest location
• Inventory availability: Allocate from locations with stock
• Custom allocation rules: Complex workflows based on multiple factors

Configuring Order Allocation Preferences

When inventory can't satisfy all demand, allocation rules determine priorities:

• Customer priority levels: VIP customers get first allocation
• Order age: Older orders ship first (FIFO)
• Profitability: Higher-margin orders receive priority
• Geographic zones: Regional fulfillment commitments

Companies that properly configure fulfillment workflows report improved order fulfillment rates.

Integrating Shipping Carriers with NetSuite

Shipping integration completes the fulfillment process:

• Carrier selection rules: Based on shipping method, destination, or package weight
• Rate shopping: Compare carrier rates in real-time
• Label printing automation: Generate shipping labels from item fulfillment records
• Tracking number capture: Automatic updates to customer records

For e-commerce operations, shipping integration becomes even more critical for customer experience and operational efficiency.

Implementing Advanced Inventory Controls and Automation

Advanced controls transform NetSuite from a tracking system into a predictive planning engine.

Setting Up Automated Reorder Points

Reorder points trigger purchase orders when inventory drops below specified levels:

Reorder Point Formula: Reorder Point = (Average Daily Demand × Lead Time) + Safety Stock

Configuration Steps:

1. Navigate to item records > Inventory subtab
2. Set Reorder Point based on demand and lead time
3. Define Preferred Stock Level (maximum inventory target)
4. Configure Safety Stock Level for demand variability
5. Enable Reorder Point by Location for multi-location operations

The system continuously monitors inventory levels and generates purchase suggestions when quantities fall below reorder points.

Configuring Demand-Based Replenishment

Demand planning uses sophisticated algorithms beyond simple reorder points:

Demand Planning Parameters:

• Forecast Method: Moving average, linear regression, or seasonal models
• Demand Modifier: Adjust for known changes (promotions, market shifts)
• Outlier Handling: Exclude abnormal spikes/drops from calculations
• Seasonality Factors: Account for predictable demand patterns

Demand planning accuracy improves significantly when using location-specific lead time configurations rather than generic global settings.

Creating Inventory Exception Alerts

Automated workflows can notify stakeholders of critical inventory situations:

• Low stock alerts: When inventory approaches reorder points
• Excess inventory notifications: Items exceeding preferred levels
• Slow-moving item reports: Products with minimal recent activity
• Expiration warnings: Lot-tracked items approaching expiration dates
• Inventory variance alerts: Significant differences between expected and actual quantities

These workflows free your team from constant manual monitoring, allowing them to focus on strategic decisions rather than tactical inventory checks.

Supply Chain Preferences for Manufacturing Operations

Manufacturers require additional supply chain configurations specific to production environments.

Configuring Work Order and Assembly Build Preferences

Manufacturing preferences control how production consumes components and creates finished goods:

Work Order Settings (Setup > Accounting > Manufacturing Preferences):

• Backflushing method: Automatic component deduction when production completes
• Component availability checking: Block production starts without materials
• WIP account assignment: Track work-in-process inventory value
• Production scheduling: Capacity and resource allocation rules

Assembly Build Configuration:

• Multi-level assembly support: Nested bill of materials
• Component substitution rules: Alternate materials when preferred items unavailable
• Yield management: Account for expected production loss
• Lot/serial tracking: Finished goods receive their own lot/serial numbers; component traceability is preserved via build records

Our team has extensive experience helping manufacturers set up NetSuite work orders including WIP tracking, routing operations, and labor costing.

Setting Up BOM Component Tracking

Bill of Materials (BOM) accuracy is critical for production planning:

• Component lead times: Individual lead times for each BOM component
• Component availability rules: Hold production if components unavailable
• Substitution hierarchies: Automatic or manual component substitutions
• Supplier diversification: Multiple approved vendors per component

Managing WIP and Manufacturing Routing

Advanced manufacturing includes routing and work center management:

• Routing sequences: Step-by-step production process
• Work center capacity: Available hours and resource constraints
• Labor cost capture: Direct labor tracking by operation
• Queue and move times: Non-productive time between operations

For complex manufacturing operations, we configure NetSuite WIP to track production progress through multiple work centers and operations.

Classes, Departments, and Subsidiaries in Supply Chain Reporting

NetSuite's organizational dimensions provide powerful segmentation for supply chain visibility.

Configuring Classes and Departments for Inventory Tracking

Classes and departments allow inventory tracking beyond physical locations:

Class-Based Inventory Segmentation:

• Product lines or brands
• Customer segments (retail, wholesale, e-commerce)
• Project-specific inventory
• Consignment vs. owned stock

Department Tracking:

• Operating divisions
• Business units
• Cost centers
• Regional operations

Understanding how to use NetSuite organizational dimensions provides granular visibility into inventory performance across different business dimensions.

Setting Up Multi-Subsidiary Inventory Preferences

NetSuite OneWorld enables subsidiary-specific inventory configurations:

• Subsidiary-specific locations: Assign warehouses to subsidiaries
• Inter-subsidiary transfers: Track inventory movements between legal entities
• Costing configuration: Costing method is defined per item; Per-Location and Per-Subsidiary costing affects how valuation layers are stored
• Consolidated reporting: Roll-up inventory across global operations

Creating Supply Chain Reports by Business Segment

Leverage organizational dimensions for advanced reporting:

• Inventory valuation by class and location
• Turn rates by product line and warehouse
• Demand planning accuracy by department
• Procurement performance by vendor and subsidiary

These reports identify opportunities for inventory reduction, allocation optimization, and working capital improvement.

Integrating E-commerce with NetSuite Supply Chain

Online sales channels require real-time inventory synchronization and automated fulfillment workflows.

Syncing Inventory Levels Across Sales Channels

E-commerce integration ensures accurate available-to-promise calculations:

SuiteCommerce Integration:

• Real-time inventory sync to webstore
• Location-based availability display
• Backorder and pre-order handling
• Reserved inventory for online orders

Our SuiteCommerce services optimize order flows and inventory sync to ensure accurate available-to-promise calculations across your online and offline channels.

BigCommerce Integration:

• Bi-directional inventory sync
• Multi-location inventory display
• Automated order import
• Fulfillment status updates

For businesses using BigCommerce, our NetSuite Connector ensures seamless inventory synchronization and automated order fulfillment.

Configuring Available-to-Promise for E-commerce

Available-to-promise (ATP) calculations determine what inventory can be sold online:

ATP Configuration:

• Include inventory locations: Which warehouses serve e-commerce
• Exclude committed inventory: Don't oversell allocated stock
• Include in-transit inventory: Count incoming purchase orders
• Lead time buffers: Add processing time to availability dates

Setting Up Order Routing from Online Stores

Automated routing ensures online orders flow efficiently:

• Location assignment: Route to optimal fulfillment center
• Drop-ship automation: Send directly to vendors when appropriate
• Split shipment rules: Partial fulfillment from multiple locations
• Priority handling: Express orders get preferential treatment

Common Supply Chain Configuration Mistakes to Avoid

Even experienced NetSuite users make configuration errors that undermine supply chain performance.

Inventory Costing Method Pitfalls

• Mistake: Changing costing methods after going live
• Impact: Requires complete inventory revaluation and creates accounting complications Solution: Carefully evaluate costing method implications during implementation and commit to the choice
• Mistake: Using standard cost without regular variance reviews
• Impact: Inventory values drift from actual costs, distorting profitability
• Solution: Establish quarterly standard cost review processes

Location Hierarchy Configuration Errors

• Mistake: Creating flat location structures without logical grouping
• Impact: Difficult reporting and inefficient allocation rules
• Solution: Design location hierarchies that mirror your actual distribution network
• Mistake: Not enabling "Make Inventory Available" on location record
• Impact: Inventory exists but can't be allocated to orders
• Solution: Verify all active locations have proper flags enabled

Permission and Role Setup Issues

• Mistake: Granting excessive supply planning permissions
• Impact: Unauthorized users can modify critical inventory parameters
• Solution: Create role hierarchies with appropriate supply chain permissions
• Mistake: Not providing sufficient access to demand planning tools
• Impact: Stakeholders can't view or act on planning recommendations
• Solution: Balance security with operational accessibility

Testing and Validating Your Supply Chain Configuration

Thorough testing prevents costly errors in production environments.

Creating a Supply Chain Testing Plan

Develop comprehensive test scenarios covering:

Inventory Transaction Testing:

• Receipts from purchase orders
• Item fulfillments from sales orders
• Transfer orders between locations
• Inventory adjustments and cycle counts
• Work orders and assembly builds (for manufacturers)

Demand Planning Validation:

• Review calculated demand against historical patterns
• Verify purchase order suggestions match expected needs
• Test lead time calculations across vendor combinations
• Validate safety stock calculations for seasonal items

Integration Testing:

• E-commerce inventory sync accuracy
• Shipping carrier integration functionality
• EDI transactions with vendors
• Third-party warehouse management systems

Implementation timelines vary by scope; many teams allocate several weeks to supply chain configuration and testing, depending on their specific requirements.

Validating Inventory Calculations and Workflows

Use NetSuite's sandbox environment to validate configurations:

• Create test items: With realistic demand patterns and lead times
• Generate test transactions: Full order-to-cash and procure-to-pay cycles
• Review automated suggestions: Confirm purchase orders make business sense
• Test allocation rules: Verify inventory allocates to correct locations and customers
• Validate costing: Ensure inventory valuation updates correctly

Preparing for Go-Live

Final preparation steps before production deployment:

• Data migration validation: Confirm all inventory data transferred correctly
• User training completion: Ensure teams understand new workflows
• Cutover checklist: Document step-by-step go-live procedures
• Rollback plan: Prepare contingency if critical issues emerge
• Support coverage: Arrange enhanced support during stabilization period

How Anchor Group Helps You Get Supply Chain Preferences Right

Supply chain configuration in NetSuite isn't just about clicking checkboxes—it's about understanding how your business operates and translating those operations into system settings that drive efficiency.

That's where we come in. As NetSuite Alliance Partners with deep experience in wholesale distribution and manufacturing, we've configured supply chain preferences for dozens of businesses facing the exact challenges you're encountering.

What makes our approach different:

• We nerd out over the details: Location-specific lead times, safety stock calculations, allocation rules—this is what we geek out about. We don't just set defaults; we optimize every parameter for your specific operation.
• Industry-specific expertise: Our work with wholesale distributors means we understand procurement complexity and vendor coordination. Our manufacturing experience includes configuring work orders, assembly builds, BOMs, WIP routing, and labor costing.
• Automation-first mindset: We build custom workflows that free your team from manual inventory monitoring, letting you focus on strategic decisions rather than tactical firefighting.
• Real implementation track record: In our client engagements, we observe measurable improvements—fewer stockouts, reduced excess inventory, automated replenishment, and supply chain visibility they never had before.

Working with us should feel like calling up your neighbor for a hand—familiar, reliable, and no fuss. We're Midwestern born and bred, and we believe in earning our keep by helping you earn yours.

Whether you're implementing NetSuite for the first time or optimizing an existing system that's never quite worked right, we bring the technical expertise and practical experience to get your supply chain preferences configured correctly. Because when your supply chain runs smoothly, everything else gets easier.

Frequently Asked Questions

How quickly can I expect results after configuring supply chain preferences?

Most organizations see initial improvements within several weeks after implementing proper supply chain configurations. However, optimal performance requires 2-3 months of monitoring and adjustment as the system learns your demand patterns. The demand planning engine needs sufficient historical data to generate accurate forecasts—typically 3-6 months of transaction history. Businesses that complete comprehensive configuration report significant reductions in inventory carrying costs within the first quarter, with continuing improvements as workflows mature and teams adapt to automated processes.

What are the essential supply chain preferences to configure in NetSuite?

The foundational configurations include enabling Advanced Inventory Management, selecting your inventory costing method (FIFO, Average, or Standard), setting location-specific lead times, configuring safety stock levels, and establishing reorder points. Beyond these basics, you'll want to configure demand planning horizons (typically 6-12 months historical and 3-6 months forward), allocation rules for inventory distribution, and automated purchase order generation parameters. Multi-location businesses must also configure transfer order preferences and location-specific inventory availability. The exact configuration priority depends on your business model—manufacturers need work order and BOM settings while distributors focus on vendor management and procurement automation.

How do I set up multi-location inventory tracking in NetSuite?

Start by creating location records at Setup > Company > Locations, ensuring you check "Make Inventory Available" and "Include in Supply Planning" for each active warehouse. Then enable location-specific inventory features under Setup > Company > Enable Features (Items & Inventory). Configure location-specific settings on each item record, including preferred stock levels, reorder points, and safety stock by location. Set up transfer order preferences to manage inventory movements between facilities, including transfer lead times and approval workflows. For e-commerce integration, specify which locations serve online orders and configure available-to-promise calculations accordingly. Companies with multiple inventory locations see substantial improvement in inventory turnover after proper configuration.

What's the difference between FIFO and average costing in NetSuite inventory management?

FIFO (First In, First Out) tracks each receipt lot separately and values inventory based on the oldest purchases still in stock, making it ideal for perishable goods or items where cost fluctuates significantly. Average cost calculates a weighted average of all inventory purchases, simplifying accounting but losing specific lot cost visibility—best for commoditized items where individual costs don't matter. Standard cost assigns a predetermined value to inventory regardless of actual purchase price, requiring regular variance analysis but enabling simplified production costing for manufacturers. Your choice is permanent after going live, as changing costing methods requires complete inventory revaluation and can create significant accounting complications. In our client engagements, safety stock configuration errors frequently contribute to excess inventory situations, making this foundational decision critical to long-term success.

Can NetSuite automate purchase order generation based on inventory levels?

Yes, NetSuite's demand planning functionality automatically generates purchase order suggestions based on reorder points, demand forecasts, and vendor lead times. Enable this by configuring demand planning preferences at Setup > Accounting > Accounting Preferences (Items / Transactions tabs) and setting item-level parameters including reorder points, preferred stock levels, and safety stock. The system monitors inventory continuously, calculating expected demand based on historical sales patterns and generating PO suggestions when quantities fall below reorder points. Organizations implementing automated demand planning achieve significant reductions in manual PO creation while improving order accuracy. You can configure automatic PO creation or require manual review and approval of system suggestions, depending on your comfort level with automation and inventory value thresholds.