how does NS handle sending company owned inventory to a contract manufacturer ?

Depends on the level of granularity and visibility you want. I've seen people have contract manu set up as a location, transfer inventory to that location, and create WO for the work done there which consumes the inventory sitting there. Once contract work is done, finished good sent back wherever on another transfer order.

yeah I agree or you can do as a step on the manufacturing routing

Yes, NetSuite rolled out the Outsourced Manufacturing functionality a few releases ago. This helps automate the receipt of the good and consumption of the components and rolling it all neatly into a proper asset value.