Is there any recommended NetSuite method to handle outsourcing? Scenario is order item from vendor A, send directly to Vendor B for refinishing/inspection, then the client receives it in.

I don't believe NS has any functionality for this. We are using Transfer Orders for a similar process, but the only issue is it won't be a PO. Let me know if you find any better way to handle this

If you have work orders and assembly items you can put a non-inventory item on the work order and have it generate a PO.

Depends if you want to track the quantity of raw materials and/or Work in Process at Vendor B, and if you have a timely and reliable way to find out from them what they have and when they receive and ship the items. Do you issue a PO to Vendor A and instruct them to ship to Vendor B? Or do you issue a PO only to Vendor B and they do the ordering from Vendor A? You could set up Vendor B as a location. PO the raw material and receive to Location of Vendor B. Do a Work Order for the refinishing at Vendor B Location, then drop ship order from Vendor B Location to Customer. Something like that. Probably need some more details of how you do things before I can give you a full explanation

Pretty similar to the first way you put it - PO sent to Vendor A with shipping address to Vendor B (location is set to 'outsourcing' location). Transfer order from out sourcing location back to client warehouse, bill the PO from Vendor A for the raw material, standalone bill from Vendor B for the outside service. I think introducing the work order component may be something I will explore

The standalone bill from Vendor B would be OK if you don't need to issue them a PO for their service. Not sure if you'd need the Tfr Order, you could do drop ship order from Vendor B outsourcing to Customer shipping address