Acting as a subcontractor

Hi all,

I am aware of the subcontracting process where we are sending raw materials to vendors, however in my case, it is the other way around and we are the vendors and receiving the raw materials.

Would this process make sense?

1. Create sales order

2. Create PO with 'free item' checked so there is no accounting impact and MIGO goods into inventory

3. Make-to-Order production

4. Deliver goods

5. Invoice

My issue is with the 'free item' on the PO and whether it is the standard way of approaching this or not.

Thanks