Unable to create Purchase Requisitions from Planned Orders

Summary:

We are implementing contract manufacturing and on releasing the planned order, work order is created successfully. But the Purchase Requisition fails with the following error -

The supplier site isn't valid. It must be an active purchasing or sourcing-only site of the supplier and assigned to the requisitioning BU. If the same site name exists across multiple procurement business units, then either the requisitioning BU supplier site assignment must be unique, or there must be an agreement to determine the supplier and supplier site.

The supplier and site are both active and valid with unique BU assignments. We also tried creating an agreement for the same. But the error persists. Kindly help with resolution.