Drop Ship Orders

When a customer orders product and you choose to have the supplier deliver directly to the customer rather that to your warehouse, those orders are referred to as Drop Ship orders. Even though the product never actually passes through your own warehouse, a purchase order will be issued to control the purchase. If you do not normally stock those products, records must still exist for the product in Maintain Inventory Master (IM13) and in Maintain Purchasing Info (PO13).

It is our suggestion that a separate (phantom) warehouse be set up to control drop Ship orders. The following steps describe what functionality happens with a Drop Ship order:

  • The Sales Order is entered in Enter Orders & Quotes (OE30) against the Drop Ship warehouse. Since it is not expected that this warehouse will actually carry On Hand balances, all order lines will go on back order.

  • If the operator uses the Generate PO function in OE30, a Purchase Order for all back ordered lines will automatically be generated for the primary supplier or instead, the Purchasing Department may generate the Purchase Order when they review products for reorder in the Drop Ship warehouse. In either case, the Purchase Order is issued against the Drop Ship warehouse and the customer's address will be entered as the Ship To address on the PO. For more information on Dedicated Purchase Orders, click here.

  • When you receive notification from the supplier that the goods have been delivered, that is your cue to receive the Purchase Order; Quantity On Hand is increased in the Drop Ship warehouse. Once back orders are flushed or allocated, a shipping document is produced and passed to the Invoicing department where the Order is invoiced; Quantity On Hand is decreased in the Drop Ship warehouse.

  • The shipping documents printed for the Drop Ship warehouse can be easily identified by assigning a unique Sales Order Prefix and by setting the Warehouse Name to "Drop Shipped-DO NOT PICK" in Maintain Sales Office/Warehouse Numbers (CC96).

  • Because quantities are technically rolling in/out of the Drop Ship warehouse, any stock in that warehouse represents goods delivered to the customer and received into the Drop Ship warehouse but not yet invoiced to the customer.

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