Drop Shipment in Order Management
Order Management allows you to enter drop-ship sales orders as well as standard sales orders.
It means you can receive orders for items that you do not stock or for which you lack sufficient
inventory, and have a supplier provide the items directly to your customer.
Drop Shipment allows a supplier to fulfill a sales order where the seller is not required to handle stock or
deliver the items. This also helps in meeting urgent customer requirements.
Drop shipment occurs when a customer needs an item urgently and which is generally not stocked by the
seller or customer requires large quantity which is not there in the sellers warehouse. If it is more
economical to ship the goods directly from the supplier to customer, then also Drop Shipment process
used.
There are 3 types of Drop Shipments:
Full Drop Shipment:
Seller send the purchase orders to the supplier for the items that customer has ordered.
Normal Shipment and Partial Drop Shipment:
If the seller has only part of the quantity order, the seller supplies the available quantity to the customer
and creates a purchase order for the rest of the quantity, which supplier can send to the customer.
Normal Shipment and Full Drop Shipment:
Seller ships some goods from the inventory to the customer. The rest of the goods are shipped from the
supplier after creating a purchase order.
Steps:
Drop shipments are created as Sales Order but it can be identified when the source type is External.
The Purchase Release concurrent program or workflow in Order Management creates records in the
Requisition import tables in the purchasing module. This creates requisitions and once these are
approved, it generates the purchase order to supplier where the source type is Supplier.
This Purchase Order sent to the supplier who will arrange the delivery of the item to the customer via an
Invoice, EDI document or an ASN (Advanced Shipment Notice). Then Seller will generate the invoice to
customer.
In addition to this, when the seller receives the confirmation of the drop shipment or receives the invoice
from the supplier, it creates a receipt. It creates the inbound and outbound transactions for the accounting
purpose.
These are the following activity takes place when you have drop shipment
Supplier
o
Warehouse Item
Ship order
Shipment notification
Order Entry
o
Enter customer
Enter order
Demand order (optional)
Cancel order (optional)
Close order
Purchasing
o
Create and send Purchase Order
Enter shipment notification in system
Receivables
o
Create invoice
Collection of payment
Receipt
The best can be described as:
hence, drop ship order items ship directly from a supplier to the customer of the order processing
company. A purchase requisition, then a purchase order, is generated to notify the supplier of the
requirement. After the supplier ships the order, it notifies Purchasing to enter this information in the
Purchasing module.
What are the advantages of Drop Shipment Orders?
These are the benefits:
No inventory is required
Reduced order fulfillment processing costs
Reduced flow times
Elimination of losses on non-sellable goods
Elimination of packing and shipping costs
Reduced inventory space requirements
Reduced shipping time to your customer
Allows you to offer a variety of products to your customers
How to understand the dataflow for Drop shipment Orders?
To understand,
here are the
processes divided
in sub process
and the underline
activity is
highlighted here:
Here are the Details as per Mark
1.Order Entry
Here the activity is entering process where oe_order_headers_all (flow_status_code as entered)
oe_order_lines_all . The order is booked as DROP SHIP
2. Order Booking
3. The Purchase Release program passes information about eligible drop-ship order lines to Oracle
Purchasing.The interface table which gets populated is
po_requisitions_interface_all
4. After Purchase Release has completed successfully, run Requisition Import in Oracle Purchasing to
generate purchase requisitions for the processed order lines. The Requisition Import program reads
the table po_requisitions_interface_all validates your data, derives or defaults additional information
and writes an error message for every validation that fails into the po_interface_errors table.The
validated data is then inserted into the requisition base tables
po_requisition_headers_all,po_requisition_lines_all,po_requisition_distributions_all.Then use
autocreate PO fuctionality to create purchase orders and then perform receipts against these purchase
orders
7. After the goods are successfully received invoices for vendors are created in accounts payables as
in normal purchase orders.
8. Invoices are generated for customers In account receivables.
9. oe_order_lines_all (flow_status_code 'shipped', open_flag "N")
10. oe_order_lines_all (flow_status_code 'closed', open_flag "N")
Drop Shipment
Drop shipment on the other hand is a method of order fulfillment where the organization
taking the order does NOT maintain their own inventory for the drop-shipped product, but
fulfill their orders through 3rd party vendors who directly ship to the end customer ordering
the product.
For example,
A orders item x from B
B orders item x from C
C ships Item x to A.
B bills A for the order, C bills B for the order
Drop Shipment Setup
You need to make sure these are attribute setup Correctly:
Item Attributes
Purchased : Enabled
Purchasable : Enabled
Transactable : Enabled
Stockable : Optional
Reservable : Optional
Inventory Item : Optional
Customer Ordered : Enabled
Customer Order Enabled : Enabled
Internal Ordered : Disabled
OE Transactable : Enabled
Shippable : Optional
And ,your do set up for Order Source Type as External
Drop Shipment Your Setup checklist
Ensure you have created your Order Management Transaction Types and linked your
Transaction Types to order and line workflows that support drop shipments.
Ensure the Oracle Workflow Background Engine is running.
Ensure all Drop ship locations you will use to perform drop shipments have the Ship To Site
and Receiving Site defined.
Ensure you have defined the Internal Ship To Locations for your drop shipment customers
(Oracle Receivables Standard Customer window, Business Purpose Details Tab).
Ensure your standard items have an associated List Price defined within your PO Inventory
organization (Oracle Payables Financial Options window, Supplier-Purchasing Tab).
Drop Shipment - Process Steps
Create a Sales Order with line where the line source is External
Book and Schedule the Sales Order
Run Requisition Import Process
Now the line status will be in Awaiting Receipt
Login to the Receiving Organization (Purchasing) who has been setup as an Approver
Run Requisition Import
Create Purchase Order from the Requisition
Approve the PO
Receive the full quantity
Run Auto Invoice
Verify Invoice in Sales Order
Things not to forget in a DropShipment
Release 11i/12 does not support Drop Shipment across operating units.
Blanket PO's will not used with Drop Shipment , the reason the PO must be created when OM
notifies PO that a Drop Ship order has been created.
You can't cancelled Drop Shipments once Oracle Purchasing obtains the receipt.
Standard Items can be used for Drop Shipment.
In 11i, PTO's and ATO's cannot be drop shipped
What is the major difference between drop shipment and back to back order ?
In B2B the source will be internal but the item would be procured after the order is
created or after the demand is made.
In Drop Ship the source will be external
In Drop Ship orders, material is directly shipped to the customer from the supplier. Thus,
inventory is not affected. In this case, only logical receiving is done. But in the case of
Back-to-Back orders, material is taken from inventory.
Drop Ship orders may have many Purchase Orders connected to them. In Back-to-Back
orders one PO is tied to one Sales Order.
More on Drop Shipment & Back to Back Orders(Functional)
High Points for EBS Base Functionality for Drop Shipment
Drop shipment order processing in EBS is managed using workflow
Drop ship functionality is based on source type of an order line (Internal/External)
You can automate your PO/BPA release creation based on ASL/sourcing rule information
Drop ship process uses standard OM workflows.
You can use Sales order Purchase order discrepancy report to identify discrepancies between
the OM and the PO
There is a links OM and PO to provide visibility through entire supply chain Flow.
The entire Drop shipment process flow can be best understood as figure below:
Points for Implementation Considerations
Order line attribute: Source Type (need to be external). You can be defaulted from item or
order type
o
Menu -> Responsibility Order Entry Super User/setup/Orders/Types
Setup an order type using the cycle defined in the previous step (a),an order number
source, a valid standard value rule set.
Item attributes (OM and Purchasing)
***********************DROP SHIPMENT STATUSES***************************
STEP 1:-ENTER THE DETAILS THEN SAVE(IN SHIPPING TAB SOURCETYPE=EXTERNAL)
HEADER STATUS:--ENTERED
LINE STATUS :--ENTERED
STEP 2:-BOOK THE ORDER
HEADER STATUS:--BOOKED
LINE STATUS :--BOOKED
STEP 3:-NOW RUN THE WORKFLOW BACKGROUND PROCESS(PARAM:ITEMTYPE
NULL,YES,YES)
HEADER STATUS:--BOOKED
LINE STATUS :--Awaiting Receipt
(THE DETAILS MUST BE PRESENT IN REQUISITION INTEFACE TABLE)
STEP 4:-NOW RUN THE REQUISITION IMPORT(PARAM:ITEMTYPE=ORDER
ENTRY,ITEM,NO,YES)
TO LOAD THE DATA INTO REQUISITION BASE TABLES
HEADER STATUS:--BOOKED
LINE STATUS :--Awaiting Receipt
(THE DETAILS MUST BE PRESENT IN REQUISITION BASE TABLE)
STEP5 :-NOW COPY THE SALES ORDER NUMBER
GOTO-->PURCHASING-->REQUISITION SUMMAY->RELATEC DOCUMENTS>SALES ORDER
NUMBER->FIND->COPY REQUISITION NUMBER
GOTO-->PURCHASE ORDERS->AUTO CREATE->DELETE SEARCH CRITIRIAA->ENTER
REQUISITION
NUMBER->AUTOMETIC->ENTER SUPPLIER NAME->CREATE>PURCHASE ORDER WILL BE
CREATED->COPY PO NUM&APPROVE THE
PURCHASE ORDER
GOTO-->RECIEVING->RECIEPTS->ENTER PONUM->FIND->SUB:STORES->SAVE
HEADER STATUS:--BOOKED
LINE STATUS :--SHIPPED
STEP6 :--NOW RUN THE WORKFLOW BACKGROUND PROCESS
HEADER STATUS:--BOOKED
LINE STATUS :--CLOSED
---------------------------------------------------------------HEADER STATUS:-ENTERED
LINE STATUS:-ENTERED
HEADER STATUS:-BOOKED
LINE STATUS:-BOOKED
HEADER STATUS:-BOOKED
LINE STATUS:-AWAITING RECIEPT
HEADER STATUS:-BOOKED
LINE STATUS:-SHIPPED
HEADER STATUS:-BOOKED
LINE STATUS:-CLOSED
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