Drop-ship Order Flow

Setup

Before you enter an order that you intend to source externally, verify that you have set up appropriate order cycles and order types. If you plan only to fulfill orders that are either purely drop-shipped or sourced internally, create an order cycle for each case. If you plan to fulfill orders with some drop-shipped lines and some internally sourced lines, you must create an order cycle that includes Purchase Release for externally sourced lines, as well as the Pick Release, Ship Confirm, and Inventory Interface cycle actions for internally fulfilled lines. Assign these order cycles to order types. Note: You can create a custom API to define whether your default order source type will be Internal or External.

Entry and Booking

Enter, copy, or import an order. Ensure that the order type you select includes the cycle steps necessary to process the order completely. If your order type's order cycle is for drop-ship sales orders only, Oracle Order Entry/Shipping defaults External in the Source Type field for each line and makes available the Receiving Organization field. If your order type's order cycle allows for both externally and internally fulfilled orders, you must designate a source type of External or Internal on each line.

Only standard items may be drop-shipped; kits and models cannot be drop-shipped.

Depending on how your order cycle is defined, you can change the source type until the line has been processed by either Purchase Release or Pick Release. You can book an order without specifying a source type, but Purchase Release and Pick Release will not process lines lacking that information.

Purchase Release and Requisition Import

In order for Oracle Purchasing to generate requisitions for the ship-to location entered on your sales order, you need to associate the ship-to location with the appropriate Purchasing receiving location before you run Purchase Release.

The Purchase Release concurrent program processes eligible lines with a source type of External and passes information to Oracle Purchasing. Run Purchasing's Requisition Import program to create purchase requisitions based on this information. When you submit the program, ensure that you set Requisition Import's Multiple Distributions parameter to No. After Requisition Import completes successfully, you can approve the requisitions to generate purchase orders.

If the buyer makes changes to the requisition or purchase order in Oracle Purchasing after Purchase Release has been run, use the Sales Order and Purchase Order Discrepancy Report to note differences between the original sales order and its associated purchase order.

Shipment and Receipt

Standard Oracle Purchasing functionality confirms that your supplier has completed the drop shipment. Confirmation may be as simple as a phone call, or it may include Electronic Data Interchange (EDI) documents, such as an Advance Shipment Notice (ASN).

When you receive shipment confirmation, enter a receipt in Oracle Purchasing, even if the drop-shipped item is not transactable. This creates inbound and outbound material transactions in your system for accounting purposes.

You must receive drop-ship items in a logical organization. If you use Oracle Master Scheduling/MRP and Oracle Supply Chain Planning, to avoid miscounting supply you may not want to include logical organizations in your planning. If you choose to include logical organizations, ensure that doing so does not cause planning and forecasting complications.

If your supplier should send only an invoice, you need to enter a passive receipt.

Invoicing

After your system's inventory has a record of the transaction, run the Receivables Interface and AutoInvoice programs to generate an invoice for your customer. You may want to pass on any landing or special charges that your supplier imposed on the drop shipment. Such charges must be applied manually to the invoice.

Closing

After all lines on the order have completed all applicable cycle actions and after you have invoiced your customer, run the Close Orders program.

Drop Shipments

Oracle Order Entry/Shipping allows you to enter drop-ship sales orders as well as standard sales orders. 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. The following diagram illustrates the drop shipment process.

Order Placement

You can enter orders using standard Oracle Order Entry/Shipping functionality, and decide at the time of entry whether a particular line will be drop-shipped. As with standard sales orders, you can modify orders or lines that you intend to drop ship after you have entered them.

Purchase Requisitions

Oracle Order Entry/Shipping creates purchase requisitions when you use the Purchase Release concurrent program with Oracle Purchasing's Requisition Import program. Purchase Release acts upon eligible lines that you want to fulfill from an external source. To use this program, add the Purchase Release cycle action to any order cycles you use with drop-shipped orders.

Quantity Adjustments after Shipping

If part of a drop-ship line ships and you do not wish to fulfill the remaining quantity, cancel the line. Over-shipments must also be handled manually. If the supplier ships more than the ordered quantity, you can bill your customer for the additional quantity or request that they return the item. Use the Drop Ship Order Discrepancy Report to view differences between your drop-ship sales orders and their associated purchase requisitions and orders.

Returns

Use standard Oracle Order Entry/Shipping functionality to process return material authorizations (RMAs). Your customers can return drop-shipped items to you or to your supplier. If you receive the return into your inventory, you can retain it or ship it to your supplier. If you pass the returned item to your supplier, you should notify the buyer and authorize the return by generating

a return document in Oracle Purchasing. If the supplier receives the return directly, they must inform you of the event before you can process the return in Order Entry/Shipping.

Holds and Approvals

Standard holds and approvals functionality controls drop-ship sales orders. You can implement holds and approvals at different stages in your order cycle to control the drop shipment process. For example, if your supplier reserves the right to refuse returns, you can add an approval step to your order cycle to ensure that the customer will not receive a credit unless your supplier notifies you that they accept the returned item.

If you place a hold on a line before you run Purchase Release, Oracle Order Entry/Shipping enforces the hold automatically. However, after a purchase order has been generated for your drop-ship line, you must control holds manually by coordinating with your supplier. The Drop Ship Discrepancy Report displays held orders for your review.

Drop-ship Return Flow

Setup

Define an order cycle that includes an approval action, RMA Interface, and Receivables Interface. If your business has no physical contact with returned items that are shipped directly to your supplier, the RMA Interface enables you to track the return for accounting purposes. If you choose not to account for the returned item in inventory, you need not include the RMA Interface in your order cycle. Assign the order cycle to an order type.

Entry and Booking

Enter, copy, or import a return material authorization (RMA) using standard functionality. Ensure that the order type you select includes the cycle actions discussed above. If you have agreed with your supplier that customer returns proceed directly to them, the supplier must inform you of the customer's intention to return or of the actual receipt before you enter the RMA in Oracle Order Entry/Shipping.

Approval

If the drop-ship item will ultimately be returned to your supplier, you may want to wait to process the RMA until your supplier notifies you that they accept the returned item. To control processing, you can use an order-level or line-level approval action.

RMA Interface (Conditional)

You can use the RMA Interface to adjust inventory even if your business will not receive the returned item physically.

If the returned item ships directly to your supplier and you do not want to record a logical transaction for the return, you need not run the RMA Interface or include it in your order cycle. Subsequently running the Receivables Interface credits your customer for the full amount on the RMA line.

If the returned item ships directly to your supplier and you want to record a logical transaction for the return, increment inventory by receiving the returned amount into a logical organization, so that your system records receipt but the item cannot be used accidentally by another order. Communicate the transaction to your buyer, who may enter a return in Oracle Purchasing, enter a miscellaneous transaction in Oracle Inventory, or perform a similar transaction according to how you have set up your business. This decrements inventory to indicate that your supplier has ownership of the returned item.

If your customer returns the drop-shipped item to you and you pass it to the supplier for final receipt, communicate the transaction to the buyer after you have received the returned item. The buyer may enter a return in Oracle Purchasing, enter an issue transaction in Oracle Inventory, or perform a similar action according to how you have set up your business.

If your customer returns the drop-shipped item to you and you retain it in inventory, process the RMA as you would for a standard return.

Crediting Your Customer

Run the Receivables Interface to communicate the RMA to Oracle Receivables, then use AutoInvoice to generate a credit memo for your customer.

Closing

After all lines on the RMA have completed all applicable cycle actions and after you have credited your customer, close the RMA.

Drop-ship Order Flow

Setup

Before you enter an order that you intend to source externally, verify that you have set up appropriate order cycles and order types. If you plan only to fulfill orders that are either purely drop-shipped or sourced internally, create an order cycle for each case. If you plan to fulfill orders with some drop-shipped lines and some internally sourced lines, you must create an order cycle that includes Purchase Release for externally sourced lines, as well as the Pick Release, Ship Confirm, and Inventory Interface cycle actions for internally fulfilled lines. Assign these order cycles to order types. Note: You can create a custom API to define whether your default order source type will be Internal or External.

Entry and Booking

Enter, copy, or import an order. Ensure that the order type you select includes the cycle steps necessary to process the order completely. If your order type's order cycle is for drop-ship sales orders only, Oracle Order Entry/Shipping defaults External in the Source Type field for each line and makes available the Receiving Organization field. If your order type's order cycle allows for both externally and internally fulfilled orders, you must designate a source type of External or Internal on each line.

Only standard items may be drop-shipped; kits and models cannot be drop-shipped.

Depending on how your order cycle is defined, you can change the source type until the line has been processed by either Purchase Release or Pick Release. You can book an order without specifying a source type, but Purchase Release and Pick Release will not process lines lacking that information.

Purchase Release and Requisition Import

In order for Oracle Purchasing to generate requisitions for the ship-to location entered on your sales order, you need to associate the ship-to location with the appropriate Purchasing receiving location before you run Purchase Release.

The Purchase Release concurrent program processes eligible lines with a source type of External and passes information to Oracle Purchasing. Run Purchasing's Requisition Import program to create purchase requisitions based on this information. When you submit the program, ensure that you set Requisition Import's Multiple Distributions parameter to No. After Requisition Import completes successfully, you can approve the requisitions to generate purchase orders.

If the buyer makes changes to the requisition or purchase order in Oracle Purchasing after Purchase Release has been run, use the Sales Order and Purchase Order Discrepancy Report to note differences between the original sales order and its associated purchase order.

Shipment and Receipt

Standard Oracle Purchasing functionality confirms that your supplier has completed the drop shipment. Confirmation may be as simple as a phone call, or it may include Electronic Data Interchange (EDI) documents, such as an Advance Shipment Notice (ASN).

When you receive shipment confirmation, enter a receipt in Oracle Purchasing, even if the drop-shipped item is not transactable. This creates inbound and outbound material transactions in your system for accounting purposes.

You must receive drop-ship items in a logical organization. If you use Oracle Master Scheduling/MRP and Oracle Supply Chain Planning, to avoid miscounting supply you may not want to include logical organizations in your planning. If you choose to include logical organizations, ensure that doing so does not cause planning and forecasting complications.

If your supplier should send only an invoice, you need to enter a passive receipt.

Invoicing

After your system's inventory has a record of the transaction, run the Receivables Interface and AutoInvoice programs to generate an invoice for your customer. You may want to pass on any landing or special charges that your supplier imposed on the drop shipment. Such charges must be applied manually to the invoice.

Closing

After all lines on the order have completed all applicable cycle actions and after you have invoiced your customer, run the Close Orders program.

Drop Shipment – Functional Setup and flow

A Drop Shipment occurs when a customer order is sourced from and delivered by a supplier.

Order Management sends information to the Purchasing Application to create that PO, and then when that PO is received (to indicate shipment from the supplier to your customer), the order line is automatically updated to indicate that it was fulfilled.

In this process, the company running Order Management is modeled as the company to whom the end customer places the original order.

Drop Shipment - Setup

You need to make sure these are attribute setup Correctly:

Item Attributes

Purchased : EnabledPurchasable : EnabledTransactable : EnabledStockable : OptionalReservable : OptionalInventory Item : OptionalCustomer Ordered : EnabledCustomer Order Enabled : EnabledInternal Ordered : DisabledOE Transactable : EnabledShippable : 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

Check the details here .

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

Understand “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.

 

The best can be described as:

These are the following activity takes place when you have drop shipment

Supplier o Warehouse Item o Ship order o Shipment notification

Order Entry o Enter customer o Enter order o Demand order (optional) o Cancel order (optional) o Close order

Purchasing

o Create and send Purchase Order o Enter shipment notification in system

Receivables o Create invoice o Collection of payment o Receipt

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 ispo_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")

Hope this is great help to understand the flow.

Most of us heard about e-commerce site like ebay,ubid.com,amazon,com which is very common place in advance countries like USA, UK & Singapore where people can sell or buy there product. Have you ever think ,what is similar situation in real world , when the the word 'drop shipment' comes to your mind. ......a business situation when the retailer or trader has no stock himself, instead giving customer details directly to the seller, and then saler than fills the order and send it to customer directly.How its sounds...

Drop shipping still remains a hot topic among SCM practitioner and apps Implementer , but even though it has many benefits, it isn’t the best option for every business. I am not going to walk through the pros and cons of the process , rather would like to walk through some of the key steps and processes which exist in real world which is important to understand the concept which helps during configuration with the product.

As in one of the last post , we have seen drop shipments is a method of fulfilling sales orders by selling products without the order taker handling, stocking, or delivering the products. The seller buys a product and the supplier ships the product directly to the seller’s customer .

In other word ,drop Shipment is a process where the customer places a purchase order on a company and this company instructs its supplier to directly ship the items to the customer.

Drop shipments are done because of the following reasons:

Customer requires an item that is not normally stocked Customer requires a large quantity of the item which is not available with you It is more economical when the supplier ships directly to the customer

 

 

 

 

 

 

Types of drop shipment

If you see the real world scenarios this can be best categorize as mainly under three heads as:

Type 1 : Full Drop Shipment

Where the seller sends the purchase order to the supplier for the full quantity that the customer had ordered

Type 2 : Normal Shipments and Partial Drop Shipment

Under this scenario, If the seller has only part of the quantity available for shipping to the customer, then that quantity is shipped; a purchase order is created for the remaining quantity which the seller was not able to fulfill. This is typically true for single based item.

Type 3 : Normal Shipments and Full Drop Shipment

In this scenario, the seller ships some goods from inventory to the customer, and the other goods are always shipped from an external source (supplier).

Process Flow for Drop Shipment (Adopted from User Guide)

Drop Shipments for Standard Items

1. Enter an order for drop ship item

2. Book the order 3. Run Requisition Import 4. Create a purchase order from the requisition 5. Approve the purchase order 6. Receive against the purchase order

Forward drop ship flow for ATO model

1. Enter a sales order for your drop shipped ATO model. 2. Select your options. 3. Schedule and book order (schedule date should default to request date for all

lines). 4. Create you configured item by progressing your order ATO Model line or

running the Autocreate Configuration batch process. 5. Verify order and line status. 6. Create a supply order (dropship requisition) by progressing your

configuration item line or running the Autocreate Dropship Requisition batch process

7. Run the Oracle Purchasing Requisition Import to create a purchase requisition.

8. Create a purchase order for the requisition. 9. Approve the purchase order. 10. Receive the purchase order.

Forward drop ship flow for ATO Item

1. Enter a sales order for your drop shipped ATO item 2. Schedule and book order (schedule date should default to request date for all

lines). 3. Create a supply order (dropship requisition) by progressing your

configuration item line or running the Autocreate Dropship Requisition batch process.

4. Run the Oracle Purchasing Requisition Import to create a purchase requisition.

5. Create a purchase order for the requisition. 6. Approve the purchase order. 7. Receive the purchase order.

Non-SMC PTO model with drop shipped standard options

1. Enter a sales order for your PTO model.2. Select options; source type on the components will default.3. Schedule and book the order.4. Run requisition import to create a purchase requisition.5. Create a purchase order for the requisition.6. Approve the purchase order.

7. Receive the purchase order.

Drop Shipment (Technical)

This section is going to help those who asked to provide some more granular details for drop shipment some time back.

As discussed above and in last post drop shipment is the process by which an organization takes orders from their customer and gets it fulfilled by a 3rd party. The selling organizatoin places a purchase order to teh 3rd party (supplier) who ships the ordered products to the end customer directly. There are a large number of tables that contain data related to drop ship orders. For example:

oe_order_headers_all and lines_all (order info) po_requisition_lines_all, headers_all etc.( req. info) po_headers_all, lines_all (po info) oe_drop_ship_sources_all (this table contains the link between the req, po and the

original order)

Moreover, there are many more tables involved in this therefore its better to have a understanding by corresponding ER diagram.

There is always a need to develop some of the custom report, therefore understanding of understanding table is very very important. Here are the same of underline tables details.

PO_LINE_LOCATIONS_ALL

o This table stores document shipment schedules for purchase orders, purchase agreements, quotations, and RFQs.

PO_LINES_ALLo This table stores purchase document lines for purchase orders, purchase

agreements, quotations, and RFQs. PO_HEADERS_ALL

o This table stores document headers for purchase orders, purchase agreements, quotations, and RFQs.

PO_DISTRIBUTIONS_ALLo This table stores purchase order distributions.

PO_REQUISITION_HEADERS_ALLo This table stores requisition headers.

PO_REQUISITION_LINES_ALLo This table stores requisition lines.

PO_REQ_DISTRIBUTIONS_ALLo This table stores requisition distributions.

PO_REQUISITIONS_INTERFACE_ALLo This is the Requisition Import interface table.

OE_ORDER_LINES_ALL o This table stores information for all order lines in Oracle Order Management.

OE_DROP_SHIP_SOURCESo This table stores relationships between order lines in oe_order_lines_all table and

associated oracle purchasing requisitions in PO_REQUISITIONS_ALL and Oracle purchasing purchase orders in PO_LINES_ALL.

RCV_SHIPMENT_LINESo This table stores receiving shipment line information.

Drop Ship @Release 12There are no Changes in R12 for Drop Ship Flow same as R11 only