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Drop Ship Order Demoin Oracle Apps

By:Devendra Gulve

http://functionalguy.blogspot.com




Drop-Ship Order Demohttp://functionalguy.blogspot.com

Drop Shipment

Drop shipment enables to take order from customer and fulfill it directly from a supplier●Key Business Drivers

○ Low inventory cost○ Reduced shipment time to customer○ Can offer a variety of product to customer○ Used heavily in contract manufacturing environment where the

product is standardized and the company plans to focus more on product design rather than manufacturing

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Introduction to Drop Ship

Drop shipment 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: (C=Customer, M=Organization, S=Supplier)

○ C orders item x from M○ M orders item x from S○ S ships Item x to C○ S bills M for the order, M bills C for the order○ C pays M for the order, M pays S for the order




Drop Shipment

Functionality Overview● Order processing is managed using workflow● Links Order Management and purchasing to provide visibility

through entire supply chain● Drop ship functionality is based on source type of an order line

(Internal/External) ● Automatic PO/BPA release creation based on ASL/sourcing rule

information● Drop ship process uses standard OM workflows. Hold and

approval steps can be added to order processing flow.● Use Sales order Purchase order discrepancy report to identify

discrepancies between the SO and the PO




Drop Shipment New features in 11i

● Internal location relationships need not be maintained● Can drop ship kit, model and configured items excluding

Ship model complete (SMC)■ Within a configuration items can be sourced from different

suppliers■ File attachment can be sent for ATO configurations. Vendor can

also view information using iSupplier portal■ Perform a match and use existing configuration ids

● Item master attribute can be used to identify Drop ship items

● User item description can be sent to Purchasing




Implementation Considerations

Order line attribute: Source Type (need to be external). Can be defaulted from item or order type● Item attributes (OM and Purchasing): Item should be

Purchasable, BUY and ATO unchecked.● Setup requisition import parameters

■ Typically group by Vendor■ Multiple distributions set to No

● ASL and/or Sourcing rule relationship need to be setup for Automatic PO creation

● Oracle recommends using a logical organization for drop shipment. Exclude this organization for planning purposes. It can be worked around using non nettable ‘Dropship’ subinventory




Steps for Drop-ship order

1. Receive PO from Customer.2. Enter Sales Order against the PO from customer with EXTERNAL

source type.3. Requisition will be generated and then PO for fulfillment/s.4. This PO will be sent to suppler with ship-to address as customer’s

address and Bill-to address as our address.5. Supplier ships material to customer directly and sends shipping

details to us.6. Customer sends us acknowledgment of material received.7. Suppler sends us invoice against PO sent by us8. Receipt will be done against PO sent to suppler

○ no change in on-hand quantity, even we do receipt9. Sales Order gets fulfilled and we can send Invoice to customer

against the sales order.




Drop Ship Order flow




Drop Shipment Process Flow : Standard Item




Enter Order Header

Note the Order# and Ship-to , bill-to address

Note the Order# and Ship-to , bill-to address




Enter Order Line/s

Now the Line status is Entered




Enter Order Line/s

Make Sure Source type is “External”

Mention the Organization, where you want to receive the material from External Source




Book the Order

Order / Line status becomes Booked




Creating Supply

●Run workflow background○This will process the record/s and will put

eligible records in Interface●Run Requisition import program and make

sure the requisition gets generated○This will pull the records from Interface and

then create requisition/s.




Requisition Import

This program created one requisition




Find Requisition

●PO (R) > Requisitions > Requisition Summary




View Requisition

It is Same as Ship-to address mentioned

on Sales Order

Once PO gets created against this Req. this field will

get populated




Auto Create PO




Auto Create PO

●PO (R) > Auto Create




Auto Create PO

Enter Suppler Details here




Auto Create PO




View Requisition

●Here the PO number got Populated for the Requisition




Open PO




Approve PO




Sales Order Line Status




PO Receipt

●PO (R) > Receiving > Receipts

Enter PO Number




PO Receipt

●Item is Serial Controlled, so enter Serial Number




View PO Receipt

● PO (R) > Receiving > Receiving Transaction Summary





Just on PO Receipt, Order Line status becomes

“Shipped”. No need to do Shipping activity




Run workflow background

●Run workflow background○This will process the record/s and will put

eligible records in Receivables Interface





Now the Line status became Closed




Auto-Invoice Program

●This Program will pull records from Receivables Interface and create Invoice for the same




Mention the Order Number to be invoiced




Invoice Details

●Receivables (R) > Transactions > Transactions




●Customer will pay against this receivables Invoice.

●Similarly generate Invoice against the PO/Receipt in Payables and pays money to Supplier.

●Profit margin depends on price difference in these two invoices




Drop Shipment: Limitations

●Sales order changes need to be manually updated in PO sourcing an item from multiple supplier

●Management of sales order holds and approvals ■ Need to be managed manually after the PO has been created

●Tracking serial number could be a problem. ■ Serial numbers cannot be captured during PO receipt if the item

is serial number control at shipment ■ Serial number control at receipt works fine for manual receipt.

This implies receiving using serial number for all transactions. May be worked around using a logical receiving organization.




Thank You

●Please post your comments on

● http://functionalguy.blogspot.com/2008/10/drop-ship-order-flow.html



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