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 : 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

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 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")

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_ALL
o 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_ALL
o This table stores purchase order distributions.
 PO_REQUISITION_HEADERS_ALL
o This table stores requisition headers.
 PO_REQUISITION_LINES_ALL
o This table stores requisition lines.
 PO_REQ_DISTRIBUTIONS_ALL
o This table stores requisition distributions.
 PO_REQUISITIONS_INTERFACE_ALL
o 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_SOURCES
o 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_LINES
o This table stores receiving shipment line information.

Drop Ship @Release 12

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