Shipping Control

Shipping Control
The primary objectives of the shipping function are first, to ensure that you only ship the items that
customers ordered, and nothing more. Second is to absolutely, positively ensure that you charge them for
the items that were delivered. These two objectives must be supported by our controls.

What Is a Sales Order?

A sales order verifies the specifics of the transaction between a buyer and a seller. Orders are
typically created by sellers in response to purchase orders. This document may be provided to the
customer by the vendor or may be used only internally. Quantity, price, delivery time frame, and
other information are specified in the sales order.

What Is the Difference Between a Sales Order and a Purchase Order?

Purchase Order: The customer gives the supplier a purchase order that specifies the kind, amount,
caliber, and other specifications of the goods or services they want. A costumer order is another
name for a purchase order.
Sales Order: The seller issues the sales order and confirms the sale after the buyer accepts the
seller’s price quotation.
Once you create a sales order, the transaction is deemed final and legally binding, there is no
additional negotiating is allowed.

What is Drop Shipping

Drop shipping is a common logistics and supply chain shipping method in the e-commerce retail sector
and refers to when a seller ships its customers' purchases directly from its supplier's warehouse.

Here is the illustration how drop shipping works:

There are Six Drop Ship Benefits
1.Lower Capital Requirement

Drop shipping's main benefit is not needing to buy and retain inventory in anticipation of customer
purchases, which greatly enhances an organization's order-to-cash cycle (O2C).

2.Ability to Offer a Diverse and Broad Product Mix to the Market

Since a business does not have to buy its inventory in advance of a client transaction, it is also possible
to offer a wide range of SKUs to customers without having to invest in inventory. Therefore, the
dropship model can alter the business owner's perspective from developing a product offering for a
certain audience to one in which they could always search for the next deal to provide for a wide variety
of clients.

3.Maintain Profitability Without Carrying the Inventory

When drop shipping, the vendor waits to buy the goods until the customer makes a purchase

4.Lower Financial Risk

A start-up or established business faces numerous risks and obstacles, including financial flow. A
company is less likely to be exposed to a loss or a fall in profits associated with excess and obsolete
inventory because they don't have to make the initial investment in inventory.

5.Increased Scalability

Because it requires less money and distribution space, a drop ship business model is much simpler to
scale.

6.Convenience and Practicality

A DC or warehouse is not necessary, as was already stated. A business merely needs to offer a user-
friendly website that makes it simple for customers to locate the product. Utilizing Shopify is one of the
greatest software, website, and service solutions for businesses just starting out in the drop shipping
industry. This startup has developed an extraordinarily potent platform for drop ship and more
traditional enterprises to launch an ecommerce marketplace.

The items and markets that a drop ship company focuses on providing affect the profit margins of the
company. For instance, pricey gadgets will probably have lower margins compared to cheaper
products, which will have larger margins. Even so, 5% of $1,000 is significantly greater than 35% of $25.

According to estimates, drop shipping gross margins typically fall between 10% and 15%.

There are numerous businesses out there that provide a directory of goods that are available for drop
shipping from all over the world.
What Is a Backorder?

It is generated when an order can’t be fulfilled at the time of purchase because the item is not
in the seller’s current inventory. However, the item is still in production or available from the
distributor.

A backorder, often referred to as a backlog, occurs when a seller cannot meet the demand for a
certain product with the quantity they have on hand. That could be the result of inadequate
planning, problems with the supply chain, overly strict policies on safety stock, or an unforeseen
increase in demand for a particular good.

How Backorders Work?

When a company takes orders and potentially payments for products that are not in stock, it is
accepting backorders.

Once backorders are accepted, the inventory management system converts them to purchase
orders and sends them to the appropriate internal department, vendor or distributor. Customer
service teams should provide buyers with an estimate of when they can expect their orders and
how payment will be handled.

Sometimes, companies see an unexpected surge in demand for a product. Again, depending on
visibility into availability of additional stock, accepting backorders allows the retailer to make
those sales and keep customers happy.

Small suppliers that drop ship most or all of their items often take backorders as a matter of
course and place an order with the supplier only once backorders reach a certain threshold. These
companies avoid inventory carrying costs altogether.

What Causes Backorders?

 Unusual demand or demand exceeds supply

 Supplier or manufacturing issue
 Inaccurate forecasting
 Delayed orders
 Human errors
 Warehouse management discrepancies
What is a Merchandise Returns?

It is a Return procedure as seen by the customer

The consumer can choose to return an item after you've enabled the returns feature in your back office
(as long as the order is still valid, of course). To accomplish this, he/she must take the following actions:

1. access his or her account's "Orders history" area.

2. Clicking "Details" will allow the user to choose the order from which they want to return an item.

3. By checking the box next to the item(s)' name(s), the customer designates the product(s) they intend
to return.

4. In the event that more than one product needs to be returned, include the quantity.

5. Add a description in the "Merchandise return" section (optional) to help the shop team.

Return process: how the customer sees it

Once you have activated the returns option in your back office, the customer can choose to return an
item (provided the order is still in the time of validity). In order to do this, he/she must do the following:

1.Access the "Orders history" section of his/her account.

2.Select the order from which he/she wants to return an item by clicking on "Details".

3.Select the product(s) that he/she wishes to return by checking the box next to its name(s).

4.Add the quantity that needs to be returned (in case more than one product need to be returned).

5.(optional) In the "Merchandise return" section, add an explanation, in order for the shop team to
better understand why the customer wants to return this product.

6.Click on "Request a return".

The request is forwarded to the store manager (you) when the consumer hits "Request a Return" after
filling out the form. The customer's "Merchandise Returns" page, which is accessed through the account
page, displays the request as "Waiting for confirmation" as it is.

How do you view the return process?

The "Merchandise Returns" page in your back office contains the return request. The return request
initially has a "Waiting for confirmation" status.

The refund process can take several steps, which are indicated by the return status. It can be either:

 Waiting for confirmation.

 Waiting for the package.
 Package received.
 Return denied.
 Return completed

Returns for Items

A list of all RMA processes (Return Merchandise Authorization) is provided on the "Merchandise
Returns" page.

You can allow consumers to return items to you by selecting the "Enable returns" option at the bottom
of the page. Make your selection, specify the window of time during which a return request may be
submitted, and save your preferences. Customers are now able to seek a return permission. The return
number's prefix can also be changed, or you can decide against having one.

What the customer thinks about the return procedure

The customer can choose to return a product after you've enabled the returns feature in your back
office (assuming the order is still inside its valid period of time).
You can now choose to accept or reject it:

To get further information, click on the return request ID.

Change the status to start or halt the return procedure.

Simply select the "Return denied" option to end the return process and deny the buyer a refund.

If you agree that the product should be returned and the buyer should receive a refund, carefully
complete each step:

"Waiting for package" is the procedure' next step that you should select. This will notify the customer
via email that you are accepting returns for the product.

Change the status of the request to "Package received" once you have received the package.

Finally, after the procedure is over (either the customer has received a refund

Refunding a client
An order may be refunded in full or in part. Instead of visiting the return page, two actions buttons are
located in the top bar of the order page itself.

Depending on the condition of the order, different actions are available. For instance, the "Add a
product" and "Remove products" buttons are replaced with the "Return products" and "Partial refund"
buttons once the order has reached the "Delivered" status.

Product returns are not by default turned on. To turn it on, go to the "Customer Service" menu's
"Merchandise returns" page and turn it on in the settings area at the bottom of the page. All orders and
products are covered by this.
Return merchandise. This feature should only be utilized when a customer has really returned an item.
Once a product has been returned and received, you can designate it as such immediately in the order
form.

When you click the "Return products" button, a "Return" column will be added to the product list.
Choose "Return products" from the menu at the bottom of the table, check the boxes next to the
impacted products, and then select how many items were returned.

Partial refund. Used when you need to refund only a portion of an order rather than the entire order,
either as a result of the customer returning the requested item or simply as a gesture of goodwill for a
defective item that the client decided to keep nevertheless. When you click the "Partial refund" option,
the product list will update to include a new column with the heading "Partial refund." Choose one of
the choices at the bottom of the list (see below), enter the quantity and amount for each of the
impacted products, and then click the "Partial refund" button at the bottom of the table.

The payment system might automatically refund the cart if the consumer purchased with a
credit card, or you might have to do it yourself. If the item was paid for with a check or a bank
transfer, you will need to manually mark the transaction as having been refunded in the back
office (on the order's page).
Controls Over Deliveries

There are several of controls that can help us in achieving the delivery objective. Let's start
by making sure that nothing is shipped that shouldn't be. Checking that the sales order has been
stamped or flagged by the credit manager, indicating that the order has the approval of the credit
department, is an obvious control.

In printing the daily shipping list, it should automatically eliminate any orders for which
credit has not been accepted, only if the shipping and credit departments share a database. And
you might support this with a standard policy that stipulates that no orders are released without
the credit manager's prior permission. That policy can occasionally be effective in promoting the
shipping manager with a fear of God if it is properly enforced.

There can also be an occasional audit to compare credit authorizations to what was actually
shipped, just to make sure that this control works.

The second measure of control is to verify that the sales order and the selected items match as
soon as the chosen items are delivered to the shipping area. If some items were not in stock, then
you complete a three-part backorder request form for the missing items.

One copy goes to the order entry staff for follow-up with the customer, while another copy goes
to either the purchasing department or production scheduling department to either order or create
the missing items, and the shipping manager retains the final copy, along with the sales order.

The third control is investigating the cause of customers product returns, since these returns
may involve goods that were shipped incorrectly.

Controls Over Billing of Shipped Goods

 The goal of making sure that all shipped items are billed. The main control for this goal is the
proper use of a bill of lading. When an order is shipped, the shipping staff prepares a three-part
bill of lading. One copy goes with the shipment, one stays in the shipping department, and the
last copy is the important one it goes to the accounting staff. The accounting staff the uses this
bill of lading as a trigger to create an invoice.

Another measure of control is to finish a daily shipping record that includes a list of all
shipments made that day. To determine whether any shipments were skipped, the accounting
team can compare this log to what they actually invoiced. This record should be generated
automatically by the shipping software if the shipping department is fully computerized.

Drop shipping refers to the unique circumstance that occurs when a business does not actually
ship anything; rather, a supplier sends the products directly to the client. When the business
delivers a cargo to the client, it sends a copy of the sales order to the supplier, who then sends a
copy of its bill of lading to the business. In having a long-distance shipping dock. The main risks
are that either the supplier doesn't receive the customer's order (and hence doesn't ship it), or that
it ships the item but never notifies the company's accounting staff of the shipping. By looking
into past open customer orders for which we have never sent the customer an invoice, we protect
ourselves from both the first and second risks.

Although they may just indicate that the provider has not yet made a shipment, these are a
great sign if there are issues with the drop shipping process. A further measure of control is to
compare the supplier's billings to the business with the business's bills to the client. If there are
items on the supplier's invoices that are not on the firm's invoices, the company must have missed
an opportunity to bill for those items.

The use of an evaluated receipts system by a client is another unique circumstance. When they
do this, they pay their suppliers based on what they actually receive rather than what they have
been invoiced for. They actually refuse to receiving an invoice at all. Instead, these clients
typically request that a unique label be printed and attached to any delivery sent to them.

The customer's authorized purchase order number and sometimes some other details regarding
the shipment's contents are always listed on these labels. The business is not paid if the label is
not attached. Therefore, it is a very helpful control to carefully verify the label before these
shipments are sent out. The shipping manager can also run a report from the computer system
that identifies which distinct label was applied to each delivery if each label has a unique
identification number. You can tell that a label wasn't printed if the report doesn't list any unique
numbers.

Hence, this area would otherwise be clogged with papers and hinder the department's
effectiveness, it is necessary to use an integrated computer system as much as possible. The
shipping staff can quickly confirm credit authorization, create labels and bills of lading, and
digitally notify the billing department of shipments by using computers. The process would be
significantly slower and more prone to mistakes without computers.