Drop Ship Orders Process Flow

The drop ship process is designed to create a sales order for a customer and create a purchase order for the supplier of the ordered products. The step of processing the voucher(s) and invoicing the customer is also necessary to complete the drop-ship process. A single customer's order can contain drop-ship line items, regular shippable line items, and/or special order line items.

The drop-ship order process flow has two variations based on whether the Automatically Invoice Drop Ship Customers check box is selected in Customer Service Control Maintenance. The only difference between the two variations is how confirmed pick demands are created and inventory is adjusted for the customer's sales order. If the check box is cleared, confirmed pick demands are created and inventory is adjusted in Drop Ship Purchase Order Confirmation. If the check box is selected, confirmed pick demands are created and inventory is adjusted during voucher entry.

NOTE You can only process EDI ASNs for drop-ship orders if the Automatically Invoice Drop Ship Customers check box is cleared. If you need to process ASNs for an EDI trading partner's drop-ship orders, select the Process ASNs for Drop Ships check box in Advanced Ship Notice Options.

To perform the drop-ship order process:

1. In Order Entry, enter the order, as follows:

1. Enter a Sales type order class in the Order Class field.

2. Enter a customer code or name in the Customer Code or Customer Name field.

3. Verify/change order entry and customer defaults, such as the shipping and sales location, ship complete, ship backorder complete, freight free, sales representative, payment terms, etc.

4. Verify/change the order required date entered in the Required Date field.

5. Add order notes and/or remarks if necessary using the Notes or Remarks button in the ribbon.

6. Click the Ship To tab, and verify/change the ship-to address information.

7. Click the Bill To tab, and verify/change the bill-to address information.

8. Click the Additional Charges tab, and add additional charges if necessary.

9. Click the Edit Items button in the ribbon. The O/E Line Item Entry window appears.

10. Enter a product code in the Product Code field. The product must be set up to allow it to be drop shipped in Product Maintenance.

11. Select the Drop Ship from Supplier check box, and enter the supplier code in the field to the right of the check box.

12. Enter the quantity to order in the Quantity field, and then press the Tab key.

13. If you are not using express order entry, verify/change the unit of measure, price, and price adjustment, then click the Enter button to enter the line item in the Items grid.

If you are using express order entry, the line item appears in the Items grid automatically.

14. Verify all settings in the Items grid. Notice the check box in the Drop Ship column is selected. If you are using freight calculations, verify the check box in the Freight Free column is cleared.

15. Add line item additional charges if necessary using the Additional Charges button in the ribbon.

Note You can only add additional charges to the order (or order line) until the associated accounts payable voucher is reconciled.

16. Add other products to the order if necessary.

17. Click the OK button in the ribbon.

18. Click the OK button in the ribbon. The order is created. The order status is now Open.

2. In Drop Ship and Special Order Create, create the drop ship purchase order, as follows:

1. Clear the Create Special Order PO's check box if you want to only create drop ship purchase orders.

2. Click the Show Data button in the ribbon. The order you created in step 1 should appear in the grid on the Results tab if the customer order's shipping location is the default shipping location. If the order does not appear, change the shipping location. You can also change the other filter criteria to display the correct order.

3. Select the check box in the Create column of the grid for the order you created in step 1.

4. Click the Print Options tab, and verify the process option and output options.

5. Click the Create Selected Purchase Orders button in the ribbon to create the purchase order and output a summary report defining created purchase order numbers.

Note You can skip this step for customers who are set up to have drop-ship purchase orders automatically created.

3. In Purchase Order Maintenance, enter the drop ship purchase order number in the Purchase Order # field, and review the purchase order. Notice the purchase order status is Pending Invoice. This indicates you need to process the accounts payable voucher against the purchase order. Receipt processing and posting is not required for drop ship purchase orders. You can edit the purchase order if necessary.

Note You can only add additional charges to the purchase order (or order line) until the accounts payable voucher is reconciled. Duty charges are automatically added to the purchase order, if applicable.

4. If you need to generate compliance labels for drop-ship order packages, print the labels in Drop Ship Label Print. This generates package records for drop-ship orders, which are used for processing ASNs.

5. In Container Management and Shipment Management, enter container and shipment information for the drop ship purchase order products. This step is optional and should only be performed if you are tracking by container and shipment. Specific customer can be set up to have containers/shipments automatically created.

Note You can only add additional charges to a shipment until the accounts payable voucher is reconciled. Duty charges should have already been added (if applicable) as purchase order additional charges. A shipment can contain all drop ship purchase orders or no drop ship purchase orders, but not both.

6. In Voucher Entry, enter an accounts payable voucher for the merchandise, selecting the supplier, and reconciling with the drop ship purchase order. After the voucher is entered for the supplier, the software automatically generates a confirmed pick demand for the customer's order, and adjusts inventory for it.

Note Using the As Is button in the ribbon in A/P PO Reconciliation sets the voucher status as Fully Invoiced, and that in turn sets the purchase order status as Closed. A closed purchase order cannot be edited for amendments. The customer’s order can be amended for quantities (cannot be less than what was entered for the voucher in accounts payable), as well as additional line items as long as it is not closed.

7. In Voucher Entry, enter an accounts payable voucher for invoices from other suppliers for additional purchase order or shipment charges, and reconcile the voucher.

Note Additional charges of type Other cannot be reconciled before reconciling the merchandise voucher. No customer invoicing is triggered from additional charge accounts payable entry. No additional charges can be added to a purchase order or shipment after the merchandise is reconciled.

8. Post and/or pay the voucher(s). If you prefer, you can skip this step and post/pay at a later time. Post in Accounts Payable Post. When you post the merchandise voucher, the following general ledger entry is made:

Account	Debit	Credit	Comment
Accounts Payable Clearing			Additional charges waiting for a voucher
Accounts Payable			The voucher amount to pay
Drop Ship In Transit			The total cost of goods for the drop ship, including additional charges

When you post the additional charges voucher, the following general ledger entry is made:

Account	Debit	Credit	Comment
Accounts Payable Clearing			Reversal of the Accounts Payable Clearing amount posted for the merchandise voucher
Accounts Payable			The voucher amount to pay
A/P Charge Recon			Difference between the above two amounts

9. If the Automatically Invoice Drop Ship Customers check box is cleared in Customer Service Control Maintenance, create confirmed pick demands and adjust inventory in Drop Ship Purchase Order Confirmation. During this process, package records and bill of lading records are created for trading partners that process ASNs for drop-ship orders.

10. If you have unresolved accounts, correct or update the general ledger accounts in Pick Demand Account Resolution Update. Users set up for general ledger account exceptions in Location Exception Notification Setup will receive an email if errors occurred.

11. If a trading partner requires ASNs for drop-ship orders, export the ASNs in EDI Advanced Shipping Notice Export.

12. In Invoice Create and Print, create the customer's invoice. You can create and print the invoice at one time, or create the invoice, and later print the invoice in Invoice Print.

13. In Invoice Post, post the customer's invoice. This will set the customer's order and invoice status as Closed and Invoiced, and post to EIS and other history tables. The cost of goods sold for EIS and the history is the Drop Ship Cost of Goods Sold. When you post the invoice, the following general ledger entry is made:

Account	Debit	Credit	Comment
Accounts Receivable			The total amount invoiced to the customer
Sales			The sales amount of the customer invoice
Drop Ship Cost of Goods Sold			The total cost of goods for the drop ship, including additional charges
Drop Ship In Transit			The total cost of goods for the drop ship, including additional charges
Other			Any other additional charges or taxes on the customer order at the time of accounts payable merchandise reconciliation

Notes on the Process

• The drop shipment process does not recognize products as being inventoried, therefore creating a purchase order receipt is not necessary. You do however need to associate some cost for the product, an account called the Drop Ship Cost of Goods Sold account is necessary in the drop-shipment process. This account typically falls in the Cost of Goods (Merchandise) Sold category. If the drop-ship purchase order is ordered, and you have bad accounts, it is likely a valid drop-ship cost of goods sold account has not been set up. Because drop-shipped products are not inventoried, the process of invoice creation does not use these standard general ledger accounts: Accounts Receivable (Dr), Sales (Cr), Cost of Goods (Merchandise) Sold (Dr), and Inventory (Cr).

• A drop-ship cost of goods sold account (or account mask) can be entered for products, purchase order classes, and locations.

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