Drop Shipping: A Growing Trend in Supply Chain for Dealer Sales and Ship-to-Order Businesses
Drop shipping has become more prevalent in the last 5-10 years due to changes in the Supply Chain world. It is used mostly by Companies that sell to a Dealer who then sells to their customers. At Implementation Specialists, we’ve also seen this used in a scenario where the Company does not have warehouse space or is more of a Ship-to-Order business, or one that does not maintain inventory.
Some of the struggles we see are companies keeping track of questions like:
- Did I order that from the Vendor?
- How does the vendor know what and when to Ship?
- How do I know when to invoice my customer and know that they received the product.
Most ERP systems handle this well. Yet, we will walk through the processes that we believe make Business Central more efficient and easier to follow. Below, we’ll provide two different ways to create the Sales Order to Purchase Order link:
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Prepare a drop shipment:
Create a sales order for an item. On the sales order line for the drop shipment, select the Drop Shipment checkbox. By default, the Drop Shipment checkbox and Purchasing Code field aren’t available on the lines. If they aren’t, you can add them by personalizing the section of page that contains the lines.
You can now navigate to the Shipping/Billing Fast tab and select the Customer address to receive the Items This what the Purchase process is cross matching between the two documents.
Release the sales Order once completed.
This is required as this is what starts the need to Order process. To prepare a drop shipment manually, you indicate on the purchase order that it must be shipped to your customer, not to yourself. Create a purchase order. Don’t fill any fields on the lines.
In the Ship-to field, select Customer Address. In the Customer field, select the customer that you’re selling to. This is where the second needed link is completed.
Navigate to the Actions/Functions/Choose the Drop Shipments action, and then choose the Get Sales Order action.
On the Sales List page, select the sales order that you prepared in To create a sales order for drop shipment.
Choose the OK button. The line information from the sales order is inserted on the purchase order line(s). You can now tell your vendor to ship the items directly to the customer. For example, you might send them the order by email. If your vendor provides additional information, such as a tracking number, you can add that information as a comment on a purchase order line. To add a comment on a line, in the Type field, choose Comment, and then enter the information in the Description field.
2. Use the requisition worksheet to create purchase orders.
The advantage of using the requisition worksheet is that it can create purchase orders for all outstanding drop shipments. That means you won’t have to create each order individually and if you have the Vendor/Item cross reference established it knows what Vendor to use without any manual process.
Choose the search icon, enter Requisition Worksheets, and then choose the related link. Choose the Drop Shipments action, and then choose the Get Sales Order action.
If needed, enter filter criteria for the orders you want to get, and then choose the OK button.
Review the purchase order lines, and in the Vendor No. field, select the vendor that supplies the goods. This will default if the Vendor and Item have a relationship.
Choose the Carry Out Action Message action to convert the lines to a purchase order.
This now links the two documents together and guarantees that the PO Cost matches the Sales Costs and provides real time tracking of said Items. Select the drop-shipment sales order line, choose the Order action, choose the Drop Shipment action, and then choose the Purchase Order action.
After the vendor ships the items, you can post the sales order as shipped. You must Post the sales Order prior to Closing the PO process. You can also post the purchase order, but only with the Receive option until the sales order has been invoiced. Choose the search icon, enter Sales Orders, and then choose the related link. Open the sales order that you created in To create a sales order for drop shipment. In the Qty. to Ship field, specify how many of the order quantity to ship, the full or a partial order quantity. Choose the Post or Post and Send action. Choose either the Ship option to invoice later, or the Ship and Invoice option to invoice immediately.
Tip: Don’t forget that you need to post the purchase order invoice.
Want to incorporate drop shipping into your business processes?
Contact: sales@iscorp.biz
Contact: support@iscorp.biz
Blog authored by: Allen Phillips – Senior Consultant
