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Drop Shipment

The document discusses the differences between drop shipment, backorders, and back to back orders in Oracle Applications. Drop shipment occurs when an organization fulfills orders through third party vendors who directly ship to the end customer, without the organization maintaining inventory. Backorders occur when available inventory is insufficient to fulfill an order. Back to back orders involve procuring inventory after a sales order is created to fulfill that order internally.

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Saleem Javed
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57 views5 pages

Drop Shipment

The document discusses the differences between drop shipment, backorders, and back to back orders in Oracle Applications. Drop shipment occurs when an organization fulfills orders through third party vendors who directly ship to the end customer, without the organization maintaining inventory. Backorders occur when available inventory is insufficient to fulfill an order. Back to back orders involve procuring inventory after a sales order is created to fulfill that order internally.

Uploaded by

Saleem Javed
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Drop Shipment, BackOrders and

Back to Back Order


Posted on April 12th, 2008 by Sanjit Anand | Print This Post | Email This Post
This was yet another query asked by one of the reader..so thought to combine in a post so
that others can also understand.
Lets try to understand these key terms from Oracle Apps Product side:
Back Orders
The Oracle term! backorder is a status! on the order line or deli"ery line
indicating that you ha"e tried to release an order for picking in your warehouse#
but that the pick release was $%&$''E&&($L because there was no a"ailable
in"entory.)*ackorder can be partial or complete+. The Oracle term backorder does
%OT mean that you ha"e open purchase orders for the out,of,stock item from
your "endors.
The term backorder is also used in business a little differently than in Oracle. The
term An item is on backorder! usually means that the item is not in stock# but the
shipping company has already placed purchase orders from their suppliers to
restock the item.
*ack Order is when u do not fulfill the &ales Order# or if the in"entory is out of
stock for deli"ery to customer.
Drop Shipment
-rop shipment on the other hand is a method of order fulfillment where the
organi.ation taking the order does %OT maintain their own in"entory for the
drop,shipped product# but fulfill their orders through /rd party "endors who
directly ship to the end customer ordering the product.
(or e0ample#
A orders item 0 from *
* orders item 0 from '
' ships 1tem 0 to A.
* bills A for the order# ' bills * for the order
Back to Back Orders
1n *ack to *ack order the shipment process is also completed through O2 as a standard
order after the item is recei"ed against a PO.
hat is the major di!!erence "et#een drop shipment and "ack to "ack order $
1n *3* the source will be internal but the item would be procured after the order
is created or after the demand is made.
1n -rop &hip the source will be e0ternal
1n -rop &hip orders# material is directly shipped to the customer from the
supplier. Thus# in"entory is not affected. 1n this case# only logical recei"ing is
done. *ut in the case of *ack,to,*ack orders# material is taken from in"entory.
-rop &hip orders may ha"e many Purchase Orders connected to them. 1n *ack,to,
*ack orders one PO is tied to one &ales Order.
%ore on Drop Shipment & Back to Back Orders'()nctional*
4igh Points for E*& *ase (unctionality for -rop &hipment
-rop shipment order processing in E*& is managed using workflow
-rop ship functionality is based on source type of an order line )1nternal5E0ternal+
6ou can automate your PO5*PA release creation based on A&L5sourcing rule
information
-rop ship process uses standard O2 workflows.
6ou can use &ales order Purchase order discrepancy report to identify
discrepancies between the O2 and the PO
There is a links O2 and PO to pro"ide "isibility through entire supply chain
(low.
The entire -rop shipment process flow can be best understood as figure below:

+oints !or ,mplementation -onsiderations
Order line attribute: &ource Type )need to be e0ternal+. 6ou can be defaulted from
item or order type
o 2enu ,7 8esponsibility Order Entry &uper $ser5setup5Orders5Types
o &etup an order type using the cycle defined in the pre"ious step )a+#an
order number source# a "alid standard "alue rule set.
1tem attributes )O2 and Purchasing+
6ou need to do the setup for these attributes:
,Purchased )PO+ Enabled
,Purchasable )PO+ Enabled
,Transactable )1%9+ Enabled
,&tockable )1%9+ Optional
,8eser"able )1%9+ Optional
,1n"entory 1tem )1%9+ Optional
,'ustomer Ordered )OE+ Enabled
,'ustomer Orders Enabled )OE+ Enabled
,1nternal Ordered )OE+ -isabled
,1nternal Orders Enabled )OE+ -isabled
,&hippable )OE+ Optional
,OE Transactable )OE+ Enabled
&etup requisition import parameters
6ou can also use grouping by 9endor
6ou can also set the multiple distributions set to %o
A&L and5or &ourcing rule relationship need to be setup for Automatic PO creation
Oracle recommends using a logical organi.ation for drop shipment. E0clude this
organi.ation for planning purposes. 1t can be worked around using non nettable
:;<-ropship:;= subin"entory
Back to Back Order
As mention abo"e this is ability to create specific supply orders for customer sales orders.
These are main features a"aible in E*&
-esignate specific items as :;>*,to,*:; order able
Enter sales order lines for these items# and ha"e the supply automatically created
"ia a requisition
4a"e the requisition con"erted into a Purchase Order or a release of a blanket
Purchase Order
9iew the requisition number or PO number and its status from the &ales Order
)using reser"ation details window+
8eser"e the supply from the 8equisition to the PO and finally to the &ales Order
once the PO is recei"ed
Pick# ship and finally in"oice the customer for the product.
:;<%ote to *uyer:;= field in the requisition captures the &ales order information
Line status information shows the progress of the order
PO 8eq 'reated
PO 8eq 8equested
PO 'reated
PO 8ecei"ed
1f line is manually reser"ed it progresses to :;<Awaiting &hipping:;=
'hanges and 'ancellations on sales orders:
o 8eser"ation is changed
o %otification sent to *uyer
4ope this makes a clarity on topics.

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