Drop Ship Purchasing

Drop ship purchasing automates the order creation and transaction process for distribution-oriented businesses who purchase goods directly against sales orders, and then want these goods shipped directly to end customers.

Overview

Drop ship purchasing automates the order creation and transaction process for distribution-oriented businesses who purchase goods directly against sales orders, and then want these goods shipped directly to end customers. This functionality is roughly divided into two main areas:

  • The first area is the ability to link a sales order line item directly to a purchase order line item in the same way that work orders are linked to sales orders. Additionally, purchase orders support the designation of specific ship-to address information that, in the case of drop ship orders, match the ship-to address entered on the sales order that generated it.
  • The second area facilitates the option to flag a purchase order item for "Drop Ship." When the receipt transaction for the purchase order item is performed for a drop shipped item, the item will be automatically issued to shipping, shipped, and selected for billing — effectively saving several transactional steps for end users.

Terms and Definitions

  • Drop Ship
    • A designation that indicates sold items will be purchased from a vendor and shipped directly to the end customer.
  • Releasing Purchase Orders
    • Previously, there was a notion of purchase orders being "unposted" and "posted." This has been misleading because it suggests that the posting of purchase orders may generate a general ledger transaction (which it doesn't do). Now the notion of posting a purchase order has been replaced with the act of  "releasing" a purchase order. Releasing effectively changes the status of a purchase order from "unreleased" (U) to "open" (O), in exactly the same way as posting purchase orders did previously, and transfer orders do currently in xTuple ERP.

Drop Ship Features

The following sections describe the specific areas in the application where you will encounter drop ship purchasing features.

Configure Purchase

To open the purchasing configuring options, you can follow these steps:

  • Go to "Purchase" from the top menu
  • Click the "Setup" submenu
  • Make sure the "Configure" option is selected on the menu to the left
  • The "Purchase Configuration" window will look as follows:

dsp001v2

When the "Enable Drop Shipments" option is selected, another option to "Select Drop Shipped Orders for Billing on Receipt" is enabled for selection as well; otherwise it is disabled. The use of these flags should be self-explanatory, but is discussed in additional detail in the sections below. In order to prevent you from creating a conflict by disabling drop shipment when drop shipments are in progress, the "Enable Drop Shipments" check-box will be selected and disabled if any open purchase orders are found that are enabled for drop shipment.

Item Sources

For drop shipping to work, you must have item sources defined. To open the "Item Source" window, please follow these steps:

  • Go to "Purchase" from the top menu
  • Select the "Item Source" submenu
  • Select "List" and choose TBOX1 from the "Toy Parts Inc." vendor
  • The "Item Source" window will open:

dsp002v2

The item source window includes a check-box to designate the "default" item source, as pictured. Select this option to distinguish an item source from other item sources for the same item number. If selected, the default item source will be selected automatically when releasing purchase requests or creating drop shipments. If no default item source is specified, you will be asked to select item sources from a list of available item sources when releasing purchase requests or creating drop shipments. When this box is selected and saved, any other item sources for this item flagged as the default will be unchecked.

Item Sites

There are several item site flags which must be set to ensure drop shipping operates properly. To open the item site window you can follow these steps:

  • Go to "Purchase" from the top menu
  • Select the "Reports" submenu
  • Select "Item Sites"
  • From the list, choose the WH1 TBOX1 item number
  • The "Item Site" window will open for that item:

dsp003v3

The "Site can purchase this Item" option is a check box which must be enabled for any items you want to drop ship. The option to either "Create Purchase requests for Sales Orders" or "Create Purchase Orders linked to Sale Orders" are mutually exclusive. When "Create Purchase Orders" is selected, a check box option to "Drop ship items by Default" will be enabled beneath the "Create Purchase Orders." However, this option will only be visible when drop shipments are enabled in configure purchasing. If you, the user, selects any of the create "Purchase Orders" or "Request" check boxes, the application will check for valid item sources. If none are found, a warning will be presented:

  • Warning: "Purchase Orders cannot be automatically created for this item as there are no item sources for it. You must create one or more item sources for this item before the application can automatically create purchase orders for it."

Sales Orders

The sales order item screen is designed to create purchase orders linked to sales orders. If that option is checked on the item site screen for an item, the "Create Purchase Order" and "Drop Ship" check-boxes will be made visible if drop shipping has been configured for purchasing. As with purchase requests created from sales order demand, you will be provided the ability to enter an override purchase price if desired. The application will also check to make sure there are valid item sources available. If not, you will be presented with a warning:

  • Warning: "Purchase orders cannot be automatically created for this item as there are no item sources for it. You must create one or more item sources for this item before the application can automatically create purchase orders for it."

If that message has been displayed, the "Create Purchase Orders" group will be unchecked and disabled.

If the "Create Purchase Order" check box is successfully checked the application will attempt to create the purchase order when the sales order line item is saved. First, it will determine if there is a default item source for the item. If a default item source has not been designated, you will be prompted to select an item source using the same screen that is used to select item sources when a purchase request is released. This also holds true for kit items when they are drop shipped. Each component of a kit must have its own item source. Once the vendor is determined by the item source selection, the application will look to see if a purchase order exists for this sales order. If "Drop Ship" is checked, it will specifically check for a purchase order linked to this sales order with a matching ship-to address as well. If a match is found, a new line item will be created for the existing purchase order. If not, a new purchase order will be created linked to the sales order. If the line item is drop shipped, the purchase order will inherit the ship-to address and contact information from the sales order.

To open the "Sales Order Item" window follow these steps:

  • Go to "Sales" from the top menu
  • Select the "List Open" submenu
  • The "Open Sales Orders" window will open, for this example we will be using Order # 50524 for TTOYS
  • The "Sales Order" window will open, from here select the "Line Items" tab
  • Select the first listed line item, TBOX1 and click the EDIT button
  • The "Sales Order Item" window will open for that item:

dsp004v2

  • Go to the "Supply" tab and select the SUPPLY ORDER radio button
  • The option to "Drop Ship" will now be available to be selected

Note: Make sure you have a ship-to address defined on the Sales Order header. Otherwise, you will not be able to select the Drop Ship option here.

When the sales order item screen is subsequently opened in edit or view mode, the purchase order number line number, status, due date and quantity will be displayed. This information is inferred from the purchase order linkage information stored on the co-item table. If a purchase order has been created, the "Create Purchase Order" group will be disabled. Breaking the purchase order links must be done from the purchase order window by deleting the purchase order line item.

If you edit a quantity or date of a sales order item linked to a purchase order item that is open, the purchase order item will be updated with the new quantity and date. However, if you attempt to modify the quantity or date of a sales order item linked to a purchase order, and the purchase order item is closed, you will then be given an error message:

  • Warning: "The purchase order item this sales order item is linked to is closed. The quantity may not be updated."

When a sales order item is linked to a purchase order item, and the sales order item is canceled, you will receive a warning that linked purchase order will not be affected, and that it should be closed or deleted manually if necessary.

Sales Order Header

Because different items may have different vendor sources, one sales order may be linked to multiple purchase orders. Furthermore, this set up allows for the case where one item may be drop shipped and another may not, for items from the same vendor. In this case, two purchase orders would be created, one for the vendor to ship to the receiving warehouse, and another for the vendor to ship directly to the customer's address.

Right-click options on the line item list enables you to jump to an associated purchase request, purchase order, or work order.

Deleting a sales order line will delete the links between the sales order and the purchase order. However, the following rules apply:

  • If the purchase order line is unreleased, it will be deleted automatically. Afterward, if the purchase order contains no more line items, the header will be deleted automatically.
  • If the purchase order line is open, with no receipts, you will be notified that the purchase order will remain open and must be deleted separately if desired.
  • If the purchase order line has receipts or is closed, you will be notified that they may not delete the sales order line, but instead must cancel it.

Clicking "Cancel" to exit a newly-created sales order will delete any purchase orders created by it the same way work orders are deleted when a new sales order is canceled.

Purchase Orders

Purchase orders can have three different statuses: unreleased, open, or closed. The default for new purchase orders is "unreleased," but you can change the status to "open" or "closed" from within the main window. Once a purchase order has been saved as "open," it may not be changed back to unreleased. All line items are made "open" if the header status is changed to "open." Likewise, all line items are closed if the header status is changed to "closed."

A sales order cluster appears on the purchase order header. Linkage for this cluster is created when you opt to create a purchase order from a sales order. Sales order linkage may only be established by creating the purchase order from the sales order item window, and never the other way around.

The address information uses contact and address clusters. When selecting a vendor address, you may select from any address using the address cluster search. The vendor's primary contact will populate in the contact cluster by default when a vendor is selected. It will be set to search on the vendor CRM account so that if you choose to search for another contact, they will, at first, be limited to the list of contacts associated with this vendor.

Selection of the receiving site causes the contact and address information from that site to populate the purchase order ship-to address information. You can over-ride this manually. A "Drop Ship" check box will be visible if drop shipments are enabled in configure purchase; however, it will only be enabled and checkable if the purchase order is linked to a sales order.

To open the "Purchase Order" window follow these steps:

  • Navigate back to the TBOX1 line item from the "Sales Order" window
  • Right-click the TBOX1 line item and select "View Purchase Order"
  • The "Purchase Order" window will open for that item:

dsp005v2

The purchase order window will be altered so that the purchase order line list will have two new columns hidden by default: "Demand Type" and "Order." The demand type column will display "SO" or "WO" depending on the supply linkage. The order column will contain the sales order number concatenated with a hyphen and the line number, or the formatted work order number with hyphen, accordingly.

Purchase Order Item

To open the "Purchase Order Item" window follow these steps:

  • Navigate back to the "Purchase Order" window for TBOX1
  • Select the "Line Items" tab
  • Select TBOX1 from the list and click the EDIT button
  • The "Purchase Order Item" window will open:

dsp006

  • Select the "Demand" tab

The "Purchase Order Item" window will include a tab labeled "Demand"  that will show linked sales orders or work order numbers respectively. The labels should change to reflect the type of order they represent (i.e. "sales order" or "work order").  If there is no demand linkage, the demand tab will be disabled. The quantity and date of a purchase order should not be editable if the header is linked to a sales order.

List Open Purchase Orders

To open the "Open Purchase Orders" window follow these steps:

  • Go to "Purchase" from the top menu
  • Select "Purchase Order" from the submenu
  • Click "List Open" from the submenu
  • The "Open Purchase Orders" window will open
  • Click the OPEN and UNRELEASED check boxes to show a full list of results:

dsp007

  • Right-click P/O # 20165 and select "Release" in preparation for the next section.

The list of open purchase orders allows you to show both unreleased and open purchase orders. Open purchase orders are purchase orders that have been released, making them available for receiving. In the past, purchase orders were unposted or posted; however, the new release and open terminology was introduced in order to support drop shipping.

Receiving

In order to open the "Enter Order Receipts" window follow these steps:

  • Go to "Inventory" from the top menu
  • Select "Receiving" from the submenu
  • Select "New Receipt" 
  • The "Enter Order Receipts" window will open:

dsp008v2

  • In the "Order #" box, click the magnifying glass icon to list or search for your desired order. For the purpose of this exercise the order number will be 20165, which is TBOX1.

If configure purchase has drop shipments enabled, the receiving window will display a new read-only informational "Drop Ship" checkbox that will be checked when the selected order is a drop ship purchase order. Drop shipped receipts will be processed through shipping automatically when posted. There is also a configuration option in configure purchase to select drop shipped orders for billing after they've been shipped.

Purchase Order Returns

To open the "Enter Purchase Order Returns" window, follow these steps:

  • Go to "Inventory" from the top menu
  • Select "Receiving" from the submenu
  • Click "Purchase Order Return"
  • The "Enter Purchase Order Returns" window will open
  • Search for or enter in the order number shown below to display "Purchase Order Items"

dsp009

If configure purchase has drop shipments enabled, the "Purchase Order Returns" window will show when a purchase order is flagged for drop ship, as pictured above. Purchase order returns will not reverse shipping transactions for drop shipped purchase orders. You will receive a message if you choose to return a drop shipped purchase order:

Warning: "Returns made against drop shipped purchase orders will not reverse shipment transactions generated by the original receipt.  Shipment transactions should be reversed separately if necessary."