Oracle Apps Order Management - Drop Shipments Overview

Overview

Note: The supply and demand details for drop ship orders are not visible to Oracle Planning applications. Therefore, it is recommended that you associate a separate logical (dummy) organization for shipping drop ship orders; the logical organization should not be included in your planning processes.

Drop shipping functionality enables you to take an order from your customer and fulfill it directly from your supplier's site. Order Management enables you to enter drop ship sales orders and lines for standard, model and kit, and configured items, although you currently cannot perform a drop shipment for Ship Model Complete (SMC) PTO's.

You can receive orders for items that you do not stock or for which you lack sufficient inventory, and have a supplier provide the items directly to your customer. The benefits of drop shipping include:

• no inventory is required.
• reduced order fulfillment processing costs.
• reduced flow times.
• elimination of losses on non-sellable goods.
• elimination of packing and shipping costs.
• reduced inventory space requirements.
• reduced shipping time to your customer.
• enables you to offer a variety of products to your customers.

When processing drop shipments for orders, you can:

• optionally receive and electronically process Advanced Shipping Notices (ASN).
• automatically perform logical receipts upon notification of shipment.
• perform Drop Ship for both make and buy items, and automatically default the source type of External for order lines which need to be drop shipped.

When processing drop shipments for orders that contain models or kits, you can:

• drop ship individual items within non SMC PTO configurations from different vendors or even ship several components from your own inventory.

When processing drop shipments for orders that contain ATO configurations, you can:

• send a generated attachment file which provides the configuration details to the vendor to manufacture the configurable item. Your vendors can also view this information via the iSupplier portal.
• perform a match and use existing configuration ids. instead of generating new ones during the Create Config subprocess. Match is organization/supplier independent.

Note: For changes to drop shipment orders, use the Order Management Sales Order and Purchase Order Discrepancy Report to view the differences between sales orders and associated purchase orders so that you can identify where manual changes must be made.See: Sales Order and Purchase Order Discrepancy Report

For more information on purchasing, dropshipping ATO items or configurations, and changes to these order types, see: CTO Implementation Manual.

Item Attributes that affect Drop Ship orders

All Drop Ship items (and all external ATO or PTO models, it's option class and options) must be defined within the item validation organization specified by the value of the Order Management system parameter Item Validation Organization.

The table below displays a listing of the inventory item attributes and the respective value that affect the ability to create drop shipment orders lines for an item.

Item Attribute used within Drop Ship order processing	Setting
Purchased (PO)	Enabled
Purchasable (PO)	Enabled
Transactable (INV)	Enabled
Stockable (INV)	Optional
Reservable (INV)	Enabled
Customer Ordered (OM)	Enabled
Customer Orders Enabled (OM)	Enabled
Default SO Source type	Optional
Shippable (OM)	Enabled
Transactable (OM)	Enabled
Costing Enabled	enabled for items that are to be costed
Inventory Asset Value	enabled for asset items (non-expense items)

In Oracle Purchasing, a term called one-time expense item is used. This term refers to an expense item that is not defined in inventory, nor does an associated record exist in the items database table, MTL_SYSTEM_ITEMS. Since a one-time expense item is not defined in inventory, it cannot have the inventory attributes checked and therefore, cannot be drop shipped.

Defaulting order line attribute Source Type

The organizational item attribute, Default SO Source Type, (Organization Item window, Order Management Tab) is used within the seeded Order Management defaulting framework to provide a default value for the Source Type field for sales order lines, enabling you to set the value of this attribute by organization.

The initial sequence for defaulting the Source Type field is:

1. The organizational item attribute, Default SO Source Type.

If the value of this attribute is NULL:

2. Order Management will default the value Internal.

• If you do not wish to default a value for the Source Type field for sales order lines, you must disable the seeded defaulting rules for the order line attribute Source Type.
• If the value of Source Type for an order line is changed from External to Internal and you have manually entered the Schedule Ship Date for the line, Order Management will attempt to schedule the order line with the date provided.
• Order Management seeded constraints will not allow you to perform changes to the Source Type value if the branch on source type workflow activity within the Create Supply - Line workflow subprocess has completed.

Mass Change and order line attribute Source Type

You currently cannot perform a Mass Change for the order line attribute Source Type. Although the order line attribute Source Type is available (as a field) within the Shipping Tab of the Mass Change window, the field is for display purposes only; if you enter a value in this field when performing a mass change, the value is ignored.

Reservations

Once an order line has been specified as an External order, Order Management does not allow reservations to be placed against the order line.

Entry and Booking

You can enter orders using standard Order Management functionality, and decide at the time of entry whether a particular line will be drop shipped (order line source type is set to External). Both standard and expense items may be drop shipped, although drop shipments currently support a Destination Type (item attribute) of Expense and Inventory only. As with standard sales orders, you can modify orders or lines that you intend to drop ship after you have entered them, typically up to the point of Booking the order line.

When an order line with a source type of external is booked, the seeded workflow Line Flow - Generic will process drop shipment lines. The Create Supply - Line subprocess utilizes the function Branch on Source Type which detects an item with a Source Type of External and moves the line to Purchase Release - Deferred. External ATO Models or ATO Items will still follow the appropriate ATO paths. Then within the Create Supply Order - Line, Manual subprocess, CTO detects that the item has a Source Type of External and moves the line to Purchase Release - Deferred When the Workflow Background processor processes the line, the Purchase Release process is initiated to write records to the PO_REQUISITIONS_INTERFACE table.

Purchase Release and Requisition Import

The Purchase Release concurrent program processes eligible lines with a source type of External and passes information to Oracle Purchasing. Buyer details transferred to Oracle Purchasing during Purchase Release are dependent upon the value of the Order Management profile option OM: Population Of Buyer Code For Dropship or OM: Employee for Self-Service Orders.

The Autocreate Drop Ship concurrent program processes eligible ATO item and configuration lines with a source type of External and passes information to Oracle Purchasing. Submit the Oracle Purchasing Requisition Import concurrent program to create purchase requisitions based on this information. When you submit the program, ensure that you set the input parameter Multiple Distributions to No.

See: Profile Option within Order Management and Requisition Import Process, Oracle Purchasing User's Guide

Note: If the buyer makes changes to the requisition or purchase order in Oracle Purchasing after Purchase Release has been run, or modifies the sales order after the PO has been created, use the Order Management Sales Order and Purchase Order Discrepancy Report to note differences between the original sales order and its associated purchase order.

Confirmation of Shipment and Receipt

Standard Oracle Purchasing functionality confirms that your supplier has completed the drop shipment. Confirmation may be as simple as a phone call, or it may include Electronic Data Interchange (EDI) documents, such as an Advance Shipment Notice (ASN) and an Advance Shipping and Billing Notice (ASBN).

When you receive shipment confirmation, enter a receipt in Oracle Purchasing, even if the drop shipped item is not transactable. This creates inbound and outbound material transactions in your system for accounting purposes. Drop shipment orders cannot span multiple orders, or be processed across multiple operating units. For example, if you take an order in one operating unit, you cannot receive the order in a different operating unit.

You must receive drop ship items in a logical organization. If you use Oracle Advanced Planning and Scheduling for planning, to avoid miscounting supply, you may not want to include logical organizations during your planning. If you choose to include logical organizations, ensure that doing so does not cause planning and forecasting complications.

If your supplier should send only an invoice, you need to enter a passive receipt.

Invoicing

After your system's inventory has a record of the transaction, run the Invoicing Activity and AutoInvoice programs to generate an invoice for your customer. You may want to pass on any landing or special charges that your supplier imposed on the drop shipment.

Passive Receipts

When a vendor sends only an invoice for drop shipments, you will need to perform a passive receipt. Passive receiving must be performed manually.

The receipt quantity should be retrieved from the associated invoice and a logical receipt of the drop shipment should be performed.

Service Items

Purchasable service items can be drop shipped based on the assumption that the service is provided by the seller and the vendor is actually drop shipping the item; service lines for drop shipment are not source dropshipped.

For example, you can define a television as a serviceable item. When you place the order, the source type must be set to External and then define service lines for the television. However, only the television can be sent to Oracle Purchasing for creating a requisition or purchase order. The vendor is only responsible for the shipping of the television to the customer.

Deferred services for models or kits, the service is defined as an order line in order management.

Scheduling

When performing drop shipments of models or kits or standard items, the scheduled ship date is defaulted from the order line request date, and Oracle Global ATP calculations are ignored (demand for drop ship orders are not visible to Oracle Planning products).

Drop Shipment orders cannot consume forecast demand for standard items, ATO items, and models and their respective components.

Returns

Use standard Order Management functionality to process return material authorizations (RMAs). Your customers can return drop shipped items to you or to your supplier. If you receive the return into your inventory, you can retain it or ship it to your supplier. If you pass the returned item to your supplier, you should notify the buyer and authorize the return by generating a return document in Oracle Purchasing. If your supplier receives the return directly, they must inform you of the event before you can process the return within Order Management.

Holds and Approvals

Standard holds and approvals functionality controls drop ship sales orders. You can implement holds and approvals at different stages in your order workflow to control the drop shipment process. For example, if your supplier reserves the right to refuse returns, you can add an approval step to your order workflow to ensure that the customer will not receive a credit unless your supplier notifies you that they accept the returned item.

• If you place a hold on a line before you submit the Requisition Import concurrent program, the requisition will not be created; the hold must be removed prior to successfully generating a requisition.
• If you place a hold on a line before you submit the Purchase Release concurrent program, the Purchase Order will not be created; the hold must be removed prior to successfully generating the purchase order.

Once a purchase order has been generated for your drop ship order line, you must control holds manually, which you can coordinate with your supplier. The Sales Order and Purchase Order Discrepancy Report displays orders on hold for your review.

Using Oracle Workflow in Oracle Order Management Manual, Release 11i

Release 11i Drop Ship: Tips, Hints and Gotchas White Paper, available on OracleMetalink, http://www.oracle.com/support/metalink/.

For details on the required setup for a purchased item, see: Oracle Purchasing User's Guide, Oracle Inventory User's Guide, and the Oracle Configure To Order Implementation Manual.

Sample Drop Ship Order Flows

Prerequisites

Drop Shipments for standard items

1. Enter an order for drop ship item

2. Book the order

3. Run Requisition Import

4. Create a purchase order from the requisition

5. Approve the PO

6. Receive against the PO

Forward drop ship flow for ATO model

1. Enter a sales order for your dropshipped ATO model

2. Select your options

3. Schedule and Book order (Schedule date should default to request date for all lines)

4. Create you configured item by progressing your order ATO Model line or running the Autocreate Configuration batch process.

5. Verify order and line status

6. Create Supply Order (Dropship requisition) by progressing your configuration item line or running the Autocreate Dropship Requisition batch process.

7. Run the Oracle Purchasing Requisition Import to create a Purchase Requisition.

8. Create a Purchase Order for the requisition

9. Approve the Purchase Order

10. Receive the Purchase Order

Forward drop ship flow for ATO Item

1. Enter a sales order for your dropshipped ATO item

2. Schedule and Book order (Schedule date should default to request date for all lines

3. Create Supply Order (Dropship requisition) by progressing your configuration item line or running the Autocreate Dropship Requisition batch process.

4. Run the Oracle Purchasing Requisition Import to create a Purchase Requisition.

5. Create a Purchase Order for the requisition

6. Approve the Purchase Order

7. Receive the Purchase Order

Non-SMC PTO model with dropshipped standard options

1. Enter Sales Order for your PTO model.

2. Select options; Source type on the components will default

3. Schedule and Book the order

4. Run requisition import to create a purchase requisition.

5. Create a purchase order for the requisition

6. Approve the PO

7. Receive the PO