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Drop Shipment and Special Orders
To reduce costs and liabilities, ‘streamlining’ product delivery can be done with Drop Shipping and Special Orders.
What is ‘Drop Shipping’
An order (in the form of a Sales Order) is taken from a customer and the corresponding Purchase Order is sent to the associated Supplier. The Supplier delivers the goods directly to the Customer. The advantage is that you never have to store the goods as stock.
The Bill from the Supplier is received as normal, while you invoice the Customer for the goods from the originating Sales Order.
What is ‘Special Orders’
This is when a Customer orders a product that you do not keep in stock. It needs to be ‘specially’ ordered from the associated Supplier. These goods are then received by you for onward delivery to the customer, rather than the Supplier delivering directly to the Customer.
How salesorder.com handles Drop-Ship and Special Orders
Salesorder.com provides the ability to create a Purchase Order directly from a Sales Order.
- If the order is Drop Shipped, the ship-to address of the Purchase Order is the Customer address on the originating Sales Order. This means that when the Supplier receives the Purchase Order they will deliver it directly to the Customer.
- If it is a Special Order, the Purchase Order’s ship-to address will be your company.
How to set up an Item for Drop Shipment and Special Order
- Ensure the Item has the Preferred Supplier field set (on the Purchasing Tab).
- Go to New Stock Item.
- Navigate to the field ‘Preferred Supplier’.
- From the dropdown, click and select the associated Supplier.
When adding an Item onto a Sales Order from the Item Select List, select the Order Type (Standard, Drop Ship or Special Order).
The default Order Type on the actual Item can be set to Drop Shipped, if you know that a particular Item will always be Drop Shipped.
When the Item is placed on the Sales Order it is marked with a blue ‘D’ or ‘S’ icon, signifying that the Item is to be Drop Shipped or Specially Ordered.
Once the Items have been added to the Sales Order save it in the usual way.
From the Sales Order select the Item(s) you wish to Drop-Ship or Special Order. Note that you can only Drop Ship items that have been flagged using Step 1 (similarly with Special Order).
From the action bar, click either ‘Drop Shipment‘ or ‘Special Order‘. A new Purchase Order with the required Items will be created. On the Purchase Order the Item will remain marked with a blue ‘D’ or blue ‘S’.
On the originating Sales Order the Items are now marked with a green ‘D’ or ‘S’ signifying that the Item has an associated Purchase Order.
The remaining details can now be completed and the Purchase Order saved.
- If multiple items are selected for Drop-Shipment or Special Order, they may come from multiple preferred suppliers.
- The procedure has to be repeated for the remaining Items as well.
- You will end up with 1 Purchase Order for each preferred supplier.
- Now you can deal with the Purchase Order in the usual way.
- You may receive a Bill from the Supplier for a Drop Shipped Item.
- Select the appropriate Item and create the Bill as normal.
- The Item on the originating Sales Order will be marked with a red D as ‘Drop Shipped – Bill Received’, see below.
If the Item was a Special Order it would be flagged with an ‘S‘ rather than a ‘D‘.
From the Sales Order the Customer can now be invoiced in the usual way.
Once invoiced, it will also be flagged with the ‘Has Been Invoiced‘ icon which is a tickmark.
How Drop Ship and Special Order Items affect the accounts
Drop Shipped Items are never received into your Stock as they are delivered directly to the Customer. If you Drop Ship a Stock Item the associated Stock Asset account will never be affected.
If you create a Special Order for a Stock Item, it will be received into your Stock and will affect your Stock Asset account, both on the purchasing and sales side.