SUMMARY
The document encompasses the utilization of the drop ship feature within NetSuite, accompanied by relevant screenshots illustrating the associated functionalities and transactions. Furthermore, it provides an in-depth analysis of the impact on inventory within the drop ship process.
DROP SHIPPING
A dropship item is a product that is sent directly from the vendor to the customer, bypassing any processing within the inventory system. Dropship items do not affect inventory asset accounts or influence stock counts. They can be configured for drop shipping either as a default setting or manually on sales orders.
Mark an item as drop ship item
To identify an item as a drop ship product, within the item record, navigate to List> Accounting >Items, choose the item and click edit and then navigate to the purchase/inventory subtab. Select the preferred vendor, enable the “Drop Ship Item” checkbox, and save the changes.
If the Multiple Vendors feature is not utilized, opt for a preferred vendor on the Basic subtab of the item record. In case Multiple Vendors are employed, mark the Preferred box adjacent to the vendor.
After a sales order containing this item is approved, a purchase order for the preferred vendor is automatically generated.
Creating sales order for the drop ship item
To create a sales order for the drop ship item, navigate to Transaction> Sales > Enter Sales Order. Then enter the details and save. For example – A customer’s order for five speakers, designated as a dropship item, has been generated below.
At the time of creation of sales order the on-hand quantity of the drop ship item will be zero
Purchase order generated from the sales order
NetSuite will automatically generate a purchase order, reflecting the chosen vendor for the item and the shipping address of the customer, based on the sales order that has been generated.
The shipping address on the purchase order will be that of the customer
When there is a discrepancy between the quantities in the sales order and the purchase order, the item no longer functions as a drop shipment, potentially impacting the inventory.
Fulfil And Receive Drop Ship Order
If the advanced shipping and billing features are enabled in the NetSuite account, then
- Click on Mark Shipped on the purchase order to receive purchase order and to mark sales order as fulfilled. An item fulfilment is generated for the customer.
- The on-hand inventory will be 0
- The order is then ready to be billed. Using both Advanced Shipping and Advanced Receiving requires manual billing for sales and purchase orders, as they are not automatically billed.
Billing the purchase order generated – Within the generated purchase order, select the “Bill” option.
- A bill will be generated for the purchase order and click on make payment
- Upon payment, the bill is completely settled.
Billing sales order – On the item fulfilment generated from the sales order click on bill and an invoice is generated for it.
- Click on accept payment to accept payment from the customer
- Within the item record, there are no observable alterations, as the inventory on hand continues to display no values.
- When solely utilizing Advanced Shipping, the process involves selecting “Mark Shipped” on a purchase order to initiate billing and choosing “Fulfil” on a sales order to signify fulfilment, resulting in an invoice or cash sale. In cases of exclusive Advanced Receiving, similar steps apply, with “Mark Shipped” on a purchase order for billing and “Process” on a sales order for fulfilment into an invoice or cash sale. If neither feature is enabled, selecting “Mark Shipped” on a purchase order will receive the order and convert it into a bill, while “Process” on a sales order will denote fulfilment and result in an invoice or cash sale.
Creating purchase orders for drop ship items
To create purchase orders for the drop ship item, navigate to Transaction > Purchases > Enter Purchase Order > New. If a regular purchase order has been generated for a drop ship item, it will no longer retain its drop ship status and will instead be treated as a standard purchase order.
Drop Ship Preferences
Emailing and faxing purchase orders of drop ship items to vendors – Automating the process of emailing or faxing drop ship item purchase orders to the preferred vendor can be done by following these steps: Navigate to Setup > Accounting > Preferences > Accounting Preferences, then access the Order Management subtab. Here, enable the options for automatic emailing of drop ship purchase orders and automatic faxing of drop ship purchase orders. To utilize this preference, ensure that the preferred vendor’s email address or vendor fax number is entered in the vendor record.
Automatic updating of purchase orders – In case there is an edit to increase the quantity of a sales order, the linked purchase order will automatically adapt to the revised quantity. This adjustment can be enabled by turning on the “Update Drop Ship Order Quantities Automatically Prior to Shipment” option. It’s important to note that this update should be executed prior to any fulfilment or receipt entries being made against the order.