A guide to managing orders fulfilled directly by your suppliers in Oracle.
The Drop Ship cycle is a fulfillment model where a seller accepts customer orders but does not keep goods in stock. Instead, when a sales order is placed, the seller creates a purchase order for a third-party supplier, who then ships the goods directly to the end customer. This process streamlines logistics and eliminates inventory handling for the seller.
Items must be defined with Default Source Type = 'External' on the Order Management tab.
Sourcing rules must be set up to define the supplier for the externally sourced item.
The OM order line workflow must include the 'Purchase Release' activity to interface with Purchasing.
The item must have 'Purchased' and 'Purchasable' attributes enabled on the Purchasing tab.
Create & Book Sales Order
Progress Order & Run Requisition Import
Create & Approve Purchase Order
Supplier Ships to Customer
Create Logical Receipt
Create AP & AR Invoices
Actor: Order Entry Clerk | Module: Oracle Order Management
The process starts when a sales order is created for an item that is sourced externally (i.e., a drop-ship item). Booking the order confirms customer demand.
Example: A customer orders a specific, high-end office chair that your company sells but does not stock. The clerk enters a sales order for the chair.
Navigation Path:
Order Management > Order Management > Create Order
Key Actions:
Select a Business Unit, enter Customer, and add the drop-ship enabled item. Click "Submit".
Actor: System / Buyer | Module: Purchasing & Order Management
Progressing the order line flags it for purchasing. The "Requisition Import" program then automatically creates a purchase requisition linked to the sales order.
Example: The "Progress Order" program is run. This triggers the "Requisition Import" process, which creates a purchase requisition for the office chair, tied directly to the customer's sales order.
Navigation Path:
Scheduled Processes > Schedule New Process > "Generate Supply Orders"
Key Actions:
The orchestration process creates a supply order, which is then processed by "Generate Supply Orders" to create a requisition.
Actor: Buyer | Module: Oracle Purchasing
The requisition is converted into a standard purchase order (manually or automatically), which is then approved and sent to the third-party supplier.
Example: The buyer converts the requisition into a PO and sends it to the chair manufacturer. The PO includes the customer's address as the "Ship To" location.
Navigation Path:
Procurement > Purchase Orders > "Process Requisitions" task
Key Actions:
Select the requisition in the Process Requisitions work area. The customer ship-to address is automatically populated.
Actor: Third-Party Supplier | Module: External Process
The supplier ships the goods directly to the end customer. This step occurs outside of the Oracle system, but is the trigger for the next steps.
Example: The chair manufacturer ships the product directly to the customer's office.
Navigation Path:
N/A
Key Actions:
Supplier can send an ASN which can be imported into Fusion via collaboration messaging framework (CMK).
Actor: AP Clerk / Receiving Agent | Module: Oracle Purchasing / Receiving
Since the company does not physically receive the goods, a "logical" receipt is created in Oracle. This confirms the supplier has shipped the item and enables payment processing.
Example: Upon receiving shipping confirmation from the manufacturer, the clerk creates a logical receipt in Oracle. This does not increase inventory, but it confirms the PO fulfillment.
Navigation Path:
Supply Chain Execution > Receiving > "Receive Expected Shipments" task
Key Actions:
Create a receipt for the PO. The system recognizes it as a drop ship receipt.
Actor: AP & AR Accountants | Module: Payables & Receivables
A supplier invoice is created in Payables to pay the supplier. An AR invoice is created in Receivables to bill the customer for the goods.
Example: An AP invoice is created to pay the manufacturer for the chair. Simultaneously, an AR invoice is created to bill the customer for their purchase.
Navigation Path:
Payables > Invoices > "Create Invoice" | Scheduled Processes > "Import AutoInvoice"
Key Actions:
Create AP Invoice and match to PO/Receipt. Run Import Autoinvoice for AR.