Difference Bewteen Drop Ship and Back to Back Order

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Both the Process are quite similar . In both cases, your sales order line creates a requisition line that becomes a PO sent to your supplier. In a drop shipment, however, you instruct your supplier to send the item or configured item directly to your customer. The items never physically pass through your warehouse, and therefore you do not 1. pick, 2. pack or 3. ship them yourselves.

In the back-to-back scenario, you instruct your supplier to send you the goods, and then you 1. pick, 2. pack or 3. ship them on to your customer

Drop Shipment, BackOrders and Back to Back Order This was yet another query asked by one of the reader..so thought to combine in a post so that others can also understand. Lets try to understand these key terms from Oracle Apps Product side: Back Orders

The Oracle "term" backorder is a "status" on the order line or delivery line indicating that you have tried to release an order for picking in your warehouse, but that the pick release was UNSUCCESSFUL because there was no available inventory.(Backorder can be partial or complete). The Oracle term backorder does NOT mean that you have open purchase orders for the out-of-stock item from your vendors. The term backorder is also used in business a little differently than in Oracle. The term "An item is on backorder" usually means that the item is not in stock, but the shipping company has already placed purchase orders from their suppliers to restock the item. Back Order is when you do not fulfill the Sales Order, or if the inventory is out of stock for delivery to customer.

Drop Shipment

Drop shipment on the other hand is a method of order fulfillment where the organization taking the order does NOT maintain their own inventory for the drop-shipped product, but fulfill their orders through 3rd party vendors who directly ship to the end customer ordering the product.

For example,

A orders item x from B B orders item x from C C ships Item x to A. B bills A for the order, C bills B for the order

Back to Back Orders In Back to Back order the shipment process is also completed through OM as a standard order after the item is received against a PO. What is the major difference between drop shipment and back to back order ?

In B2B the source will be internal but the item would be procured after the order is created or after the demand is made. In Drop Ship the source will be external In Drop Ship orders, material is directly shipped to the customer from the supplier. Thus, inventory is not affected. In this case, only logical receiving is done. But in the case of Backto-Back orders, material is taken from inventory. Drop Ship orders may have many Purchase Orders connected to them. In Back-to-Back orders one PO is tied to one Sales Order.

More on Drop Shipment & Back to Back Orders(Functional) High Points for EBS Base Functionality for Drop Shipment

Drop shipment order processing in EBS is managed using workflow Drop ship functionality is based on source type of an order line (Internal/External) You can automate your PO/BPA release creation based on ASL/sourcing rule information Drop ship process uses standard OM workflows. You can use Sales order Purchase order discrepancy report to identify discrepancies between the OM and the PO There is a links OM and PO to provide visibility through entire supply chain Flow.

The entire Drop shipment process flow can be best understood as figure below:

Points for Implementation Considerations

Order line attribute: Source Type (need to be external). You can be defaulted from item or order type o Menu -> Responsibility Order Entry Super User/setup/Orders/Types o Setup an order type using the cycle defined in the previous step (a),an order number source, a valid standard value rule set. Item attributes (OM and Purchasing)

You need to do the setup for these attributes: -Purchased (PO) Enabled -Purchasable (PO) Enabled -Transactable (INV) Enabled -Stockable (INV) Optional -Reservable (INV) Optional -Inventory Item (INV) Optional -Customer Ordered (OE) Enabled -Customer Orders Enabled (OE) Enabled

-Internal Ordered (OE) Disabled -Internal Orders Enabled (OE) Disabled -Shippable (OE) Optional -OE Transactable (OE) Enabled

Setup requisition import parameters You can also use grouping by Vendor You can also set the multiple distributions set to No ASL and/or Sourcing rule relationship need to be setup for Automatic PO creation Oracle recommends using a logical organization for drop shipment. Exclude this organization for planning purposes. It can be worked around using non nettable Dropship subinventory

Back to Back Order As mention above this is ability to create specific supply orders for customer sales orders. These are main features avaible in EBS

Designate specific items as B2B orderable Enter sales order lines for these items, and have the supply automatically created via a requisition Have the requisition converted into a Purchase Order or a release of a blanket Purchase Order View the requisition number or PO number and its status from the Sales Order (using reservation details window) Reserve the supply from the Requisition to the PO and finally to the Sales Order once the PO is received Pick, ship and finally invoice the customer for the product. Note to Buyer's field in the requisition captures the Sales order information Line status information shows the progress of the order PO Req Created PO Req Requested PO Created PO Received If line is manually reserved it progresses to "Awaiting Shipping" Changes and Cancellations on sales orders: o Reservation is changed o Notification sent to Buyer

Hope this makes a clarity on topics. Posted 29th August 2012 by Krishnareddy
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