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What is Drop-shipment?
Drop shipment is the process by which an organization takes orders from their customer and gets it fulfilled
by a 3rd party. The selling organization places a purchase order to the 3rd party (supplier) who ships the
ordered products to the end customer directly.

Following are the benefits of using drop shipping :

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

SETUP
1- Inventory Setup
(Define and Maintain The Item)
The drop ship inventory organization, item and subinventory must be setup prior to creating any drop ship
orders. All drop ship subinventory must have the Reservable box checked.
Below are list of the required item attributes for a drop ship item. All of these attributes MUST be enabled
unless otherwise specified.

Inventory Attributes: Inventory Item , Stockable, Transactable, Reservable.

Purchasing Attributes: Purchased, Purchasable.
Costing Attributes: Costing Enabled – this should only be checked for items that are cost enabled,
Inventory Asset Value – this should only be checked for asset items (non-expense items)
Receiving Attributes: Receipt Routing set to Direct – this is not required, but preferred since it makes
receiving process one step versus two or three
Order Management Attributes: Customer Ordered, Customer Orders Enabled, OE Transactable.

As a Troubleshooting tips on creating a drop ship item and subinventory:

Make sure the subinventory is Reservable.If the subinventory is not Reservable, the sales order issue
transaction will not be created in MTL_TRANSACTIONS_INTERFACE.
Make sure the item has the above mentioned item attributes in the drop ship organization. If the above
item attributes are not set, problems will arise in various places during the drop ship transaction
process.

2- OM Setup

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Make sure the sales order line Source Type is External. If the source type is not External, workflow will not
distinguish the line as being a drop shipment and will not insert any data into the purchasing module’s
requisitions interface.
For customer, enter internal ship to location.
Customer must have a valid ship-to and bill-to locations.
Make sure that either the schedule ship date or request date is populated.If both of these are null, the
requisition will not be imported into the purchasing module’s requisitions interface.
Make sure there are no holds against the line. If there is a hold, the hold must be removed and then the order
can be progressed or the line must be manually purchased release.
Verify in HR, that the employee has an active status and has not been terminated.
For more details..
<<Note 99888.1>>: Drop Shipments – Setup
<<Note:99886.1>> : Drop Shipments – FAQ
<<Note:99889.1>> : Drop Shipments - Troubleshooting

3- PO Setup
Make sure the Import Source parameter list of values contains ORDER ENTRY.
If ORDER ENTRY appears in the Import Source parameter list of values, then it means that the Workflow
Background Processor successfully inserted a requisition into PO_REQUISITIONS_INTERFACE_ALL. If
ORDER ENTRY is not visible in the Import Source parameter list of values, then no rows were inserted into
the table. Review the setup under Order Management.
User should be setup as a valid PO Buyer.
Make sure the Group By parameter is actually set the user wants the requisitions grouped.

PROCESSING OVERVIEW
USED ACTIVITIES
These are the following activity takes place when you have drop shipment

-Supplier (Warehouse Item, Ship order, Shipment notification) .

-Order Entry (Enter customer, Enter order, Demand order (optional), Cancel order (optional),
Close order).
-Purchasing (Create and send Purchase Order , Enter shipment notification in system ).
-Receivables (Create invoice , Collection of payment , Receipt ).

THE DATAFLOW OF DROP SHIPMENT ORDERS:

Order Entry: Create a Sales Order with a source type of external (at the line level) and a receiving
organization . Here the activity is entering process in oe_order_headers_all (flow_status_code as entered),
oe_order_lines_all .

Sales Order Booking : Book the Sales Order, The order will be booked as DROP SHIP,

Run the Workflow Background Processor that will passes information about eligible drop-ship order lines to
Oracle Purchasing. It will pick up the sales order line and insert a requisition into the
PO_REQUISITIONS_INTERFACE_ALL table .

After Purchase Release has completed successfully, run Requisition Import in Oracle Purchasing to generate
purchase requisitions for the processed order lines. The Requisition Import program reads the table
po_requisitions_interface_all, validates your data, derives or defaults additional information and writes an
error message for every validation that fails into the po_interface_errors table.The validated data is then
inserted into the requisition base tables po_requisition_headers_all, po_requisition_lines_all,
po_requisition_distributions_all. (For that stuck requisitions it can be retrieved using the following SQL.
SQL>select * from PO_INTERFACE_ERRORS where interface_type= 'REQIMPORT';) .
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To run the Requisition Import, navigate as following (Purchasing responsibility=>Request=>Submit a new

request=>Single request =>Requisition import ). Define the import Source as ORDER ENTRY and way you
want requisition to be grouped from the group by, and whether you want to approve the requisition after
importing

After the requisition has been imported, the requisition number can be found (to Find the Requisition
Number/ Po Number from the Sales Order, navigate to Shipping > Actions > Additional Line Info > Drop
Ship to get the requisition / Purchase Order Number).

Then use autocreate PO functionality to create purchase orders.

Perform receipts against these purchase orders. . The inventory organization where the drop ship receipt
should be created is the same as the warehouse for the drop ship line as well as the same inventory
organization listed for the PO line shipment. Ideally, drop ship receipts will have the same quantity as the
quantity listed on the sales order line.

After the goods are successfully received, invoices for vendors are created in accounts payables as in normal
purchase orders. (Enter a receipt against PO in receiving subinventory and run workflow background
process). After the receipt is recorded, Invoicing workflow activity transfers shipped item information
including quantities, selling prices, payment terms, and transaction dates to Oracle Receivables, which
processes invoices and accounts for revenue. Additionally, process credit memos and credits on accounts
created from returns can be created using this process.

Invoices are generated for customers In account receivables. Upon completion of the Invoicing workflow
activity, submit AutoInvoice from Oracle Receivables to import invoice and credit data into Oracle
Receivables, we can use the Concurrent request ‘Pay On Receipt AutoInvoice’ as another example of
interface between purchasing and Payables to Execute AutoInvoice then run Auto Invoice Master Program
hence if we checked the SO line status it should be closed.
oe_order_lines_all (flow_status_code ’shipped’, open_flag “N”)
oe_order_lines_all (flow_status_code ‘closed’, open_flag “N”)

USED TABLES

The following tables contain data related to drop ship orders.

PO_LINE_LOCATIONS_ALL Stores document shipment schedules for purchase orders,

purchase agreements, quotations, and RFQs
PO_LINES_ALL Stores purchase document lines for purchase orders, purchase agreements,
quotations, and RFQs
PO_HEADERS_ALL Stores document headers for purchase orders, purchase agreements,
quotations, and RFQs
PO_DISTRIBUTIONS_ALL Stores purchase order distributions
PO_REQUISITION_HEADERS_ALL Stores requisition headers
PO_REQUISITION_LINES_ALL Stores requisition lines
PO_REQ_DISTRIBUTIONS_ALL This table stores requisition distributions
PO_REQUISITIONS_INTERFACE_ALL This is the Requisition Import interface table
OE_ORDER_LINES_ALL Stores information for all order lines in Oracle Order
Management
RCV_SHIPMENT_LINES Stores receiving shipment line information
OE_DROP_SHIP_SOURCES Stores relationships between order lines in oe_order_lines_all
table and associated oracle purchasing requisitions in PO_REQUISITIONS_ALL and Oracle
purchasing purchase orders in PO_LINES_ALL

TRACING
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How to trace an issue related to the dropshimpent, first you have to determine if it is a database
related or form related issue. You may get the Concurrent trace, Form trace or the code Debug
Log to figure out the error more clearly

The Concurrent trace:

You can enable the sql trace for the concurrent request program that is not passing the data properly to help
identifying and figure out the error as following:

1. Use the System Administrator responsibility Nav: Concurrent / Program / Define.

2. Query the process with the short name (REQIMPORT is the Short Name of 'Requisition Import'
program, POXPOIV is the Short Name of 'Pay On Receipt AutoInvoice', .. ).
3. Check the box enable trace
4. Then launch the report / program.
5. To retrieve the trace:
6. a. Retrieve the request_id of the program ((M) Views=>Requests=>(B) Find)
7. b. Execute the following sql SELECT oracle_process_id FROM fnd_concurrent_requests WHERE
request_id = &request_id;
8. c. The trace file should have the name orannnnn.trc where nnnnn is the oracle_process_id returned by
the previous SQL
9. You can analyze yourself or provide to support:

- the trace generated (Raw and Tkprofed files)

- the log and output files.

The Form trace:

Through out your navigation among the application modules you may get a trace file, if the issue
is reproducible you can enable the trace before the failure of the functionality.
To enable the SQL trace navigate to (M) Help > Diagnostics > Trace > Trace with
Binds and Waits, it is the same path to disable the trace, in between you will find a populated
message informing you of the location of the trace file.
Do not run several requisition import simultaneously while retrieving the trace.

The code Debug Log (FND LOG)

You may need to get the code debug log to analyze the issue further. Here are the detailed steps to get the fnd
log.
1. Run the query:
select max(log_sequence) from fnd_log_messages;
Note this log_seq.

2. Set the following profiles at the user level:

FND: Debug Log Enabled = YES

FND: Debug Log Filename = NULL
FND: Debug Log Level = STATEMENT
FND: Debug Log Module = %

3. Then try to reproduce the issue. Once the issue is reproduced, check or upload the output of the following
sql in xls format into Metalink.

4. Run the following sql:

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Select * from fnd_log_messages

where log_sequence > &log_seq_noted_above
order by log_sequence

5.You can check the message text filed to check if there any error, you can upload the data [fnd Log
Messages] from the above SQL in an xls file to support.

How to Notes related to the dropshipment functionality

(Doc ID 566616.1) :How to Diagnose Issues Related to the Drop Shipment Process and the Interface
Between Order Manageme
(Doc ID 832763.1) :Defaulting PO Distributions Subinventory With Special Value / Other Value for
Dropshipment POs
(Doc ID 372010.1): How to receive a dropshipment which was returned as defective and re-shipped
(Doc ID 296164.1): Drop Shipment: Handling Freight Amount In Dropshipment Process
(Doc ID 414058.1): OPM Enhancement Standalone Documentation - Release 12
(Doc ID 1060343.1): Vision Demo - How To Create A Drop Ship Sales Order/Purchase Order

DIAGNOSTIC
(Doc ID 732135.1): R12.0.6+ : Oracle Order Management Dropshipment Validations Setup Test
(Doc ID 463672.1) : R12.0.[3-4] : Oracle Order Management Dropshipment Validations Setup Test
(Doc ID 398741.1) : 11i : Oracle Order Management Dropshipment Validations Data Collection Test
(Doc ID 224391.1) : 11i : Oracle Purchasing Dropship Order Activity Test
(Doc ID 171257.1) : Oracle Procurement (Purchasing) / iProcurement Diagnostic Tests
(Doc ID 463567.1) : R12.0.[3-4] : Purchasing Dropship Order Activity Diagnostic Test Setup Test
(Doc ID 732173.1) :R12.0.6+ : Purchasing Dropship Order Activity Test

BULLETIN, EBZ Diagonistics

(Doc ID 942527.1) :E-Business Suite Diagnostic Tests Catalog for 12.1.2

FAQ

1. What is a Drop Ship PO?

2. How is a Drop Ship PO created?
3. What is the setup required for Drop Ship PO?
4. How can we avoid the miscounting of supply as logical organization is involved?
5. If you make changes to a Sales Order after the Purchase Order (PO) has been generated, will the order
changes automatically be updated on the PO?
6. If items on a Drop Ship order are cancelled, does the system automatically generate a PO Change to
the PO originally sent to the supplier?
7. Does Order Management 11i have functionality to do serial number management with Drop
Shipments?
8. Can Configurable Items be Drop Shipped?
9. How do I Drop Ship across operating units?
10. How are over/under shipments handled in Drop Shipment?
11. Will Blanket PO's work with Drop Shipment?
12. Is it possible to create releases based on drop shipment orders for the items in the blanket agreement
when a valid Blanket PO is created ?
13. Can we cancel Drop Shipment after it is received?
14. What debugging tools are available for Drop Shipments?
15. What is the Import source and status of PO generated from Drop Shipment?
16. Can we receive a PO Shipment for which the related Sales Order Line is Cancelled / Closed?

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FAQ Details

Q1. What is a Drop Ship PO?

A: Oracle Order Management and Oracle Purchasing integrate to provide Drop Shipments. Drop
Shipments are orders for items that your supplier ships directly to the customer either because
you don't stock or currently don't have the items in inventory, or because it's more cost effective
for the supplier to ship the item to the customer directly. Drop Shipment was introduced in R11.

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Q2. How is a Drop Ship PO created?

A: Drop Shipments are created as Sales Orders in Order Management. The Purchase Release
concurrent program or workflow in Order Management creates rows in the Requisition Import
tables in Purchasing. Then Purchasing's Requisition Import process creates the requisitions. Drop
Shipments are marked with the Source Type of External in Order Management and Supplier in
Purchasing.

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Q3. What is the setup required for Drop Ship PO?

A: ITEM ATTRIBUTES:
Navigate: Inventory -> Items - > Organization items
Purchased (PO) Enabled
Purchasable (PO) Enabled
Transactable (INV) Enabled
Stockable (INV) Optional
Reservable (INV) Optional
Inventory Item (INV) Optional
Customer Ordered (OM) Enabled
Customer Orders Enabled (OM) Enabled
Internal Ordered (OM) Disabled
Internal Orders Enabled (OM) Disabled
Shippable (OM) Optional
OE Transactable (OM) Enabled
All Drop Ship items must be defined in the organization entered in the profile option OE: Item
Validation Organization and in the Receiving Organization.
All Drop Ship sub-inventory must have Reservable box checked. If the sub-inventory is not
Reservable the Sales Order issue transaction will not be created in
MTL_TRANSACTIONS_INTERFACE. After Drop Ship inventory organization is created,
subinventories should be defined. To create the subinventory, go to an inventory responsibility
and navigate to Setup -> Organizations -> Subinventories. Asset subinventories must have the
reservable and Asset boxes checked. Expense subinventories must have the Reservable box
checked and the Asset box unchecked.
Subinventory Attributes for Asset Subinventory
Reservable/Allow Reservations
Asset Subinventory
Subinventory Attributes for Expense Subinventory
Reservable
Asset-must NOT be enabled.

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Q4. How can we avoid the miscounting of supply as logical organization is involved?

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A: You must receive drop-ship items in a logical organization. If you use Oracle master
Scheduling/MRP and Oracle Supply Chain Planning, to avoid miscounting supply you may not
want to include logical organizations in your planning. If you choose to include logical
organizations, ensure that doing so does not cause planning and forecasting complications.

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Q5. If you make changes to a Sales Order after the Purchase Order (PO) has been
generated, will the order changes automatically be updated on the PO?

A: Order changes will not be automatically updated on the PO. Pulling up the Discrepancy
report will allow you to view the differences between the Sales Order and PO. However, you will
have to manually update the POs in the Purchasing application. Please note: Sales Order changes
will be automatically updated on the PO if the PO Status is Incomplete or Require Re-approval.
If the PO is already approved, you cannot make changes to the Sales Order line (without un-
approving the PO).

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Q6. If items on a Drop Ship order are cancelled, does the system automatically generate a
PO Change to the PO originally sent to the supplier?

A: No, Drop Ship functionality in this regard remains the same as in R11. There is a discrepancy
report available that will report differences between the PO and the Sales Order.

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Q7. Does Order Management 11i have functionality to do serial number management with
Drop Shipments?

A: You are able to receive serial numbered Drop Ship stock. Order Management will receive the
serial number noted on the PO.

[top]

Q8. Can Configurable Items be Drop Shipped?

A: Currently only Standard Items can be Drop Shipped. Functionality for Configurable Items
will be added in future releases.

[top]

Q9. How do I Drop Ship across operating units?

A: Release 11i does not currently support this functionality.

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Q10. How are over/under shipments handled in Drop Shipment?

A: If part of a drop-ship line ships, and you do not wish to fulfill the remaining quantity, cancel
the line. Over shipments must also be handled manually. If the supplier ships more than the
ordered quantity, you can bill your customer for the additional quantity or request that they
return the item. Use the Drop Ship Order Discrepancy Report to view differences between your
drop-ship Sales Orders and their associated purchase requisitions and orders.

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Q11. Will Blanket PO's work with Drop Shipment?

A: Blanket PO's will not work with Drop Shipment because the PO must be created when OM
notifies PO that a Drop Ship order has been created. This PO is linked to the Drop Ship order so
that when the receipt is done (partial or complete) .OM is updated to receiving interface eligible.
Drop Ship lines do not use the pick release, ship confirm or inv interface order cycles.

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Q12. Is it possible to create releases based on drop shipment orders for the items in the
blanket agreement when a valid Blanket PO is created ?

A: Yes, it is possible to create releases from drop ship orders automatically or via Autocreate
window, if the drop ship Requisition has the correct Blanket Information (Source)

1.Set up the ASL entry for the supplier site desired.

2.Depending on the hierachy determine which assignment better suits and define sourcing rule
according to the required level with the required supplier,site.

Also ensure that ASL entry exists for the above supplier/site.

For automatic sourcing to be done also set profile 'PO:Allow Automatic Sourcing' to Yes so that
the source document will be determined automatically depending on the creation dates and the
type of the document.

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Q13. Can we cancel Drop Shipment after it is received?

A: Drop Shipments cannot be cancelled once Oracle Purchasing obtains the receipt. A user who
wants to cancel a Drop Ship Sales Order line must ensure no receipts have been created against
the line and that the requisition and/or Purchase Order associated with the line is cancelled.
Cancellation of a Partial Drop Ship receipt is allowable. But only the portion that has not been
received can be cancelled. If you cancel a Drop Shipment line for which you have not shipped
the entire quantity, the order processing splits the line. The first line contains the quantity
shipped and the second line contains the non-shipped quantity in backorder. You can cancel the
second line the backorder on the Sales Order. The PO line quantity should be changed to reflect
the new quantity.

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Q14. What debugging tools are available for Drop Shipments?

A: 1. Note 133464.1 contains a diagnostic script that can be used for troubleshooting problems
with Sales Orders.
2. Debugging receipt transaction or the Sales Order issue transaction, Set the following profile
options:
RCV: Processing Mode to Immediate or Batch
RCV: Debug Mode to Yes
OM: Debug Level to 5
INV: Debug Trace to Yes
INV: Debug level to 10
TP: INV Transaction processing mode to Background
-Then go to Sys Admin: Concurrent: Program: Define; query up the Receiving Transaction
Processor and check the Enable Trace box.
-Save the receipt for the deliver transaction (destination type will say Inventory for the deliver
transaction).
-View the Receiving Transaction Processor log file, the Inventory Transaction Worker log file, as

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well as, the trace for the errors.

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Q15. What is the Import source and status of PO generated from Drop Shipment?

A: Import source is Order Entry.

Status of PO will always be Approved.

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Q16. Can we receive a PO Shipment for which the related Sales Order Line is Cancelled /
Closed?

A: PO Shipments for which the relates Sales Order line has been cancelled or closed cannot be
received. The PO shipment should be cancelled. A new Sales Order Line should be created, if
needed.

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DOCUMENTATION
Oracle Purchasing User’s Guide. Purchase Orders (Ch4) . Drop Shipments ..( 11i , R12 )
Oracle Order Management User’s Guide. Order Processing (ch3). Drop Shipment Processing
(11i , R12)

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