Drop Shipment and Back to Back

Order Processes in Oracle 11i

July 19, 2004

©2004 Deloitte
Agenda
•Introduction
•Drop shipment process
•Back to back order process

Drop Shipment and Back to Back Order Processes ©2004 Deloitte

Drop Shipment

• Drop shipment enables to take order from

customer and fulfill it directly from a supplier
• Key Business Drivers
– Low inventory cost
– Reduced shipment time to customer
– Can offer a variety of product to customer
– Used heavily in contract manufacturing environment where
the product is standardized and the company plans to focus
more on product design rather than manufacturing

Drop Shipment and Back to Back Order Processes ©2004 Deloitte

Drop Shipment

• Functionality Overview
– Order processing is managed using workflow
– Links Order Management and purchasing to provide visibility
through entire supply chain
– Drop ship functionality is based on source type of an order
line (Internal/External)
– Automatic PO/BPA release creation based on ASL/sourcing
rule information
– Drop ship process uses standard OM workflows. Hold and
approval steps can be added to order processing flow.
– Use Sales order Purchase order discrepancy report to
identify discrepancies between the SO and the PO

Drop Shipment and Back to Back Order Processes ©2004 Deloitte

Drop Shipment Process Flow :
Standard Item
Customer

Customer
Place Customer receives
requests
PO item
product
Oracle OM

Specify line is
Create Oracle
Drop shipped &
Sales order
Book order
Purchasing

Autocreate PO
Oracle

Purchase Approve PO &

from PR (Can be communicate to
Requisition (PR)
automated using supplier (Via EDI,
created
BPA and Release) fax, email etc
Inventory
Oracle

Logical receipt into

Drop ship location
(EDI, manual)
Supplier

Shipment of
Communicate ASN product to
customer
Finance

Customer Invoice Manage Supplier invoice

Payment
(AR) collections (AP)

Drop Shipment and Back to Back Order Processes ©2004 Deloitte

Drop Shipment Features:
Sales Order Line

Source type
determines whether
item is internally
sourced or drop
shipped

Drop Shipment and Back to Back Order Processes ©2004 Deloitte

Drop Shipment Features:
Sales Order Line-> Additional Line
Information
PO/Requisition
details can be seen
from Order
Organizer

Drop Shipment and Back to Back Order Processes ©2004 Deloitte

Drop Shipment Features: Purchase
Order

Purchase
Order: Note
that header
level ‘ship-to’
is not used

Drop Shipment and Back to Back Order Processes ©2004 Deloitte

Drop Shipment Features: Purchase
Order Line -> Shipment

Shipment level
Ship to
information is
used by
supplier

Drop Shipment and Back to Back Order Processes ©2004 Deloitte

Drop Shipment New features in 11i
• Internal location relationships need not be
maintained
• Can drop ship kit, model and configured items
excluding Ship model complete (SMC)
– Within a configuration items can be sourced from
different suppliers
– File attachment can be sent for ATO configurations.
Vendor can also view information using iSupplier portal
– Perform a match and use existing configuration ids
• Item master attribute can be used to identify Drop
ship items
• User item description can be sent to Purchasing

Drop Shipment and Back to Back Order Processes ©2004 Deloitte

Implementation Considerations

• Order line attribute: Source Type (need to be

external). Can be defaulted from item or order type
• Item attributes (OM and Purchasing)
• Setup requisition import parameters
– Typically group by Vendor
– 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
Drop Shipment and Back to Back Order Processes ©2004 Deloitte
Drop Shipment: Limitations

• Sales order changes need to be manually updated

in PO
• Sourcing an item from multiple supplier
• Drop shipment across operating unit is not possible
– Cannot create sales order in OU A but receive PO into OU B
• Management of sales order holds and approvals
– Need to be managed manually after the PO has been created
• Tracking serial number could be a problem.
 Serial numbers cannot be captured during PO receipt if the item
is serial number control at shipment
 Serial number control at receipt works fine for manual receipt.
This implies receiving using serial number for all transactions.
May be worked around using a logical receiving organization.

Drop Shipment and Back to Back Order Processes ©2004 Deloitte

Agenda
•Introduction
•Drop shipment process
•Back to back order process

Drop Shipment and Back to Back Order Processes ©2004 Deloitte

Back to Back Order

• Able to create specific supply orders for customer

sales orders.
• Key Business Drivers
– Lower inventory cycle time and cost
– Link supply to specific demand

Drop Shipment and Back to Back Order Processes ©2004 Deloitte

Back to Back Order: Features

• Designate specific items as “B-to-B” 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’ field in the requisition captures the Sales order
information

Drop Shipment and Back to Back Order Processes ©2004 Deloitte

Back to Back Order: Features

• 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:
– Reservation is changed
– Notification sent to Buyer

Drop Shipment and Back to Back Order Processes ©2004 Deloitte

Back to Back Order: Process flow
Customer

Customer
Place Customer receives
requests
PO item
product
Oracle OM

Specify line item

Create Oracle enabled for Back-
Sales order to-Back orders &
Book order
Purchasing

Autocreate PO
Oracle

Purchase Approve PO &

from PR (Can be communicate to
Requisition (PR)
automated using supplier (Via EDI,
created
BPA and Release) fax, email etc
Logistics
Oracle

Receive items
against the PO Decrement
Pick Release SO Ship Confirm
linked to the sales Inventory
order
Supplier

Shipment of
Communicate ASN product to the
organization
Finance

Supplier Invoice Customer Invoice Manage

Payment (AR) Collections
(AP)

Drop Shipment and Back to Back Order Processes ©2004 Deloitte

Back to Back Order: Setup

• Item attributes Assemble to Order, Build in WIP

• Item attributes Customer Orderable and Purchasable
• Sourcing Rule need to be setup
• BPA may be setup optionally

Drop Shipment and Back to Back Order Processes ©2004 Deloitte

Back to Back Orders: Item Master
Setup

Drop Shipment and Back to Back Order Processes ©2004 Deloitte

Back to Back Order: Item Master
Setup

Drop Shipment and Back to Back Order Processes ©2004 Deloitte

Back to Back Order: ASL Setup
Specify Item Name

Specify supplier
and supplier site

Drop Shipment and Back to Back Order Processes ©2004 Deloitte

Back to Back Order: Key Process
Elements
Sales order line:
New line status

Drop Shipment and Back to Back Order Processes ©2004 Deloitte

Back to Back Order: Key Process
Elements

Sales order line:

Reservation
Details

Drop Shipment and Back to Back Order Processes ©2004 Deloitte

Back to Back Order: Key Process
Elements Purchase req line:
Note to buyer is
automatically
populated

Drop Shipment and Back to Back Order Processes ©2004 Deloitte

Back to Back Order: Limitations

• Only one sourcing rule can be defined for Back-to-Back

orderable items
• Cannot use a combination of ‘Buy from’ and ‘Make’ sourcing
rules within the assignment set
• Sales order changes need to be manually updated in PO
• Cannot create Internal Requisitions from Back-to-Back orders

Drop Shipment and Back to Back Order Processes ©2004 Deloitte

Contact Information

• Kaushik Bakhandi
• Deloitte Consulting
• kbakhandi@deloitte.com
• Ph: 650 372-4769

Drop Shipment and Back to Back Order Processes ©2004 Deloitte

 Q&A / Open Forum
THANK YOU!

Drop Shipment and Back to Back Order Processes ©2004 Deloitte