- What’s a drop shipment?
- The need for drop shipments
- Creating a Drop shipment
- Identifying drop shipments
- Invoicing a drop shipped Sales Order
- Fulfillment of a drop shipment
What’s a drop shipment?
Drop shipping is a supply chain management technique in which the retailer does not keep goods in stock but instead transfers customer orders and shipment details to either the manufacturer or a wholesaler, who then ships the goods directly to the customer.
The need for drop shipments
Eric Wolvesbane is a distributor for centrifugal pumps in Brisbane. Being a meticulous man, he closely monitors the stock flow of his pumps and promptly places purchase orders to his vendors whenever they run to the low stock zone.
Real estate saw a boom in the month of June and lot of infrastructure projects kicked into life causing a high demand for quality pumps. Eric got real busy supplying a large quantity of pumps(about 5000) for five different projects and it so happened that, one of his regular customers Julia placed an order for about 30 pumps.
With all his current stock being committed to the new customers, Eric was not in a position to fulfil this order. He knows too well that rejecting an order from a returning customer is as good as sending them off to your competitors.
That’s when he calls up one of his less frequent suppliers Roman Turntable and enquires about the availability of 30 centrifugal pumps at his negotiated rate to be delivered to Julia. Roman checks his warehouse, gets back to Eric and agrees make the drop shipment.
Now Eric opens Zoho Inventory, creates a sales order for Julia, confirms it by sending it to her and marks it for drop shipment due to which a purchase order(that has Julia’s address set as the delivery location) is generated to Roman Turntable.
Eric then raises an invoice for the drop shipment, gets paid by Julia and sends a thank you note. Roman makes the delivery and sends an invoice to Eric at their negotiated rate for which Eric makes a payment to Roman, raises a bill inside Zoho Inventory for the same and records this payment. Doing this will move the drop shipped sales order to a Fulfilled status.
This way Eric Wolvesbane not only retains a customer, but also strengthens his relations with his suppliers.
Creating a Drop Shipment
You can either create a sales order and drop ship the order or you can select an existing confirmed sales order and proceed to drop ship the order.
To create a drop shipment in Zoho Inventory follow this route map:
- Navigate to the Sales Orders module.
- Now you have two options to proceed:
- Option 1 - Create a new sales order and confirm the order by sending it to your customer or by marking it as confirmed.
- Option 2 - Select a Confirmed sales order for which a drop shipment is to be created.
- Click on the More button on top of the selected sales order. Choose the Mark for Dropshipment option in the drop-down.(Note: this option is available only for those sales orders that are in Confirmed status without a package or an invoice associated to it.)
- A New Purchase Order page opens up.
- Select the appropriate vendor from your contacts or create a new one.
- Fill up all the details.
- By default the Item details will be taken from the sales order and Dropship To tab will have the customer details fetched and populated.
- Click on the Save button to successfully create a drop shipment.
- You can access the drop shipped purchase orders from the Purchase Orders tab and you can mail it to your vendor from there.
You can only create dropshipment for sales orders that are in Confirmed status that have no invoice or package created for it.
Identifying drop shipments
To easily sort out your drop shipped orders, we have provided dedicated filters on the Sales Orders and Purchase Orders modules.
You can access these filters by navigating to these modules and clicking on the filter tab on the left-top corner.
Drop shipped Sales Orders
Drop shipped Purchase Orders
Invoicing a drop shipped Sales Order
- On opening a drop shipped sales order, you will find that instead of packages, you have a drop-shipped purchase order linked to it.
- Adjacent to the drop-shipped purchase order tab, you will find the invoices tab.
- Open the invoice tab and click on the New Invoice option.
- A new invoice bearing all the necessary details from the sales order will open up.
- Make the necessary changes and click Save.
- Now you can email this invoice to your customer and get paid.
Fulfillment of a drop shipment
In Zoho Inventory, a normal sales order attains fulfillment when the shipped packages associated with them have been delivered. Incase of a drop shipment, as your vendor takes care of package, shipment & delivery, you don’t have the need to create a package yourself.
To ensure that the order has been fulfilled by your vendor, raise a bill for the drop shipped purchase order and once your vendor confirms delivery, record the payment for the bill. Doing this will move the status of the drop shipped Sales Order from Confirmed to Fulfilled.