Manage Shipment Tolerances for Drop Shipments

You can now over ship or under ship an order line that you drop ship. You can set a tolerance percentage on the line to determine the quantity to over ship or under ship. Order Management will send the tolerance percentage to the purchase requisition and the purchase order.

Realize these benefits:

• Reduce administrative overhead. You no longer have to manually add another order line to process a quantity that your supplier overships. You no longer have to manually cancel a split line that Order Management hasn't shipped for a quantity that your suppler underships.
• Eliminate billing problems when your supplier overships or underships. Order Management can now manage the shipped quantity's billing for overship and undership.
• Maximize revenue for an overship when you bill your customer for the shipped quantity.
• Reduce follow up communications with your supplier. You can send the tolerance value through the purchase order so the supplier proactively knows what's acceptable for overship or undership.

How it Works

• Order Management sets the order line's over fulfillment tolerance and under fulfillment tolerance for a drop ship when you create the line in Order Management.
• Order Management sends these tolerances to the purchase requisition and purchase order. You can see the order line's over fulfillment tolerance in the Overeceipt Tolerance Percent attribute and the line's under fulfillment tolerance in the Receipt Close Tolerance Percent attribute on the purchase order' schedule.
• This flow works when the transfer event for the purchase order's ownership is an advanced shipment notice (ASN) or an invoice match in accounts payable (AP).

You use the new Threshold to Stop Processing Drop Shipments With Tolerances order management parameter to control each drop shipment from your supplier. You can set it's Shipped Quantity Equal to or Greater Than value to:

• Ordered Quantity. Process shipments until they reach or exceed the value on the order line's Ordered Quantity attribute. We recommend that you use this value when your supplier usually overships and never or rarely underships.
• Undershipment Tolerance. Process shipments until they reach or exceed the value in the order line's Under Fulfillment Tolerance attribute.

Ordered Quantity Example

Assume you set the parameter to Ordered Quantity and you have this sales order for a drop shipment:

Order Line	Item	Ordered Quantity	Line Status	Under Fulfillment Tolerance	Over Fulfillment Tolerance
1	S74960	100 Pounds	Awaiting Shipping	5%	10%

Oracle Purchasing creates this purchase order:

Line	Quantity	Receipt Close Tolerance Percent	Overreceipt Tolerance Percent
1	100 Pounds	5%	10%

The supplier ships 75 pounds through an advance shipping notice. Order Management will continue to split the order line until the shipped quantity is equal to or greater than the ordered quantity:

Order Line	Item	Ordered Quantity	Shipped Quantity	Line Status	Under Fulfillment Tolerance	Over Fulfillment Tolerance
1.1	S74960	75 Pounds	75 Pounds	Shipped	5%	10%
1.2	S74960	25 Pounds	-	Awaiting Shipping	5%	10%

The supplier ships another 30 pounds a few days later. The total shipped quantity is now 105 pounds, the ordered quantity is 100 pounds, the supplier overshipped 5 pounds, and the total shipped quantity is within the maximum shippable quantity of 110 pounds, so this example has reached the threshold to stop processing more shipments. Order Management considers the order line as shipped and won't split the line again. The final order contains:

Order Line	Item	Ordered Quantity	Shipped Quantity	Line Status	Under Fulfillment Tolerance	Over Fulfillment Tolerance
1.1	S74960	75 Pounds	75 Pounds	Shipped	5%	10%
1.2	S74960	25 Pounds	30 Pounds	Shipped	5%	10%

Undershipment Tolerance Example

Assume you set the parameter to Undershipment Tolerance and you have this sales order for a drop shipment:

Order Line	Item	Ordered Quantity	Line Status	Under Fulfillment Tolerance	Over Fulfillment Tolerance
1	S74960	100 Pounds	Awaiting Shipping	5%	10%

Purchasing creates this purchase order:

Line	Quantity	Receipt Close Tolerance Percent	Overreceipt Tolerance Percent
1	100 Pounds	5%	10%

The supplier ships 97 pounds through an advance shipping notice. It exceeds the minimum shippable quantity of 95 pounds that the 5% under fulfillment tolerance specifies. Order Management considers the order line as shipped and won't split the line again but instead moves to the next step in the orchestration process. The final order contains:

Order Line	Item	Ordered Quantity	Shipped Quantity	Line Status	Under Fulfillment Tolerance	Over Fulfillment Tolerance
1	S74960	100 Pounds	97 Pounds	Shipped	5%	10%

Steps to enable and configure

1. Opt in to the parent Manage Shipment Tolerances for Sales Orders feature, and then opt in to the child Manage Shipment Tolerances for Drop Shipments feature. You can't opt out of the parent or child after you create an order line, set the line's tolerance values, and save or submit the order.
2. Specify a value for the Threshold to Stop Processing Drop Shipments With Tolerances parameter. The default values are All Business Units and Ordered Quantity.

Note:

• If you set one value for All Business Units and a different value for a specific business unit, then Order Management will use the specific business unit.

• We recommend that you don't change this parameter's value for a business unit after you set it in your production environment. Changing it might result in unexpected application behaviour while processing the drop shipment.

Tips and considerations

• If Order Management receives a shipment from your supplier after the order line reaches the threshold, then it won't process the shipment but will instead log a warning message on the order line with a recommendation to create a bill-only line to invoice the additional quantity that the supplier shipped. Order Management uses this logic for undership and overship.
• You can return the shipped quantity for a drop ship that your supplier overships or underships. Order Management will use the same calculation that it uses when you return an overship or undership for a standard shipment from a warehouse.
• Order Management doesn't do credit check during shipping, so an overship or undership on an order line affects the overall credit limit when compared to the authorized credit limit.
• Order Management doesn’t recalcalculate price during or after shipping, so if an overship or undership happens, then the sales order's total is different than the invoice total.
• You can't use tolerances with a configured item, kit, or item that doesn't ship, such as a subscription or warranty.
• To set default values for the order line's over fulfillment tolerance and under fulfillment tolerance, see Set Up Shipping Tolerances in Order Management.

Key resources

Overview of Drop Ship in Order Management

Access requirements

No new access privileges have been introduced as part of this feature.