Drop Shipments in Supply Planning

Drop shipments are direct shipments of material from a supplier to a customer. It's an order fulfillment strategy where the seller doesn't keep products in inventory.

Instead, the seller relies on suppliers or contract manufacturers to build, store, and then ship orders directly to customers. The internal organization manages the process but never handles the material. In a drop shipment flow, there is one sales order to one supplier purchase order. Customer information is shared with the supplier. The internal organization bills the customer and pays the supplier.

To properly plan for drop shipments in Supply Planning, you must define the drop shipment supply chain network.

• Define drop shipment sourcing rules that determine which supplier sites support drop shipments.

• Define transit times between supplier and customer sites.

• Set up a drop ship validation organization.

• Enable the Drop Ship Validation item organization for collections.