Receipt Accounting for Drop Shipments

Global drop shipment is an order fulfillment strategy where the seller does not keep products in the inventory. The seller relies on suppliers or contract manufacturers to build, store, and ship orders to the customers.

When a customer places an order for a drop shipped product, the seller issues a purchase order for the item. The seller also provides instructions to the suppliers to ship directly to the customer. The supply chain financial orchestration process routes the orchestration flow of drop shipments through one or more business units within the corporation. These business units can belong to the same legal entity or may occur across legal entities.

The financial flow starts when the supplier sends the advanced shipment notice, or when the supplier matches the invoice with the purchase order for the drop shipment. The flow creates cost accounting distributions and intercompany invoices for the ownership transfers that occur between parties, including supplier, one or more organizations, and the customer. Supply Chain Financial Orchestration sends a request to the receiving system to create a drop ship receipt on the supplier invoice that references the purchase order. Receiving creates a logical receipt, and then notifies Order Management to start customer billing. This automation helps to reduce billing cycle time.

Receipt Accounting Distributions for Drop Shipments

You can review the receipt accounting distributions for drop shipments on the Review Receipt Accounting Distributions page. The following accounting line types are created for single busnisess unit drop shipment events.

Event	Transaction	Subledger	Accounting Line	Dr/Cr
Invoice Validation	Supplier Invoice	Accounts Payable	Accrual	Debit
Invoice Validation	Supplier Invoice	Accounts Payable	Liability	Credit
Drop Ship Receipt	Receipt	Receipt Accounting	Receiving Inspection	Debit
Drop Ship Receipt	Receipt	Receipt Accounting	Accrual	Credit

For the corresponding cost accounting distribution, see Cost Accounting for Drop Shipments.

Receipt Accounting Distributions for Drop Shipment Invoice Cancellation or Correction

For customer drop ship with payables invoice as the ownership change event, sometimes you may need to cancel the supplier invoice. For example, when an incorrect purchase order is matched to the invoice or when the supplier has sent an incorrect invoice. When the invoice is cancelled, the Oracle Supply Chain Financial Orchestration sends trade sales return as a reversal to the trade sale issue created on invoice matching.

You can review the receipt accounting distributions for invoice cancellation or correction on the Review Receipt Accounting Distributions page. The following accounting line types are created:

Event	Transaction	Subledger	Accounting Line	Dr/Cr
Invoice Cancellation	Supplier Invoice	Accounts Payable	Liability	Debit
Invoice Cancellation	Supplier Invoice	Accounts Payable	Accrual	Credit
Drop Ship Receipt Correction	Receipt Correction	Receipt Accounting	Accrual	Debit
Drop Ship Receipt Correction	Receipt Correction	Receipt Accounting	Receiving Inspection	Credit

For the corresponding cost accounting distribution, see Cost Accounting for Drop Shipments.