Drop Shipment, BackOrders and

Back to Back Order

Posted on April 12th, 2008 by Sanjit Anand | Print This Post | Email This Post
This was yet another query asked by one of the reader..so thought to combine in a post so
that others can also understand.
Lets try to understand these key terms from Oracle Apps Product side:
Back Orders
The Oracle term! backorder is a status! on the order line or deli"ery line
indicating that you ha"e tried to release an order for picking in your warehouse#
but that the pick release was $%&$''E&&($L because there was no a"ailable
in"entory.)*ackorder can be partial or complete+. The Oracle term backorder does
%OT mean that you ha"e open purchase orders for the out,of,stock item from
your "endors.
The term backorder is also used in business a little differently than in Oracle. The
term An item is on backorder! usually means that the item is not in stock# but the
shipping company has already placed purchase orders from their suppliers to
restock the item.
*ack Order is when u do not fulfill the &ales Order# or if the in"entory is out of
stock for deli"ery to customer.
Drop Shipment
-rop shipment on the other hand is a method of order fulfillment where the
organi.ation taking the order does %OT maintain their own in"entory for the
drop,shipped product# but fulfill their orders through /rd party "endors who
directly ship to the end customer ordering the product.
(or e0ample#
A orders item 0 from *
* orders item 0 from '
' ships 1tem 0 to A.
* bills A for the order# ' bills * for the order
Back to Back Orders
1n *ack to *ack order the shipment process is also completed through O2 as a standard
order after the item is recei"ed against a PO.
hat is the major di!!erence "et#een drop shipment and "ack to "ack order $
1n *3* the source will be internal but the item would be procured after the order
is created or after the demand is made.
1n -rop &hip the source will be e0ternal
1n -rop &hip orders# material is directly shipped to the customer from the
supplier. Thus# in"entory is not affected. 1n this case# only logical recei"ing is
done. *ut in the case of *ack,to,*ack orders# material is taken from in"entory.
-rop &hip orders may ha"e many Purchase Orders connected to them. 1n *ack,to,
*ack orders one PO is tied to one &ales Order.
%ore on Drop Shipment & Back to Back Orders'()nctional*
4igh Points for E*& *ase (unctionality for -rop &hipment
-rop shipment order processing in E*& is managed using workflow
-rop ship functionality is based on source type of an order line )1nternal5E0ternal+
6ou can automate your PO5*PA release creation based on A&L5sourcing rule
information
-rop ship process uses standard O2 workflows.
6ou can use &ales order Purchase order discrepancy report to identify
discrepancies between the O2 and the PO
There is a links O2 and PO to pro"ide "isibility through entire supply chain
(low.
The entire -rop shipment process flow can be best understood as figure below:

+oints !or ,mplementation -onsiderations
Order line attribute: &ource Type )need to be e0ternal+. 6ou can be defaulted from
item or order type
o 2enu ,7 8esponsibility Order Entry &uper $ser5setup5Orders5Types
o &etup an order type using the cycle defined in the pre"ious step )a+#an
order number source# a "alid standard "alue rule set.
1tem attributes )O2 and Purchasing+
6ou need to do the setup for these attributes:
,Purchased )PO+ Enabled
,Purchasable )PO+ Enabled
,Transactable )1%9+ Enabled
,&tockable )1%9+ Optional
,8eser"able )1%9+ Optional
,1n"entory 1tem )1%9+ Optional
,'ustomer Ordered )OE+ Enabled
,'ustomer Orders Enabled )OE+ Enabled
,1nternal Ordered )OE+ -isabled
,1nternal Orders Enabled )OE+ -isabled
,&hippable )OE+ Optional
,OE Transactable )OE+ Enabled
&etup requisition import parameters
6ou can also use grouping by 9endor
6ou can also set the multiple distributions set to %o
A&L and5or &ourcing rule relationship need to be setup for Automatic PO creation
Oracle recommends using a logical organi.ation for drop shipment. E0clude this
organi.ation for planning purposes. 1t can be worked around using non nettable
:;<-ropship:;= subin"entory
Back to Back Order
As mention abo"e this is ability to create specific supply orders for customer sales orders.
These are main features a"aible in E*&
-esignate specific items as :;>*,to,*:; order able
Enter sales order lines for these items# and ha"e the supply automatically created
"ia a requisition
4a"e the requisition con"erted into a Purchase Order or a release of a blanket
Purchase Order
9iew the requisition number or PO number and its status from the &ales Order
)using reser"ation details window+
8eser"e the supply from the 8equisition to the PO and finally to the &ales Order
once the PO is recei"ed
Pick# ship and finally in"oice the customer for the product.
:;<%ote to *uyer:;= field in the requisition captures the &ales order information
Line status information shows the progress of the order
PO 8eq 'reated
PO 8eq 8equested
PO 'reated
PO 8ecei"ed
1f line is manually reser"ed it progresses to :;<Awaiting &hipping:;=
'hanges and 'ancellations on sales orders:
o 8eser"ation is changed
o %otification sent to *uyer
4ope this makes a clarity on topics.