Mastering the intricacies of drop ship orders and special orders can significantly impact your business's success especially in today's dynamic retail and e-commerce environment. Numerous companies are moving away from the traditional overhead costs associated with inventory management and manufacturing.
NetSuite provides built-in support for drop shipments, and special orders, allowing businesses to seamlessly combine these approaches. The following will delve into the handling of drop shipments and special orders within NetSuite, along with guidance on optimizing configuration options to align with your business requirements.
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How Does Drop Ship Orders Work?
Drop shipments are orders directly shipped from the vendor to the customer, without ever being physically received by the seller. As drop shipments do not enter your warehouse, there is no need for a receiving step in NetSuite for drop shipment purchase orders.
Direct Shipping from Vendor to Customer
Drop-shipping involves sending items directly from your vendor to the customer, bypassing your warehouse and inventory accounts.
Automatic Purchase Order Generation
Upon receiving a sales order for a drop-ship item, an automatic purchase order is generated and sent to your vendor.
Customized Shipping Options
Depending on business requirements, the vendor may ship the item to the customer directly without additional information or with business packing slip included.
Drop Shipping Benefits
Reduced Costs
By shipping items directly from suppliers to customers, businesses can avoid the need to maintain large inventories, reducing storage costs, shipping costs, and the risk of overstocking.
Expanded Product Range
Drop shipping allows businesses to offer a wider range of products without the need to invest in stocking them, enabling them to respond quickly to market trends and customer demands.
Improved Cash Flow
Since products are only purchased from suppliers after a customer places an order, businesses can conserve cash flow by not tying up capital in inventory.
Faster order-to-delivery cycle time
Orders can be fulfilled more quickly as products are shipped directly from suppliers to customers, reducing lead times and improving customer satisfaction.
Flexibility and Scalability
Drop shipping offers flexibility as businesses can easily add or remove products from their offerings without the constraints of physical inventory. It also facilitates scalability as businesses can handle increased sales volume without the burden of managing additional inventory.
How Does Special Orders Work?
Unlike drop shipments, special orders are physically received and shipped from the warehouse, resembling the process for inventory received through standard purchase orders. Special orders distinguish themselves from normal stocking orders by restricting the use of items entered on such orders to fulfilling the corresponding sales order exclusively, with no allocation to any other order permitted.
Process in the Warehouse
Special orders are handled within your warehouse as received inventory.
Creation of Purchase Orders for Special Items
When a sales order for a special item is received, a purchase order is created with the vendor, ensuring product reservation for that specific order.
Exclusive Reservation for Specific Orders
The reservation of special items ensures they are not allocated to other orders, aligning with NetSuite's order management logic.
Special Orders Benefits
Flexible Fulfillment
Special orders provide flexibility in fulfilling orders, allowing businesses to handle non-standard requests efficiently and effectively.
Cost-Effectiveness
Utilizing special orders for just-in-demand items or customized products can help businesses avoid the need to maintain expensive inventory on hand, reducing overhead costs.
Consolidated Inventory
Special orders can be consolidated with other in-stock items for shipment. This consolidation optimizes the shipping process by combining multiple orders into a single shipment, resulting in cost savings and improved efficiency.
Utilizing Just-in-Demand Orders
Special orders can also be used for just-in-demand orders, enabling the sale of high-value items without maintaining costly inventory, thus optimizing inventory management.
Inventory Management
By treating special orders as received inventory, businesses can maintain accurate stock levels and ensure items are reserved exclusively for specific orders. This reservation process prevents the allocated inventory from being allocated based on the general allocation logic defined within NetSuite, ensuring accuracy in order fulfillment.
Comparing Drop Shipping and Special Orders
| Feature | Drop Shipment | Special Order |
| Sales tracked in NetSuite | YES | YES |
| Order Form | Drop Ship PO form | Preferred PO form |
| P.O. links to sale | YES | YES |
| Vendor ships to | customer's address | company's address |
| Inventory impact | None - if it is not received into inventory | Impacts Asset and Cost of Goods Sold (COGS) accounts upon receipt and fulfillment |
| Item commitment | Drop shipments do not commit. | A special order item always commits upon receipt of the linked PO—it is not committed from inventory. Lines marked as special order commit only from the linked purchase order. To commit non-special order stock items to a purchase order, these items must be entered on a separate line and not marked as special order. |
| Item Fulfillment | Can be marked as fulfilled before or after the linked order is received. | Can be fulfilled only after the linked purchase order has been received. |
| Item record can default to this method | YES | YES |
| Can be used for inventory items and non-inventory for resale items | YES | YES |
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