Posted by: IS | March 28, 2010

Drop Ship – processing in Dynamics GP

The cycle for Drop Ship starts with an order from your customer. Enter the Sales Order in the normal way, except that when entering the line items – be sure to tick the Drop Ship box on the line. This is the field immediately after the Inventory Item Number field and denoted with a ‘D’. 

Then enter a Purchase Order to your supplier to buy the inventory.  The first field on the Purchase Order Entry window is ‘Type’. This will default to ‘Standard’, but if you click on the down arrow, you will see ‘Drop Ship’. Select this. This tells Dynamics GP that the inventory on this Purchase Order will be delivered direct to the end customer…therefore you would expect GP to ask for the Customer ID and their Ship To Address?..and that’s exactly what it does – when you select the Supplier ID for the Purchase Order. So far so good.

Now…because the inventory won’t be received into your warehouse, Dynamics GP skips the Inventory Receipt stage in your purchasing cycle, and sends you straight to the Invoice stage. Enter the suppliers invoice and match it to the Drop Ship Purchase Order, and post it. In the background, Microsoft Dynamics GP takes a note that inventory has been delivered to your customer on your behalf.

Now to completing the sale! Open the Sales order and fulfil it in your normal way. Because the line item has been denoted as a drop ship line item, Dynamics GP knows to go and search for a Purchase record of the items being delivered to the customer. This it finds in the Purchase Order / Invoice above. For a positive match to take place, the Customer ID and their Ship To Address on both the Sales Order and Purchase Order must match.

What would happen if you ‘forgot’ to tick the Drop Ship option on the Sales Order line? Dynamics GP would try and fulfil the order from your own warehouse. If you had inventory in the warehouse, the order would be fulfilled. If not (depending on what options you choose), the Sales Order will go on back order. This is interesting: it means that you can enter two sales orders for the same inventory item to the same customer, and using the drop ship functionality, can fulfill one from your own inventory, and one from the drop ship process. It also means that you can combine multiple inventory items on a Sales Order, some of which will be fulfilled from your warehouse and some of which will be delivered direct to the customer by your supplier.

Purchase Order Commitments functionality continues to work in the drop ship process: – as does multicurrency, Non-Inventoried Items, purchase price variance, part fulfillment, Project Accounting…and all of the other goodies within the Dynamics GP merchandising cycle. One thing that is counter intuitive is that you must enter a Site ID on the Purchase Order line. I know, it doesn’t make sense if the stock is going direct to the customer…but it must be entered anyway, no big issue.

Finally, take note that you can designate a special Drop Ship account for inventory in your GL. This is essential to keep track of the value of inventory that has been delivered to customers on your behalf, but that you haven’t (Sales) invoiced out for yet. The set up for this account is maintained in the item’s Inventory Card.


  1. Ian,

    Nice article. In our company we actually go ahead and create the drop ship purchase order from the sales order. I have an article written here outlining our drop ship workflow. I hope you don’t mind me sharing it:


  2. Not at all Ron, glad to have you aboard. Funnily enough, I just linked to one of your posts – script for Inventory – thanks to Victoria Yudin. Your posts are great, always good to read real life experiences – something us partners don’t always get. Its kinda different for users at the coal face! Regards, Ian.

  3. Thanks for the link! Yea I think it is definitely a different perspective and hope that people find it useful. Keep up the good work.


  4. What if I want to place a password to the button D. The problem is that I am new to the system and do not know how to restrict this button

    • Hi Fernando, thre is no way within standard GP to password protect the Drop Ship check box. You could probably achieve this with a VBA development though.

  5. I already have succeeded in field-level security. Anyway, thanks for being outstanding on the subject

  6. I have a requirement now that we must key in a Shipping date when closing out drop ship documents. For our warehouse parts, the MaximumData InTouch software handles that. For Drop Ship, we just have not done that as it can be time consuming. Do you know of any way we can quickly tell and order processed from BO as drop ship, to update all lines with the single ship date? So if we have 30 lines on the BO, we will note which were shipped and transfer them to an Order. We need at that point, all items on that Order (that have been shipped) to be updated with the shipping date. Any quick and easy without having to manually type in the shipping date for each and every one?

  7. Don’t know if you can assist with this but would be great if you could. We have an issue where at times the inventory account is placed against the Purchase Order instead of the Drop Ship Account. I have checked and all the items have their drop ship account created, but randomly (from what I have found thus far) the system will not use itl Any suggestions?

  8. what if *we* are the supplier. our dealer puts in an order to us to be drop shipped to a customer. we just got GP and have not even gone live yet. the sales guys were asking me about this. apparently they are doing something wrong because it puts the dealers address in the ship to field rather than the end customer who ordered the parts from the dealer….

    • Hi Jon,
      Is it putting the address n the sales record in GP – or is the wrong address appearing on the invoice / order printed documents?

  9. I understand that a return cannot be processed in the SOP module for a dro-ship unit. A credit memo should be created in RM and a credit memo in PM. Now my question is, what do i do with the inventory returned? Do i just complete and inventory adjustment? The unit cost should be that of the PO receipt?

    If the unit is being returne to the vendor then the credit memo in PM should no be created?

    You feedback will be much appreciated.

  10. I have a customer that only does drop shipments, but they are items setup in inventory. The POP/SOP tie is critical to their business processing. There are no receiving documents recieved from the customer. If the customer calls after the vendor has been invoiced, they want to be able to make the return based on the original drop shipment PO/SO. I can not figure out how to do this since GP does not allow for drop shipments to flow through the returns transaction entry window. If we could do negative PO/SO docs like a backwards dropshipment that would be great. Can anyone think of a work-around please?

  11. Can we have item defined as “Drop-Ship” item in GP at Item Master?

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