Set Up Drop Shipment in Dynamics 365 Business Central

Have you ever done a sale where you purchased items from a vendor, but didn’t need to ship them to yourself, but instead, directly to the customer? If you have come across this scenario, this is a drop shipment. This article will explain how to set up drop shipment in Dynamics 365 Business Central (D365 BC).

What is a Drop Shipment?

A drop shipment involves a customer initiating an order, where the items are shipped from a vendor directly to the customer, instead of first housing them at a company location or warehouse. Effectively we are purchasing from the vendor and then shipping directly to the customer based on the customer order.

Set Up a Drop Shipment

To prepare a drop shipment, the user must first create the sales order resulting from a customer order, and indicate on the sales line that the sale is a drop shipment:

Drop Shipment Sales Line

With a sales order created, the user can indicate drop shipment for each item selected, if more than one item should be shipped.

If the drop shipment field is not readily available, then it can be added. In the top right corner, click the gear sign and then click personalize to add the field called drop shipment:

Add Drop Shipment Field in D365 BC Personalize Sales Order in D365 BC Personalize Sales Order in D365 BC - Add Field

Create Purchase Order and Link to Sales Order

Now that the sales order is created, create a purchase order that will be linked to the sales order that the user can then ship and invoice. To do so, first create a purchase order to link.
Once a vendor is selected on the purchase order, change the shipping address to the customer address by selecting the customer from the sales order, under the shipping and payment fast tab, as the items are not being held in inventory and will be shipped directly to the customer.

Shipping and Payment Dynamics 365 Business Central

Next, retrieve the sales lines from the sales order by linking the purchase order:

Drop Shipment - Link Purchase Order

Choose the corresponding sales order intended for drop shipment:

Sales Order for Drop Shipment

The same sales lines from the sales order also appear on the purchase order:

Drop Shipment - Sales Order

Note: if the sales order selected does not contain a drop shipment selected on the sales lines, the system will relay the following message:

Sales Order Lacking Drop Shipment Message

Now that the sales order and purchase order are linked, shipping on the purchase order will result in the sales order also receiving, and vice versa. Shipping or receiving on either order is fine. In Dynamics 365 Business Central, after shipping and receiving, the sales order must be invoiced first before the purchase order or the following error will appear:

Purchase Order in Business Central

Once the orders are invoiced in the correct order, the drop shipment process is complete, and the items will be shipped from the vendor location directly for receipt by the customer.

If you have any questions about the Drop Shipment in Dynamics 365 Business Central, please contact us!

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