Drop Shipping in ERPNext (Detailed Guide)

Drop Shipping is a supply chain management method where the retailer does not keep goods in stock, but instead forwards customer orders and shipment details to a manufacturer, wholesaler, or another retailer who directly ships the goods to the customer.

SUMMARY

Drop shipping allows a business to operate without maintaining inventory, acting as a middleman between customer and supplier while the supplier handles fulfillment and delivery.

1. Concept of Drop Shipping

Drop shipping is commonly used when:

A retailer does not maintain physical inventory
A large or high-value order is received
The manufacturer or distributor handles direct shipping

In this model, the retailer simply manages the sales process and coordination, while fulfillment is handled externally.

Example: A customer (ABC Inc.) places an order for 1000 DELL 24-inch monitors, which are shipped directly from the supplier.

2. Drop Shipping Workflow in ERPNext

2.1 Item Configuration

Before using drop shipping:

Disable Maintain Stock in Item Master
Enable Delivered by Supplier (Drop Ship)
Assign a Supplier for fulfillment

NOTE: Drop shipped items do not enter your warehouse. They are shipped directly from supplier to customer.

2.2 Sales Cycle

The process begins with:

Create Sales Order
Add Customer, Items, Quantity, Rate, Taxes
System links order to supplier for fulfillment

2.3 Order Fulfillment

From the Sales Order:

Create Purchase Order for supplier
Track delivery status
Generate Sales Invoice for customer billing

3. Delivery Tracking (v16 Enhancement)

ERPNext introduced improved tracking for drop shipping:

Partial delivery tracking supported
“Deliver (Dropship)” button available after submission
Supplier delivery quantity can be recorded
Qty adjustments allowed using Qty Change field

SUMMARY

ERPNext connects Sales Order → Purchase Order → Delivery tracking, enabling full visibility of drop shipping operations without inventory handling.

4. Key Characteristics

– No inventory maintenance required
– Supplier handles direct delivery
– Retailer acts as coordinator
– Suitable for high-value and bulk orders
– Reduced warehouse dependency

5. Business Flow Summary

Drop shipping in ERPNext ensures seamless coordination between:

– Sales Order (Customer side)
– Purchase Order (Supplier side)
– Delivery tracking
– Billing and invoicing

6. Important Insight

KEY POINT: The retailer never physically handles the goods, ERPNext ensures all documents are linked between customer order and supplier shipment.

7. Related Topics

– Sales Order
– Purchase Order
– Supplier Management
– Delivery Note
– Inventory Management

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