Here’s a scenario you may find yourself in. Perhaps you receive an order from a customer in one subsidiary for an item in a different subsidiary. How would you go about fulfilling that order? Did you know you can actually drop ship the order from the second subsidiary directly to your customer?
In a previous blog, we looked at the Automated Intercompany Management feature, which allows companies to buy from and sell to their own subsidiaries. The Automated Intercompany Drop Ship feature is an extension of that feature. When the NetSuite Automated Intercompany Drop Ship feature has been enabled, you can sell items to a customer from one subsidiary but have a second subsidiary actually fulfill the order. Let’s take a quick look at how to set up and use this feature in NetSuite.
Setting Up NetSuite Automated Intercompany Drop Ship
How would you set up the NetSuite Automated Intercompany Drop Ship feature in your account?
Enable Key Features
First, you would need to enable this feature, which you can do under the Advanced Features section of the Accounting tab in Enable Features. Because this feature works in conjunction with the Automated Intercompany Management feature, you will want to make sure that feature has been enabled as well.
Three other features will also need to be enabled before Automated Intercompany Drop Ship can work:
- Drop Shipments & Special Orders
- Advanced Shipping
- Advanced Receiving
Check Your Accounting Preferences
There are also a handful of preferences in Accounting Preferences (Setup > Accounting > Preferences > Accounting Preferences) that are automatically set once this feature has been turned on. You can see these features in the Drop Shipments & Special Orders section under the Order Management tab in Accounting Preferences.
What exactly are these default preferences, and what do they do?
- Update Drop Ship Order Quantities Automatically Prior to Shipment: This preference will cause NetSuite to run a check on linked transactions to make sure that quantities, prices, and amounts are identical.
- Drop Ship Fulfillment Quantity Validation: This preference is automatically set to “Do not allow unequal quantities.” As a result, any linked transactions that have unequal quantities cannot be fulfilled.
- Allow Both Mark Shipped Fulfillments and Receipts On a Drop Shipment Line: This preference is automatically set to “Do not allow.”
As mentioned previously, you cannot edit any of these three preferences; once the Automated Intercompany Drop Ship feature has been enabled, these preferences are required for the feature to work properly.
The NetSuite Automated Intercompany Drop Ship Process
What is the process for creating intercompany drop shipments? Let’s break it down into its key stages.
There are two key players in an intercompany drop shipment: the sales subsidiary and the warehouse subsidiary. The sales subsidiary begins the process by creating the sales order for an external customer. Then, the sales subsidiary creates an intercompany purchase order in order to purchase the item from the warehouse subsidiary. The warehouse subsidiary receives the sales order for the external customer, fulfills the item, and ships it off to the customer.
The warehouse subsidiary invoices the sales subsidiary for the item, and the sales subsidiary creates a corresponding vendor bill to pay the warehouse subsidiary. Then, the sales subsidiary invoices the external customer.
Conclusion
When the NetSuite Automated Intercompany Drop Ship feature has been turned on and set up, you are prepared to manage intercompany drop shipments between any of your subsidiaries.
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