How to deal with drop shipping?


My company both holds inventory and sometimes drop ships to customers without holding the inventory in our warehouse.

For drop ship orders, it is impractical to create delivery notes and goods receipts since no goods were ever received or delivered from our premises.

What is the suggested workaround for dealing with drop shipped goods? I know I could create non-inventory items for every single SKU, or perhaps a generic drop ship income and expense account, but that removes layers of detail and transparency.

Is there a suggested way to handle drop shipping without moving inventory, yet still tracking which items are being sold?

Agreed that it seems impractical for drop ship orders but currently (as you are experiencing) with Inventory Items and the using of the Goods Receipts / Delivery Notes tabs it is an all in situation - all inventory must be processed via those tabs.

So some points to consider:

  1. Do you need to use the Goods Receipts and/or Delivery Notes tabs for your own warehouse operations ?
    (a) if yes, then you are stuck with creating those tab documents if you also want to track those drop ship orders via inventory.
    (b) if no, then you could consider taking steps towards deactivating those tabs.
  2. Do you need to track those drop ship orders via the Inventory Items tab ?
    (a) if yes, then you are stuck with creating those tab documents if you also said yes at 1.a.
    (b) if no, then you could consider processing those transaction separately from Inventory transactions - such as your mentioned “generic drop ship” accounts

With 2.b you need to weigh up the administration impacts between the forced creation of the tab documents and the loss of “detail and transparency”. Is that loss material on a day to day basis - i.e. how frequently do you need to refer to such detail or do you need to know that inventory data / history. Perhaps your suppliers could provide inventory data on a periodical basis removing the need from Manager.

If it yes to both 1.a and 2.a, then you could consider creating an extra inventory location (Drop Ship Orders) so that drop ship inventory would be separated from your own warehouse inventory.

Thanks for your very detailed reply @Brucanna. As for your two questions, it would be a) on both. I like using the inventory items for granularity and details. For example, I often click on a particular inventory item’s stock number to see all past transactions for that item. Loosing that detail and utility wouldn’t be worth the time saved.

Your idea about inventory locations is interesting, but frankly I have never gotten any use whatsoever out of the inventory locations. For example, there is no way to see what is in stock in a given location. That is something I need to check multiple times per day. I do it by appending the location code at the end of the SKU. When items move between locations, I create production orders to record those movements. I also found the inventory locations to be lacking since you can only specify one location per invoice. We often receive orders containing items from more than one location, and that can’t be tracked in Manager.

Have you found any use for the inventory locations? Isn’t it strange there is no way to view all inventory for a given inventory location?

Not true. There is a report: Inventory Quantity by Location. It appears only when you are using locations.

This is what inventory transfers are for.

Just to clarify the above response, there is an Inventory Transfer tab which should be used instead of Production Orders.

I understand the other points that you were making - one can only hope for more flexibility in the future.

The reports tab indeed make it more useful! Is it safe from an accounting perspective to delete SKUs from Manager? Or would that conflict with past purchases? I think the inventory location report was quite nice and thinking about moving to this system and away from the one I use now. Alternatively I don’t have to delete anything and just start using the regular SKUs, but it would be interesting to know

You can’t delete a SKU once it has been used in a transaction but you can make them inactive. Alternatively, if you have been using “sub” SKUs (appending location code) you could edit those transactions back to the “main” SKU and once the “sub” SKU has no transactions linked to it - then it can be deleted.

Many thanks for the reply. What is the effect of making an SKU inactive? Does it simply not appear in search anymore when creating invoices and the like?

That’s correct. And it can always be reactivated. Try it out.