Configuring Drop Shipping Within SAP – All You Need To Know

To be able to understand the configuration behind drop shipment, we need to first understand the relevance of this concept in the backdrop of today’s digitally connected world. Drop shipping relates to a case where the order placed by a customer is transferred to a third party for fulfillment. Thus, the company which received the order only executes order confirmation and invoicing aspects of the transaction. The other steps associated with procurement, warehouse management and logistics execution is done by the third-party which then raises an invoice for its services. Drop shipping is a natural fit for companies dealing in ecommerce or planning to generate sales via the web.

As you would have probably guessed by now, drop shipment scenario saves the organization from production, inventory management, logistics and handling aspects. The product is not only procured or manufactured by a third-party but also shipped directly to the customer as well. We will discuss the business benefits of drop shipping in the subsequent section of the article. Let’s look at how drop shipping can be configured within SAP.

Configuring Drop Shipping Within SAP:

Using the below steps, you can configure the drop shipping within SAP. The steps have relevant screenshots along with them. The steps have been listed in a logical sequence for better understanding.

1. Configuring the Item Category Determination

For SAP to recognize that a line item in Order is a third-party item, you need to set up item category determination. Standard SAP provides TAS as the third-party item. You can view the item category determination in transaction VOV4. In the screen given below the determination happens based on order document type and Item Category group.

2. Setting up the Vendor Master:

You must have the third-party set up as a vendor within SAP. This is done with transaction XK01. In our case, we are using a vendor 100 as shown below.

3. Setting up Info Records:

Setting up info records makes SAP understand conditions for the procurement of the goods. As per the info, records are shown below, material R-1000 is procured from vendor 100 and the associated lead times are shown below. You can read more about info records at the below link.

4. Maintaining Material Master:

To trigger the third-party procurement, you must maintain the item category group as per the one maintained in step a (which was for BANS). This needs to be done in Sales Org 2 view of material master.

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