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    Mohanish Mahajan
    Use Dropshipment functionality for expense items ?Answered
    Topic posted April 30, 2018 by Mohanish MahajanBronze Medal: 1,250+ Points, tagged Orders, Payables, Requisition Processing, Setup, Supply & Distribution Planning Cloud, Tip 
    475 Views, 9 Comments
    Title:
    Use Dropshipment functionality for expense items ?
    Summary:
    Is it possible to use Oracle drop-shipment flow for a expense item.?
    Content:

    Hi,

    My client provides device installation services to its customers. But instead of doing the installation itself, it outsources it to third party vendors. We want to model this as a drop-shipment flow in Oracle cloud, even though there is no real shipment happening. We will define the installation service as an expense item in the system.

    Creation of a sales order should automatically trigger a purchase requisition and PO. and the supplier invoice should trigger the PO receipt and customer shipment and invoice. 

    I have gone through the documentation and also the release training (R11). As far as I understood, the drop-shipment feature in Oracle is predominantly for Inventory items. Therefore will like to know if it is possible to use the drop-shipment functionality for an expense items too and if there are any possible issues that we should be aware of. Please provide your inputs.

    Thanks & Regards,

    Mohanish Mahajan

    Best Comment

    Mohanish Mahajan

    Hi Manavalan,

    Thanks for a quick response. Is there any documentation on how the accounting entries will work in such case ? The release training (link below) mentions costing accounting entries (inventory valuation, COGS) which ideally should not be applicable if item is not an inventory item.

    http://download.oracle.com/ocomdocs/global/fusion_r11/scm/Supplier_to_Customer_Drop_Ship/Supplier_to_Customer_Drop_Ship.doc

    Regards

    Comment

     

    • Manavalan Ethirajan

      Hi,

      Drop-shipment feature supports service item as well. You can model 'installation service' as a service item (non shippable) and perform drop-ship flow. Internally this flow was tried by our QA and it worked fine.

      Thanks,

      Manav

      • Mohanish Mahajan

        Hi Manavalan,

        Thanks for a quick response. Is there any documentation on how the accounting entries will work in such case ? The release training (link below) mentions costing accounting entries (inventory valuation, COGS) which ideally should not be applicable if item is not an inventory item.

        http://download.oracle.com/ocomdocs/global/fusion_r11/scm/Supplier_to_Customer_Drop_Ship/Supplier_to_Customer_Drop_Ship.doc

        Regards

      • Mohanish Mahajan

        Hi Manavalan,

        I executed the entire cycle for inventory and expense items.

        Sales Order -> Requisition -> PO -> AP Invoice -> Dummy Receipt -> AR Invoice.

        The flow worked exactly same for both inventory and expense items. Even the accounting entries are same. Can you please check and confirm if this is a valid application behavior. The reasons for my doubt are –

        1. Inventory account is defaulted as PO Charge even though the item is expense.
        2. Accrual is set to receipt even though item is expense and expense accrual is setup at period end (common options for AP and PO)
        3. Cost accounting entries are created even though the item is expense item.

        Regards,

        Mohanish

    • Suman Guha

      Hi Mohanish,

      Good to hear from you. Hope you are doing well.

      It is by design that an item does not need to be flagged as stockable in order for it to be placed on a drop ship order because unlike in EBS there's no logical inventory ins and outs happening in the cloud solution.

      1) Currently TAB is not seeded differently by default for drop ship destination type scenarios between stock and non stock items. But if there's such a requirement, I would like to think it to be possible to configure account derivation differently for non stock items for the drop ship flow. It would still need to be charged to an asset account like for stock items.

      2) Accrual defaulting works the same way for inventory destinations as well as drop ship destinations as the items by definition are still assets since you are selling them even if you are not carrying them in inventory.

      3) Same as 2. You would want to account for costs for the products that you sell, won't you?

      Regards,

      Suman.

       

      • Mohanish Mahajan

        Hi Suman,

        I am fine, hope you are doing good too. It is really nice to hear from you and I feel this is a great forum which give a chance to connect directly with the product management team. 

        I agree with you that Item being stockable or not should not matter for drop-ship scenario. However we are thinking of using this feature to model services. My client Shoppertrack provides device installation (camera/sensors) services to its customers. But instead of doing the installation itself, it outsources it to third party vendors.  We thought drop-shipment would be a good way to link customer sales order with a purchase order and to automate the PO creation process. And I was hoping that by setting the item attributes appropriately, (inventory = No, Stockable = No, Costed = No), we will be able to control the accounting too. But apparently, the item attributes have no impact at all. Will like to know your opinion on this.  FYI, I also had a discussion with Sathish on this.

        Regards,

        Mohanish

    • Suman Guha

      Hi Mohanish,

      Am not sure in what way you want to change accounting from the way accounting happens for products. Between TAB in PO and SLA Account Derivatio, if you are not finding enough for you to configure the way you want to do accounting. please do enumerate the gaps for us to review.

      Thanks,

      Suman.

      • Mohanish Mahajan

        Hi Suman,
        I think achieving charge account defaulting differently for expense drop-ship items should be possible by creating item specific mapping in PO mapping set ‘expense account – Item’. Regarding the accounting entries, still need to discuss with the client. I will update the post once I know the requirement.

        Thanks a lot for your help.
        Mohanish

      • Mohanish Mahajan

        Hi Suman,

        Got more details on this requirement. These purchases are going to be project based, and they would want these orders to be part of the COGS of the project even if they are services. So, we are able to meet this requirement. 

        However, thanks a lot for your help on this issue.

        Regards,

        Mohanish

         

        • Nitin Kabra

          Hi Mohanish:

          One of our customers is having the same requirement of having Customers Saler Order with Inventory and Non-Inventory (Expense) Items to be include in a single Sales Order and a Drop Shipment to be created both for Inventory & Expense/Service Items.

          Can you help here and provide details of the solution? Our current challenge is that in the Drop Shipment Flow : Requisition is created for Inventory Item but not not Service Item

          Nitin Kabra