Direct delivery in Dynamics 365 for Finance and Operations
Direct delivery in Dynamics 365 for Finance and Operations
The Direct Delivery (Drop Shipment) process allows goods to be shipped directly from the vendor to the customer, skipping the company’s warehouse. This is commonly used in distribution, trading, and project-based businesses to avoid inventory handling.
Step-by-Step Process
1. Create the Sales Order
- Go to:
Sales and marketing > Sales orders > All sales orders.
- Click New,
select a Customer Account, and click OK.
- Add
Sales Order Lines
2. Initiate Direct Delivery
Select the Sales Order Line.
Go to: Inventory > Direct delivery.
The system prompts: "Do you want to create a purchase order for the selected lines?"
OR
Go to: Sales Order Tab >New> Direct delivery.
Select the Vendor OR the System will auto-pick the vendor if it is already attached to the item.
The system will take the Vendor Currency and convert it into local currency.
3. System Automatically Creates a Linked Purchase Order
A Purchase Order (PO) is created in the background:
The PO is linked to the Sales Order — any changes made to one can reflect in the other if settings allow.
4. Review and Confirm the Purchase Order
Go to: Procurement and sourcing > Purchase orders > All purchase orders.
Open the newly created PO.
Confirm the Purchase Order (if required by your process).
Optional: Skip product receipt, depending on vendor trust and accounting practices.
Sales Order Status
Sales Order Status turns into Delivered Automatically.
5. Vendor Delivers Goods Directly to Customer
Goods physically move from Vendor → Customer.
Your company does not receive stock, so there is no inventory transaction (no on-hand update).
6. Invoice the Purchase Order
Once goods are delivered, the vendor sends an invoice.
Go to the PO > Invoice tab > Invoice.
Match and post the invoice (3-way or 2-way match based on setup).
7. Invoice the Sales Order
Go back to the original Sales Order.
Go to Invoice > Generate > Invoice.
Post the invoice to complete the sale to the customer.
Setup Considerations
A. Product Master Setup
Procurement type: Purchase.
Default Vendor must be set (under “Purchase fast tab”). If required.
B. Customer Delivery Address
Sales Order must use the correct Ship-to address to allow direct delivery.
C. Warehouse Settings
You can use a dummy warehouse like “DROPSHIP” or configure site/warehouse policies that support direct delivery.
D. Inventory Policy
Inventory does not increase during this process.
However, the item is marked as “Ordered” for reporting and planning.
📊 Reporting and Traceability
PO and SO are linked via system reference.
Advantages
Feature Benefit No warehouse involvement Saves time and resources Linked SO-PO Easy tracking and reconciliation Customer-specific delivery Flexibility in shipping addresses Standard process Integrated with invoicing and procurement
Peace,
Muhammad Raza
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