# How to Set Up and Process Drop Ship Orders in NetSuite > Source: https://netray.co/erp-help/netsuite-how-to-drop-ship-orders > Publisher: Netray (netray.co), AI and integration engineering for ERP and manufacturing systems. > Section: ERP Help ## Short answer Enable Drop Shipments and Special Orders, set Create PO to Drop Ship on the sales order line, and NetSuite generates a purchase order that ships straight to your customer. Receiving that purchase order records the vendor shipment and fulfills the sales order line, without moving inventory in your warehouse. ## Kind how-to ## System netsuite ## Erp Oracle NetSuite ## Module Purchasing / Drop Shipments ## Query how to set up drop ship in NetSuite ## Alternate Queries - NetSuite drop ship purchase order from sales order - NetSuite drop ship vs special order - NetSuite drop ship receive and bill - NetSuite create PO drop ship column ## Applies To NetSuite (all editions) with Drop Shipments & Special Orders enabled; non-inventory for resale items and inventory items ## Steps ### Process a drop ship order end to end **Items:** - Enable the feature at Setup > Company > Enable Features > Transactions > Purchasing, tick Drop Shipments & Special Orders, and save. - On the item record, set the preferred vendor and purchase price. For non-inventory items for resale, tick Drop Ship Item so the item is always drop shipped. - Create the sales order. On each drop ship line set the Create PO column to Drop Ship and choose the Vendor if the item has more than one. - Save and approve the order. NetSuite flags the line for a purchase order; generate it from the order or from the Create POs list under Transactions > Purchases. - Open the resulting purchase order. The ship-to address is the customer's, and the PO is linked to the sales order. Send it to the vendor. - When the vendor confirms shipment, click Receive on the purchase order. This records the receipt and marks the sales order line as fulfilled. - Enter the vendor bill against the purchase order and invoice the customer from the sales order. Match the two for margin review. ## Sections ### What happens to inventory and the ledger **Body:** A drop shipped item never enters your warehouse, so on-hand quantity does not change. Receiving the purchase order records an item receipt tagged as drop ship, and NetSuite recognizes the cost of goods at that point, using the PO rate, rather than holding it on the balance sheet. The sale itself is recognized through the invoice as usual. This makes timing the main risk: revenue and cost post on different transactions. If the customer is invoiced at order approval but the vendor receipt is entered weeks later, margin for the period looks inflated until the receipt posts. Many teams report on unmatched drop ship lines weekly for that reason. ### Drop ship versus special order **Body:** A drop ship purchase order ships directly from the vendor to your customer. A special order purchase order ships to you first, you receive the goods into inventory, and then you fulfill the customer order yourself. Use special order when you need to inspect, kit, label or consolidate. Both use the same Create PO column on the sales order line and the same feature switch. The choice is per line, so a single order can mix stock items, drop ship lines and special order lines, and each is fulfilled by its own route. **Code:** -- SuiteQL: sales order lines with a linked purchase order not yet received SELECT t.tranid, tl.item, tl.createdpo FROM transaction t JOIN transactionline tl ON tl.transaction = t.id WHERE t.type = 'SalesOrd' AND tl.createdpo IS NOT NULL AND tl.isfullyshipped = 'F' ### Troubleshooting drop ship flows **Body:** If no PO is created, check that the line has a Create PO value, that the order is approved, and that the item has a vendor. If the PO ships to your own address, the line was probably set to Special Order, not Drop Ship, or the ship-to was edited manually. If receiving does not close the sales order line, check whether the receipt quantity matches the line quantity and whether another fulfillment was created manually, double counting the line. Fix by reviewing related records on the order's Related Records subtab and removing the extra fulfillment. ## Pitfalls - Forgetting to receive the drop ship PO, so the sales order never fulfills and the customer invoice stays pending. - Creating a manual item fulfillment on a drop ship line, which duplicates the fulfillment and corrupts quantities. - Letting the PO price differ from the sales cost without checking margin, since there is no inventory cost layer to catch it. - Not communicating tracking numbers back to the order, so customer service cannot answer where is my order. - Mixing drop ship and stock on one line. Split the quantity into separate lines. ## Ai Angle A grounded assistant can list drop ship lines whose PO has not been received, compare PO cost with sales price to flag negative margin, and show which vendors are slowest to ship. ERPray runs those as read-only queries on live NetSuite data and shows the SQL it used. Sending a PO or receiving it stays with your buyers or goes through human approval. ## Faq ### What is the difference between drop ship and special order in NetSuite? **Answer:** Drop ship sends goods from the vendor directly to the customer, and you never handle them. Special order sends the goods to you first, you receive them into inventory, then you ship to the customer. Both are chosen with the Create PO column on the sales order line. ### Does a drop ship purchase order affect inventory? **Answer:** No. The item is not stocked at your location, so on-hand does not change. The receipt is recorded for cost recognition and to fulfill the sales order line, but no quantity is added to or removed from your warehouse. ### Why did my sales order not create a purchase order? **Answer:** Check that Drop Shipments & Special Orders is enabled, the Create PO column is set on the line, the order is approved and the item has a vendor. Then generate the PO from the order or the Create POs page, as it is not always automatic. ### Can I drop ship an inventory item? **Answer:** Yes. Set the Create PO column to Drop Ship on the sales order line for that item. For non-inventory items for resale, you can also tick Drop Ship Item on the record so the behavior is the default for every order. ## Search terms netsuite drop ship, netsuite drop shipment setup, netsuite drop ship purchase order, netsuite special order vs drop ship, netsuite create po drop ship, netsuite receive drop ship po, netsuite drop ship item checkbox, netsuite drop ship accounting --- Talk to an engineer: https://netray.co/contact?intent=erp_ai | Machine catalog: https://netray.co/agent/catalog.json