Three Methods for the Drop Shipment Process in Business Central

With the upcoming general availability of Business Central 2026 Release Wave 1 (version 28.0), there will now be three different methods available for creating new drop shipment Purchase Orders within Business Central. Two options have been available, and now a new third option is available. And the new method may be the most attractive method for many users - a new Create Purchase Orders function that can be run directly from the Sales Order page.

This article will of course dive into this new method but will also cover the following topics:

• What is a drop shipment order?

• What does the drop shipment process typically look like in an ERP system?

• What does the drop shipment process look like in Business Central?

• The 3 methods available for creating the new drop shipment Purchase Orders

• Why is having multiple drop shipment methods important?

• What are the suggested best practices in deploying drop shipment features?

What is a drop shipment order?

A drop shipment order is when a customer places an order for a product (Inventory "Item" in Business Central) and instead of shipping the Item from on-hand inventory, the Item is shipped directly from the vendor to the customer. This is a common process used within the distribution industry, especially when one or multiple of the following situations exist:

1) The Item is not stocked in inventory, and it would require many more steps to have the Item shipped to the warehouse and then shipped out to the customer.

2 The customer requires the Item within a very short lead time (i.e. a needed part for an emergency repair on a piece of equipment)

3) The Item is bulky/heavy.

In all of these cases, it is likely faster, cheaper, and easier to drop ship the product.

What does the drop shipment process typically look like in an ERP system?

Generally, this process is handled via the creation of a Sales Order to track the Item the customer has requested. Then, a corresponding Purchase Order to the vendor is created with instructions on the Purchase Order (typically via the "Ship-to Address") to ship the product directly to the customer's location.

Once the vendor ships the Item to the customer, the vendor sends the invoice to the company. This triggers the company to invoice the Purchase Order to pay the vendor for the Item and also serves as the trigger to invoice the Sales Order to charge the customer for the Item.

What does the drop shipment process look like in Business Central?

For many years, Business Central has included a standard feature to automate several of the tasks related to the creation and processing of the drop shipment transaction.

These features centered around the use of the Purchasing Code field on the Sales document line record. This field exists specifically to trigger the standard automation functionality for both drop shipments and special orders. (Note: a special order is similar to a drop shipment, except instead of the Item being shipped by the vendor directly to the customer, it is shipped to the company's warehouse, where it is received and then shipped out.)

Before getting into the three options available, I would like to mention that the entire drop shipment process can be handled without using the Purchasing Code field. But in this case, none of the order creation or processing automations are available, making this a solution that is not typically recommended for most organizations. However, some companies may choose this option when a great degree of flexibility is required within the drop shipment order scenario. In these cases, companies may opt to manually build the Purchase Order and transact the inventory entries through a separate Location Code (called "DROPSHIP"?) in order to make auditing and reconciliation easier. There are obvious drawbacks to choosing this option, and as noted this is not the recommended method for managing drop shipment transactions, but it is a potential option available.

Now, let's go through each of the three methods available for generating a new Purchase Order for a drop shipment type Sales Order line. In all of these cases, a new Sales Order is created, and the Purchasing Code field is populated on the Sales Order line to indicate that the Item is to be shipped directly from the vendor to the customer. If any of the advanced warehouse management functionality is deployed within Business Central, all drop shipment lines are automatically excluded from Warehouse transactions (Receipts, Shipments, Putaways, and Picks) because the system recognizes that these Items are not being shipped out of the warehouse.

There are two key automations related to the drop shipment process:

1) Creation of the associated Purchase Order(s)

2) Automation of the shipping entries when the drop shipment Purchase Order lines are received.

It is the creation of the Purchase Orders where the differences exist in the two processing options detailed below. Once the Purchase Order(s) have been created, the same functionality is available to post the Purchase Order and Sales Order.

The 3 methods available for creating the new drop shipment Purchase Orders:

For each of the 3 methods below, we will begin with a Sales Order with 2 Sales Order lines and both Items are to be drop shipped from the same vendor.

Note: For the purposes of this explanation, I have personalized the fields displayed on the Sales Order lines: some fields have been hidden while I have added the Purchasing Code field and the Purchase Order No. field. Also available, but not displayed on the Sales Order lines page below, is the Drop Shipment field which is a checkbox type field which is automatically marked when the Purchasing Code field is set.

Sales Order with 2 Items to be drop shipped from the vendor to the customer

Method 1: Using the Requisition Worksheet

1) Create the Sales Order above.

2) Open the Requisition Worksheet and from the ribbon choose Drop Shipment --> Get Sales Orders. Based on the filters set on the request page, the system search for all Sales Order lines that have a drop shipment type Purchasing Code and for which no Purchase Order exists and will create new Requisition Lines:

Requisition Worksheet: Drop Shipment - Get Sales Orders

Before the process is run, the following request page is displayed to the user. This provides the user with the opportunity to filter which Sales Orders are to be considered when searching for drop shipment purchasing suggestions to create.

Any field on the Sales Order line could be used for filtering Sales Orders. Examples include filtering by Item Category Code, Dimension Codes, Location Code, Customer No., Item No.

If all of the filtering fields are left blank, then the system will create suggested requisition lines for every Sales Order line that has a drop shipment type Purchasing Code set and no linked Purchase Order exists. (This is the system saying: "Hey - you have a Sales Order line that needs to be drop shipped, but you don't have a Purchase Order created yet!")

The Get Sales Order request page used to set filters

In our example, the system creates the following suggested requisition lines:

Drop Shipment suggested action messages in the Requisition Worksheet

On the page above, I can see that these two Items have different Vendors suggested. The default Vendor is based on the Vendor No. field on the Item Card.

I can also see that a specific Vendor Item No. value has been created for Item No. 1908-S. This is due to an Item Reference record that has been created, which provides a different Vendor Item No. and Item Description. These values will be referenced on the new Purchase Order.

Finally, we can see the Direct Unit Cost. This is based on the Purchase Price Lists and standard purchase pricing logic within Business Central. These values can be manually updated on this page before creating the new Purchase Orders, or it can be updated on the Purchase Order line later. We will re-set the Direct Unit Cost for Item No. 1900-S on the Requisition Worksheet page to $145.95 before we create the Purchase Order.

To create the Purchase Orders, make sure the Accept Action Message box is checked on the lines and choose the Carry Out Action Message... button.

Accept Action Messages and Carry Out Action Message...

Two new Purchase Orders are created. Both will have a Status = Open. Each should be reviewed, Released, and sent to the Vendor.

Below is the first new Purchase Order created for Item no. 1900-S with the special price that was set on the Requisition Line before creating the Purchase Order:

New Purchase Order with the special Direct Unit Cost set.

Below is the second new Purchase Order created for Item No. 1908-S with the Item Reference fields set:

New Purchase Order with the Item Reference fields set.

Now that the Purchase Orders have been created, if we navigate back to the Sales Order, you can see that each Sales Order line now has a Purchase Order No. linked to it. Additionally, the user can navigate directly to the Purchase Order using the Order menu on the Sales Order Line section of the page:

The drop ship Sales Order with references to the linked Purchase Orders

From this point, the standard Business Central functionality is used to process the Purchase Orders and Sales Order.

Method 2: Using the Planning Worksheet

Companies that use the Business Central Manufacturing functionality often use the Planning Worksheet instead of the Requisition Worksheet to create new planning suggestions.

The Planning Worksheet contains all of the functionality included on the Requisition Worksheet, and it also includes additional functionality to handle manufacturing-related scenarios and other data visibility features required for companies using multi-level BOMs and Production Orders.

The process for creating new drop shipment Purchase Orders within the Planning Worksheet is exactly the same as the functionality on the Requisition Worksheet. Therefore, we will not repeat all of the same explanation here, but the process detailed above can also be run from the Planning Worksheet.

Method 3: Using the Create Purchase Order function

This is the newest option available with the 2026 Release Wave 1 update (version 28.0) and may be the best option now available for managing drop shipment orders in Business Central because it allows a single user to complete the creation of the Sales Order and the related Purchase Order(s) without the need to navigate to multiple pages.

We will begin by again creating a new Sales Order (same as above).

Then, instead of leaving the Sales Order, from the Sales Order page choose Actions --> Functions --> Create Purchase Document --> Create Purchase Orders. (Note: this function can be promoted to appear directly on the ribbon if this is frequently used)

Use the Create Purchase Orders to quickly create new drop shipment Purchase Orders

The following page will open. As the page opens, the purchase planning calculations are automatically run, with the system displaying the suggested quantity of each Item on the Sales Order that needs to be purchased:

The system recognizes the drop shipment lines and suggests the "Quantity to Purchase"

As you can see, this new page recognizes that the Sales Order lines are marked as drop shipment lines and automatically suggests that the full order quantity be purchased from the default Vendor from the Item Card.

Before proceeding, the user can modify the Buy-From "Vendor No." field and can even choose to not purchase the suggested order quantity (by changing the "Quantity to Purchase" to zero).

By selecting OK, the user confirms that they would like to create the new Purchase Order(s). This will automatically close the Create Purchase Orders page and launch the following page to confirm the specific Purchase Order(s) created. From this page, the user can navigate to each new Purchase Order, confirm the values, Release it, and send it to the vendor.

The Purchase Orders list page showing the new Purchase Orders created.

Also, similar to the method #1 example above, the new Purchase Order Nos. are reflected on each of the drop shipment Sales Order lines.

From this point, the Purchase Orders and Sales Order are processed using the standard drop shipment functionality.

Why is having multiple drop shipment methods important?

To explain why having multiple drop shipment methods is so important, let's describe the scenarios and use cases when each of the following method is most likely to be used:

• Requisition Worksheet: this method is most likely to be used by an organization that (1) is running on the Business Central Essentials user experience and subscription licenses and (2) has separation of duties between creation of Sales Orders and creation of Purchase Orders.

  
  

  In this scenario, it is the Requisition Worksheet and the Calculate Plan feature that are used to automate the creation of purchasing suggestions to match supply with demand. The Planning Worksheet is not available since it is only accessible with the Premium subscription, which adds the Manufacturing and Service Management features.

  
  

  For drop shipments, this same purchasing agent would use the Drop Shipment --> Get Sales Orders feature on the Requisition Worksheet page to create suggestions to ensure that all drop shipment Sales Orders have a linked Purchase Order created and then efficiently create the required Purchase Orders.

  
  

• Planning Worksheet: this method is most likely to be used  by an organization that (1) is running on the Business Central Premium user experience and subscription licenses and (2) has separation of duties between creation of Sales Orders and creation of Purchase Orders.

In this scenario, it is likely that a purchasing agent is already using the Planning Worksheet to create MPS (Master Production Scheduling) and MRP (Material Requirements Planning) purchasing suggestions for production components that need to be purchased for consumption on Production Orders.

If the same purchasing agents also are responsible for creating Purchase Orders for drop shipment Sales Orders, then it makes sense to also use the Planning Worksheet for drop shipments as the user is already comfortable working within the Planning Worksheet, is familiar with the visibility tools provided on this page, has personalized their page to make the data easy to work with, and may have different Batch Names created for different purposes.

• Create Purchase Orders

  This method is most likely to be used by an organization that (1) is running on either the Business Central Essentials or Premium user experience and subscription licenses and (2) has no separation of duties between creation of Sales Orders and creation of Purchase Orders.

In this scenario, the same person who enters and/or verifies Sales Orders also is responsible for creating the related drop shipment Purchase Orders. This feature allows this individual to complete the creation of the required Purchase Orders without leaving the Sales Order page, providing a much smoother and efficient process for the user.

What are the suggested best practices in deploying drop shipment features?

Before getting into specifics, the primary takeaway is that multiple options exist for managing the drop shipment process within Business Central. The key is to fully understand these options and then utilize the option that works best for your organization.

It is possible to use one, two, or all three of these options for creating drop shipment Purchase Orders, however, the best practices would suggest that a single uniform process be used across the organization. This clears up any confusion about who is creating the Purchase Orders and defines a uniform process that can be more easily understand by all users across the organization.

This is my suggestion for when to use each of the three methods:

1) Use the Requisition Worksheet if you have one person/team creating Sales Orders and a separate person/team creating Purchase Orders AND you do not use the Manufacturing functionality within Business Central.

2) Use the Planning Worksheet if you have one person/team creating Sales Orders and a separate person/team creating Purchase Orders AND you use the Manufacturing functionality within Business Central.

3) use the Create Purchase Order feature if you have the same person/team creating both the Sales Order and the Purchase Order for a drop shipment order.

Wrap-up

It is great to see Microsoft building new and improved features into Business Central. More options = more productive and happier users. Understand your options, and then choose the option(s) that work best for you!

For the latest learning content available from Microsoft on the Drop Shipment Process within Business Central, refer to this Microsoft Learn page: Make drop shipments - Business Central | Microsoft Learn

Note: this Microsoft page references the use of the Order Planning page to Calculate Plan to prepare new Purchase Orders, but the functionality described is not obvious, so it is likely a reference to the Planning Worksheet page, which has similar functionality as the Requisition Worksheet to generate new Purchase Orders.