Drop shipping entails shipping goods directly from your vendor to your customer without holding the items as inventory in your warehouses.
A drop ship warehouse does not actually contain items; it is a ‘virtual’ warehouse. The moment the goods ‘enter’ the drop ship warehouse, you ship them to your customer.
Virtual warehouse is always a helpful choice in SAP Business One. It’s based on users’ delivery pattern. Some users need to ship the items directly to the customer without going through their own warehouse. This action may save some money and time, but it may also cause an inventory management and document requirement problem. To solve this problem, SAP Business One allows users to create a virtual warehouse. Go to Administration > Setup > Inventory > Warehouseand click “Drop-Ship”. Note users cannot reverse the setting after a document is created. For more information, see Defining Drop-Ship Warehouses.
You can use drop ship warehouses to manage serial and batch items as well. SAP Business One does not record any inventory postings when you use drop ship warehouses in documents.
When you work with a perpetual inventory system, documents in which drop ship warehouses are used create journal entries that do not reflect the inventory value of the items received or released from a drop ship warehouse.