SD / O2Cbeginner

SD Third-Party Sales Part 1: How Third-Party (Drop-Ship) Sales Work

Key takeaway

Third-party sales let a vendor ship directly to your customer: sales order item TAS, automatic purchase requisition and purchase order, vendor delivery, vendor invoice and customer invoice — no stock, no own delivery — and how it differs from the individual purchase order process.

What this complete series covers

Learn Third-Party Sales in a clear, practical sequence — from the basic idea to real project use, troubleshooting, and interview-ready understanding.

Who it is for: Best for SAP consultants, developers, and learners who want a practical understanding of Third-Party Sales.
Prerequisites: Basic SAP S/4HANA navigation and an understanding of the business process are helpful. Configuration or transaction steps require suitable access to a practice or project system.
Final outcome: By the end, you should be able to explain Third-Party Sales clearly, follow the main end-to-end flow, apply it in a project scenario, and troubleshoot the most common issues.

Part 1: SD Third-Party Sales Part 1: How Third-Party (Drop-Ship) Sales Work
Introduces why companies use third-party sales, how it differs from standard and individual purchase order processing, and walks through the end-to-end document flow from sales ord
Part 2: SD Third-Party Sales Part 2: Configuring Item Category, Schedule Line and Requisition Determination
Explains the configuration mechanics behind third-party sales including item category determination, schedule line category control settings, purchase requisition item category lin
Part 3: SD Third-Party Sales Part 3: MM Integration, Invoice Verification and Billing
Understand how a third-party sales order triggers purchasing and how vendor invoice verification in MM flows back to control customer billing quantities and timing in SD.

System and release assumptions: Examples focus on SAP S/4HANA. Exact apps, transaction codes, configuration paths, and field names can vary by release and deployment model.

Explanation

📌 KEY POINTS
✅ Third-party: the vendor delivers directly to the customer; you never hold the stock.
✅ Order item TAS with schedule line CS creates a purchase requisition automatically, converted into a PO to the vendor.
✅ No outbound delivery and no goods issue in your warehouse; customer billing is typically based on the vendor invoice quantity.
✅ Individual purchase order (TAB/CB) differs: goods come to you first, then you deliver.
⚠️ Billing before the vendor has shipped creates disputes and revenue timing issues.

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▶ WHAT THIS SERIES COVERS
Part 1: How third-party sales work
Part 2: Configuring third-party sales — item category, schedule line, requisitions
Part 3: MM integration, invoice verification and billing

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▶ 1. BUSINESS CASE

Bulky, special or non-stocked items shipped by the manufacturer.
Reduces inventory and handling.

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▶ 2. THE FLOW

Sales order (TAS item) → PR (automatic) → PO to vendor with customer ship-to address.
Vendor ships and invoices you.
You invoice the customer.

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▶ 3. WHAT IS DIFFERENT

No stock, no delivery, no PGI.
Cost from vendor invoice; margin = customer price − vendor price.

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▶ 4. THIRD-PARTY VS INDIVIDUAL PO

TAS/CS: vendor → customer directly.
TAB/CB: vendor → you (goods receipt) → you → customer.

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▶ 5. TRACEABILITY

Document flow: order → PR → PO → vendor invoice → customer invoice.

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▶ STEP BY STEP

Create an order with a BANS material.
Check the PR in the schedule line; convert to PO.
Post vendor invoice; create customer invoice.

✅ CHECKPOINT: the order shows PR/PO numbers and the customer invoice quantity equals the vendor invoice quantity.

Code example

ABAP Code

===== STEP 1: flow =====VA01 order (item category group BANS → TAS, schedule line CS) → PR (automatic)ME21N / ME59N convert PR to PO (delivery address = customer ship-to)MIRO vendor invoice → VF01 customer invoice (order-related, based on invoice receipt quantity) ===== STEP 2: comparison =====TAS/CS : vendor ships to customer, no GR/GI in own plant (optional statistical GR)TAB/CB : vendor ships to us (GR), we deliver (GI)

Real project scenario

A distributor of lab equipment billed customers when third-party orders were created. Vendors sometimes shipped weeks later, and customers disputed invoices for goods not received. Switching TAS billing relevance to invoice-receipt-based billing and tracking vendor shipment confirmations aligned customer invoices with actual shipments.

Common mistakes

Billing at order creation.
Expecting outbound deliveries for TAS items.
Confusing third-party with individual PO.
Wrong ship-to address on the PO.
No monitoring of open PRs/POs.

Best practices

Align billing with vendor invoice or shipment confirmation.
Ensure customer address flows to PO.
Monitor PR/PO conversion.
Explain the flow to sales and purchasing.
Track margins per order.

Interview angle

Questions: "Explain third-party sales", "How is it different from an individual purchase order?", "When is the customer billed?"
Strong answer: TAS/CS create PR → PO, vendor ships to customer, no delivery/PGI, billing based on vendor invoice quantity; TAB/CB with goods receipt and own delivery.

Practice this lesson

Quick check

1. In third-party sales, who ships the goods to the customer?

2. Interviewers often ask candidates to explain, without referencing memorized transaction codes, why a third-party sales order does not require an outbound delivery and how billing is triggered instead. In the Third-Party Sales context, which answer shows the strongest practical judgment?

3. What is the key difference between third-party (TAS) and individual purchase order (TAB)?

Interview questions

1. Suppose you inherit an existing Third-Party Sales solution. How would you review it before making a change?

Answer it in your own words first, then compare.

2. A distribution company sells specialized lab equipment that suppliers ship directly to customers. Explain how you would implement it in SAP.