What is Intercompany Inventory Dropshipping?
Intercompany inventory dropshipping is a specialized logistics and accounting process that involves the transfer of inventory between subsidiaries or divisions within the same parent company structure. This method is distinct from traditional dropshipping as it focuses on internal transactions rather than external sales.
Here we will explore the concept in detail, highlighting its key aspects and differences from the regular inventory processes.
The key differences are:
1. Intercompany inventory transfers occur between related entities within the same corporate group, not between unrelated parties.
2. For intercompany inventory transfers, the selling subsidiary generates an intercompany sales order, while the purchasing subsidiary creates an intercompany purchase order. This allows the transactions to be tracked and accounted for properly.
3. Intercompany inventory transfers must be recorded at the base currency of the purchasing subsidiary, not the selling subsidiary. This ensures consistent accounting across the group.
4. Intercompany inventory transfers are managed and tracked differently than regular customer sales, with specialized accounting and reporting requirements. Companies use dedicated intercompany management systems to handle these transactions.
Intercompany Inventory Dropshipping refers to a fulfillment method where one subsidiary fulfills a sales order for another subsidiary by directly shipping the inventory from its own location to the customer, without the inventory physically passing through the purchasing subsidiary.