Is an ABC flow a drop shipment?

Yes. In an ABC flow, A sells to B and B sells to C, and the goods go straight from A to C without passing through B. That direct shipment is a drop shipment. When A, B and C all belong to your own group, it is one of the three forms of intercompany logistics.

Do the goods have to pass through the warehouse of the company in the middle?

No. In a drop shipment, the company in the middle buys and sells on paper, and the goods go directly from the first company to the last. BizBloqs keeps the orders of every company in the chain tied to that one shipment.

Can one company buy for the whole group?

Yes. A purchasing company can buy and hold the stock, and the selling companies draw on it for their own customers. Each selling company keeps its own orders, prices and margins.

Which ERP systems can sit alongside the ICL module?

The ICL module works alongside the ERP and finance systems on the BizBloqs integration list, such as Business Central, SAP Business One, Exact Online and Odoo. The integrations page lists them all.

Intercompany logistics

In brief

Intercompany logistics covers the goods and orders that move between companies of the same group. It takes three forms: drop shipments, margins across several entities, and one purchasing company supplying several selling companies.
In a drop shipment, also called the ABC flow, A sells to B and B sells to C, but the goods travel once, straight from A to C.
The paper chain and the goods flow are two separate things. BizBloqs runs the goods, the orders and the warehouse work. Your ERP runs invoicing and VAT.
A despatch advice can name the buyer and the delivery point separately, which is how a shipment from A can be sold to B and delivered to C.
The ICL module is added at a charge from SME+, and included at Enterprise, where only its configuration is charged.

Who it is for

Operations, supply chain and finance leads in groups with two or more legal entities that buy from, sell to and ship for each other. Not for you if your business trades from a single legal entity.

A group of companies often trades with itself. One company buys, another sells, a third holds the stock, and the goods do not always pass through the company that sold them. Intercompany logistics is the name for that traffic: the goods and orders that move between companies of the same group.

It comes in three forms. The most common is the drop shipment. The other two are margins spread across several companies, and one company buying for the rest of the group.

Three companies, two sales, one shipment

Take a group with three legal entities. Company A makes or holds the goods. Company B sells to the end customer, company C. On paper there are two sales: A sells to B, and B sells to C. Each sale has its own order and its own invoice.

The goods do not follow the paper. Sending them from A to B, unloading them, storing them and shipping them on to C would cost a day and a handling round for nothing. So they leave A's warehouse and go straight to C. One shipment covers both sales.

That is a drop shipment. Among accountants and tax advisers you will also hear it called an ABC flow or a chain transaction.

The trick sits in the paperwork. In the GS1 despatch advice, the electronic message that announces a delivery, the buyer and the delivery point are named separately. A shipment that leaves A can therefore be sold to B and delivered to C, and C's goods-in team still knows exactly what is on the truck before it arrives.

With the ICL module, BizBloqs runs the goods side of that chain. The order C placed with B and the order B placed with A stay tied to the one shipment that leaves A. The warehouse at A picks and ships against it, and the companies in the chain see the same status.

FIGURE 1Intercompany logistics: paper flow and goods flow

Scroll sideways to see the whole figure.

Margins across several companies

In a group, the price of a product can change hands two or three times before it reaches the customer. A sells to B at one price, B sells to C at another, and each company books its own margin.

The goods move once; the prices do not. BizBloqs carries the order of each company in the chain with that company's own price, so each one sees its own margin on the same delivery. Nobody has to rebuild the chain in a spreadsheet at month end to work out which company earned what.

One company buying for the whole group

Many groups put purchasing in one place. A single purchasing company negotiates with suppliers, buys in volume and holds the stock. The selling companies, often one per country or per brand, sell to their own customers and draw on that central stock.

On the warehouse floor this looks simple: one stock, several companies ordering from it. In the system it needs care. The purchasing company owns the goods until a selling company buys them, and each selling company needs to know what it can promise its customers.

BizBloqs keeps stock availability per sales channel and a safety stock per channel, so a selling company never promises more than the group holds for it. Read more about multichannel inventory management.

The tax route stays in your ERP

Every sale in the chain is a sale for tax purposes. Each one has an invoice, and each one has its own VAT treatment. In Europe, some chains fall under special VAT rules. Other countries have their own rules again.

That part is not BizBloqs' job. The tax route, meaning the invoices and the VAT on every sale, is handled by your ERP. BizBloqs runs the goods flow and the orders, and passes the shipment and order data to the ERP so it can invoice each sale correctly. Which VAT rule applies to your chain is a question for your tax adviser, not for your warehouse system.

This split is also how accountants talk about it. They call it intercompany transactions and look at the books. Your warehouse team looks at the truck. Both views are right; they just live in different systems.

How the module fits

The ICL module is not part of the SME solution. From SME+, it is added at a charge, plus its configuration. At Enterprise, all modules are included and you pay for the configuration. It works alongside the ERP systems on the BizBloqs integrations list, and alongside the order management system that holds every order in one place. The messages between ERP and warehouse are documented in the ERP–WMS message reference.

If one of the companies in your chain is a trading partner outside the group that works with EDI, the EDI integration module processes its messages in the same flows.

How BizBloqs is billed, without prices, is explained on the WMS cost page.

Want to see your own group's chain on screen? Book a BizBloqs demo and bring the three companies with you.

Is an ABC flow a drop shipment?: Yes. In an ABC flow, A sells to B and B sells to C, and the goods go straight from A to C without passing through B. That direct shipment is a drop shipment. When A, B and C all belong to your own group, it is one of the three forms of intercompany logistics.
Does BizBloqs handle the VAT on intercompany sales?: No. The tax route, meaning the invoices and the VAT on each sale in the chain, is handled by your ERP. BizBloqs runs the goods flow and the order processes. Which VAT rules apply to your chain is a question for your tax adviser.
Do the goods have to pass through the warehouse of the company in the middle?: No. In a drop shipment, the company in the middle buys and sells on paper, and the goods go directly from the first company to the last. BizBloqs keeps the orders of every company in the chain tied to that one shipment.
Can one company buy for the whole group?: Yes. A purchasing company can buy and hold the stock, and the selling companies draw on it for their own customers. Each selling company keeps its own orders, prices and margins.
Which ERP systems can sit alongside the ICL module?: The ICL module works alongside the ERP and finance systems on the BizBloqs integration list, such as Business Central, SAP Business One, Exact Online and Odoo. The integrations page lists them all.