The following video explains how you setup dropship functionality so that the system behaves as you require. There are step-by-step instructions below the video.
Steps
Open System Setup.
Open System Values.
Click on the Sales tab.
Click on the Edit button.
In the Manual BO/PO section, select the options you require:
Allow auto book-in of BO/POs
None, this option will not automatically book in stock items that are on BO/PO.
Allow for all, book in all BO/PO, this option will automatically book in all BO/PO stock items.
Direct to customer POs only, this option will only book in BO/PO stock items that are being sent directly to the customer.
Assign stock to dropship if available, this option will automatically assign stock if it is available to a sales order, for example if it has been booked in as the result of returns.
Deliver to site, this option will automatically book in stocks not being delivered directly to the customer to the site specified rather than the company address.
Click on the Save Screen button to save your changes.
Notes/Caveats
You will also need to mark individual stock items as dropship, the following video explains how to do this, How To Mark an Item as Dropship.
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