How is drop shipment different from converting a sales order to a purchase order?

A sales order that has been converted to a purchase order has no connections to with the purchase order derived from it. They are separate entities and can be individually edited and transacted with.

The sales order can have packages and shipment order associated with it as you are the one supplying to your customer. And the purchase order derived from it can have purchase receives associated with it as the line items in it are being delivered to you or your organization. Note:

Note: You can convert a sales order into a purchase order at any point in its life cycle.

When a sales order is being drop shipped, the purchase order for it is no longer disconnected like the previous case. They both are a part of a single transaction and hence are interlinked.

Your vendor directly supplies the items to your customer hence this sales order can have no packages or shipment order associated with it and the purchase order for drop shipping cannot have purchase receives added to it as you are not receiving those goods, its your customer who is getting it directly from your vendor.

Note: You can drop ship a sales order only when its in ‘Confirmed’ status.