Direct Ship Warehouse is used when a company has a customer order that is shipped directly to the customer from the Manufacturer. Set the warehouse code used for direct shipments in the Direct Ship Warehouse field in Modules > Settings.

Using the Direct Ship Warehouse on a sales line assures that any PO generated from that sales line will be automatically marked as "Ship To Customer" (Direct Ship).

It does NOT:
-do anything to allocations/fulfillments
-mark any line as a Drop Ship item

Order types will still behave as they should based on how they are set up in GP.