Supplier drop ship is becoming very popular amongst retailers and marketplace owners. It has a number of financial and supply chain benefits that make it an attractive fulfilment method for retailers.
What is drop shipping?
Drop shipping is the supply chain method where retailers sell products to their customers but do not actually ever handle those goods. Instead, the goods are delivered by drop ship suppliers, who handle the warehousing, picking, packing and delivery of those products.
So, without ever handling the products, the retailer is able to make revenue from the sale, and does not have the responsibility for warehousing or delivery.
For the product supplier, the drop shipper, there is the benefit of making the sales but without having to promote the products, and without the admin or costs involved with something like a direct sales operation or an ecommerce website.
The challenges for drop ship distributors
Drop shipping brings with it many business process, supply chain and IT challenges.
Firstly, it brings an increase in the number of orders. Whereas a supplier might previously have delivered pallet loads of goods to a relatively small number of wholesalers or retailers, the change to drop shipping shifts the delivery emphasis to making a much larger number of small deliveries.
This increased order volume brings with it a greater demand for carrier integration. A distributor will need its systems to integrate with those of its different logistics and courier suppliers.
And to allow for faster, easier and more accurate trading with the retailers partners, Electronic Data Interchange (EDI) becomes a necessity. EDI facilitates the secure and seamless exchange of business documents, such as purchase orders, sales orders, shipping notices, invoices and receipts. This functionality is vital so that the drop ship requests from the retailers can come directly into the distributor’s ERP system, showing as warehouse pick requests.
The extra order volume also puts pressure on warehouse service levels and efficiency. If current processes or resources are not proving effective, then they need to be evaluated and refined so that the drop shipping methods can successfully be adopted.
Of course, all these orders now means many more customers to deal with. The customer service demands increase with drop shipping and need to be managed.
How can software address these challenges?
ERP software sits at the heart of a drop shipping fulfilment process. EDI software can be integrated so that trading with ecommerce partners is seamless. And it can link to carriers’ solutions too for an efficient delivery process.
Integration with retailers’ systems ensures that the drop ship supplier can provide accurate and stock levels. And if the product costs fluctuate due to changing supply costs, then the pricing can be accurately reshown in real-time, or at least in a way that can be regularly updated.
An expert ERP system, such as NetSuite or SAP Business One – in conjunction with warehouse software and EDI – makes the whole drop shipping business model much smoother and more proficient. It makes transactions and product fulfilment both easier and more accurate. And it supports the drop ship supplier and its ecommerce partners in delivering an excellent level of customer service.
As more and more retailers and ecommerce partners are looking to reduce their warehouse costs and relieve some of the fulfilment burden, they are finding it easier and cheaper to make drop ship arrangements with their suppliers.
Have you considered offering drop shipping? If you would like to find out more, please call us for more information on 020 8819 9071 or contact us using the website form.
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