The drop ship fulfillment method can help a companys bottom line because it eliminates the need to carry product inventory. Instead, when a buyer places an order for an item, the order is sent directly to the supplier (which can be a manufacturer or a wholesaler) and that supplier is responsible for shipping the item to the buyer. The supplier is completely invisible to the buyer. The companys profit from the transaction is the difference between the wholesale and retail price. Drop ship is rapidly becoming common practice and companys need to know how this option will work in their multi-channel environment.
Shopify recently published an infographic and guide describing the art of drop shipping which included their perspective on the pros and cons of choosing this supply chain management strategy.
Shopify Drop Shipping Pros & Cons
The benefits of a drop shipping strategy are certainly tangible, so much so that some companies are using it as their main business model and carry no inventory at all. Others, however, only use drop shipping in certain scenarios:
- Abnormally large orders
- Large items with high shipping costs
- Private labeled items
- Selling on online marketplaces
In either case, overcoming the challenges Shopify points out begins with how the order is handled when it is placed, especially when there are multiple sales channels involved (web stores, eBay, Amazon, etc.). nChannels multi-channel management platform helps retailers effectively fulfill drop ship orders by managing several functions:
Integration nChannel offers integration to various sales channels, back-end enterprise resource planning (ERP) and/or point of sale (POS) systems to avoid key entry. When a company uses manual re-keying to transfer data between their order and drop ship fulfillment systems, they are open to costly human errors in their order-to-cash cycle that can cause item, quantity, pricing or shipping errors down the line. These types of errors directly impact customer experience and can quickly cut into profit margins.
Order logistics Using business rules the nChannel platform identifies where items should be fulfilled on the fly and can route the order to the appropriate system or third-party (via a purchase order) in virtually real-time, with no email, fax or phone delay.
Inventory management Inventory count can be uploaded to the nChannel platform from the supplier and pushed to all affected sales channels. If inventory gets too low, the platform can remove an item from the sales channels to avoid stock-outs and backorders.
Multi-channel management not only helps companies process drop ship orders more efficiently, but it also gives them the ability to be nimble and quickly adjust to change. Adding/deleting suppliers or deciding at the last minute to drop ship an incoming order are all easy tasks with a management platform that centralizes order, item, inventory, customer and supplier data in one location.
Our multi-channel management specialists are standing by to help you. Checkout our drop ship management solution.
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Dropshipping from multiple sources can be complicated enough! We need multi-channel integration tools like channel, Codisto to maintain everything.
Informative articles.