Drop shipping is a supply technique used by retailers. They offer products through an ecommerce shop front, without holding a physical inventory of these products. When the consumer buys a product (the point of sale), this purchase order is sent directly to the supplier, who picks packs and ships the order directly to the customer on behalf of the retailer. To work successfully drop shipping requires suppliers and retailers to achieve data integration between their businesses in three areas: product catalogue, inventory and orders.
The product catalogue is a virtual representation of the products the supplier(s) offer and the retailer wants to sell. To be noticeable in such a vast market, retailers need to choose carefully from their suppliers’ products and customise their product descriptions and images to enhance the customer buying experience.
The inventory is a record of where the products are, how many are available and how much they cost the retailer. It is an essential link between the retailers’ virtual product catalogue and the physical product they are offering for sale. Accurate virtual inventory is integral to a successful drop shipping service. This part of the drop shipping process will probably need a software solution to work optimally.
As a minimum the inventory must have a sku (the stock keeping unit) and the quantity available. Linked to the product catalogue it gives the retailer inventory visibility. Other common fields included in suitable software are title (of the sku), cost, status, and availability date and currency code.
The inventory’s constantly changing status makes this part of the process complex. Optimally updates should be on a real time basis. In practice many suppliers only update daily. The retailers’ software must synchronise with the suppliers’, hourly retailer updates are of no use if the supplier only updates daily.
The importance of inventory visibility depends on the supplier. Some points to consider are:
•Are products made to order?
•Is there a long product lead time?
•Does the supplier sell direct?
•Does the supplier drop ship for other retailers and if so how big are they?
•How efficient is the supplier’s tracking of its products?
•Does the supplier sell wholesale?
Research your suppliers to see if their working practices mesh with yours. Invest in automation and work towards a real time visible inventory so that the chances of unfulfilled customer orders are minimised.