Before jumping into a drop ship model – sure, it's enticing if you consider the benefits of carrying little or no inventory; besides there are gazillions of so-called drop ship providers to choose from! – make sure you understand all angles.
An excellent place to start is with a consulting firm. There are plenty of them, including the four mentioned in ec-bp.org’s article. And I recommend even before you pick up the phone, or type up an email, poke around on these consultancies’ sites. There’s plenty of information to leverage.
For example, I found an interesting article on the site of F. Curtis Barry & Company, a fulfillment consulting firm for catalog, e-commerce, and retail businesses. It’s all about how companies can make sales without inventory. As you guessed it, the article addresses drop shipping.
In fact, the article (which is written by Curt Barry, president of F. Curtis Barry & Company) provides some real-world examples of companies that are leveraging drop shipping. Barry mentions a retail store that sells unusual hardware. The retailer keeps its best-selling wares in stock and slower moving products are sourced and drop shipped within a 7- to 10-day window.
Barry also points out functions that make drop shipping successful, including systems functionality that provides connectivity between the retailers’ web site and order management systems to the systems at the drop ship vendors’ sites. An ideal scenario, Barry points out, is this: “The systems are connected to terminals and printers in the vendors’ DCs to process all during the day. As orders are viewed and printed by the vendor, the drop ship system controls the process and gives the retailer visibility into the various order statuses. As the vendor prints the pick tickets and the order is ship confirmed to the system, those confirmations are sent upstream to customer service files on-line or in batches.”
He also suggests products that are drop shipped be domestically sourced, and that retailers carefully vet the vendors’ shipping reliability. Also, retailers should develop and enforce vendor compliance standards for processing orders, accounting paperwork for POs, invoices, possible returns processing, etc., according to Barry. Read the full article here.