Valued at over $1.6 Trillion in 2015 and projected to grow over 20%, eCommerce is clearly a substantial industry. There are approximately 12-24 million stores selling online, even though only a small portion is profitable. Regardless, eCommerce is popular due to its easy setup- anybody can sell online. This is where drop shipping comes in.
This is one of the common ways to fulfill orders coming via an store online.
Drop Shipping is a fulfillment method where you do not stock any inventory. Instead, you work with a supplier/ wholesaler who packs and ships the products based on the order details you provide. In short, you receive an order, notify your supplier, and they ship directly to the customer. Seems easy enough!
Benefits & Drawbacks
There are various benefits to using the method of Drop Shipping when you run an e-commerce store. Such as:
– Avoid holding any stock since your supplier ships directly
– Lower Investment required with no inventory costs
– You save time by not having to pick, pack and ship outbound orders
Despite all the benefits, this method has its drawbacks. For example, the delivery times, shipping costs. Some other major ones include:
– Your supplier holds the stock, giving you very little control
– Minimum visibility into the supplier’s stock levels
– You may sell more than a product’s inventory-on-hand
If you want to stay competitive, it is important that you start gaining control over the process.
- The first step is to find and employ a system that can manage your orders as they come in and update your inventory as it goes out, meaning in real-time.
- You can invite your supplier to maintain the stock levels of the inventory on hand using the system.
- As the orders come in, the system should pass it to the supplier and request an ASN (Advanced Shipping Notification). This contains all the relevant information of the shipment and is generated when the shipment is made.
- The inventory updates automatically and you can then track the product.
Integration is key here. Make sure that your inventory system integrates with your e-commerce platform. You can have the system confirm the quantity from you before the customer can place an order. Thus, you can avoid selling more than your supplier carries. In fact, an ideal system will automate the entire process and update your online store with the stock levels.
In conclusion, if you are using drop shipping, your goal should be to attain real-time visibility of the inventory that relates to you. Having full information at hand, including product details, stock levels, and shipping times is important. Since it’s a collaboration, everyone should benefit.