Drop shipping is an extremely effective tool for retailers to extend their assortment to a broader SKU range while capitalizing on minimal carrying cost and inventory-related issues.
The Benefits
Retailers who implement drop-shipping / supplier direct fulfillment see:
- Little to no inventory carrying cost for drop-ship SKUs
- In some cases, increased speed to custmer
- Increased online conversion for web-orders
- Increased in-store orders (via endless aisle)
The Drop-Ship / Supplier Direct Process
The Preparation
Each of the four sections below are preparation areas to consider before starting your project. Hover over each line item to get more details and validating questions.
Research & Requirements
- Understandign Impact to Margin/Financials
- Picking the right Suppliers to Pilot with
System Design & Implementation
- Data Flow across enterprise systems
Project Planning
- Duration of pilot prior to launching
- Size of pilot group
Change Management Considerations
- Implications to Merchandising Organization
- Impact to e-Commerce & Omnichannel Operations
The Challenges
Supplier Relationship & Onboarding
Challenges
- Differing capabilities across suppliers regarding technical capability and operational processes
- Suppliers adherence to compliance policies
- Timely upload of inventory to drop-ship / OMS platform
- Suppliers shipping on-time, in-full and damage free
Considerations
- Creating a standard compliance manual regardless of supplier
- Not managing by exception / by supplier against compliance
- Chargebacks or penalties for non-compliance (inventory)
- Real-time tracking of orders / fulfillment for high volume suppliers
Returns Management
Challenges
- Cross channel returns leave drop-ship SKUs in stores where there’s no planorgram for them, so potential discount scenario
- Increased liklihood of returns if quality of products shipped from supplier is poor (which retailer doesn’t hear about until after fulfillment vs. prior to shipping if ‘owned’ inventory.
- Integration issues between ERP, POS and OMS systems due to SKU identified by both supplier-side and internal SKU numbers (if not tracked via UPC) which means no tracking of returned inventory if brought back to store.
Considerations
- End to end integration between systems
- Dispositioning of inventory brought back to store
- Return policy for over-sized or low-value items shipped from supplier, but returned to store
- Returns tracking in drop-ship or BI/BW to understand trends in returns, proactively
The Drop-Shipping / Supplier Direct Insights
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How It Works
Here is our methodology to ensure the success of your omni-channel business solution.
Business Case & Roadmap
Key Services Delivered
- Define Current Capabilities
- Define the Future State
- GAP Analysis
- Solution Alternatives
- ROI Analysis
- Business Solution Roadmap
Requirements & System Selection
Key Services Delivered
- Solution Requirements
- Key Business Scenarios
- RFI/RFP Demos
- References
- Contract Negotiation
- System Selection