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
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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