Published December 19, 2011
When products are warehoused in one place, they may have to be shipped to the end user when orders are made. Drop shipping is used for the shipping of such products to facilitate supply chain management. Drop shipping is a technique used within the logistics domain. Retailers or manufacturers who prefer to outsource the order fulfillment process rather than take directly responsibility for shipping the products to the customers go for techniques like drop shipping. The order-taker transfers the orders and shipping information to the drop shipping provider. The outsourced service provider then ensures that the products are delivered at the customer's doorstep within the agreed time.
How it Works
Drop shipping works well in catalogue sale locations where minimal products are stocked and the customers do not carry away the purchased product with them. Product displays satisfy the customer's desire to see the product and even use it to some extent before purchasing it. Many products are kept for display and sold through the storefront. Logistics techniques, such as drop shipping, help in minimizing the retail space required in a storefront.
Drop shipping also comes handy when orders are taken on the Internet. Products can be sold by numerous websites catering to specific target markets. Orders can be fulfilled by drop shipping all their products from the same warehouse. This kind of approach is seen on auction sites like eBay. Several people buy inventory at drop shipping locations and auction it on sites like eBay. Irrespective of who sells them, the orders are shipped from the same drop shipping location.
Usually, companies engaged in providing warehousing services to businesses offer drop shipping. Determine the capabilities of the warehouse provider that you have chosen and see if they can support your needs. However, it is important to understand how well shipping services will work for you.
Drop shipping can substantially improve the profit margins of a business. This happens because using drop shipping techniques and providers reduce the operating costs of the business by drastically cutting down the need for infrastructure as well as the other expenses incurred by the business. Drop shipping helps in improving the customer satisfaction because orders are fulfilled very efficiently.
The demand for the products of a business and its scale of operation determine the cost of drop shipping services. Some warehouse providers include these services into their offerings. Once you decide on a warehouse strategy, it become easy to determine the cost.
You can make use of drop shipping services when your business starts growing in scale and the volume of orders to be shipped increases. Proper planning has to be done much ahead of time because many systems will have to be put in place with the drop shipping service provider to integrate these services into your operational system.
Last Updated: December 19, 2011