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Making More Money on Drop Ship Orders

E-commerce drop shipping is a tough way to make a living.  At best, all is OK if everything works perfectly.  But that pursuit of a consistently “perfect order” is illusive and hard to achieve.  There always seems to be exceptions.  In fact, most businesses, where only 20% of their revenue is in drop shipping, spend close to 80% of their resource hours in managing this small piece of their business.  That’s why some companies avoid this line of business altogether.

This last part is incredibly important.  The labor associated with managing all of the moving parts associated with drop shipping, plus the cost of EDI document set-up, translation and transmission seriously impacts the profitability on shipping just one or two items.  If the price per item is reasonably high it’s not so bad, but low cost items often lose money and need to be made up from the sale of higher priced items.

Below is an example of one real company in exactly this situation.  Here were the steps they went through to ship an $8.95 order from Amazon (fortunately, they were making up the difference on other products):

  • Log in to amazon.
  • Click on each order and print out the web page.
  • Manually enter that data from the printout into SAGE order entry.
  • Print a picking ticket. (say $0.05/page)
  • Put products into USPS packaging. (“free”)
  • Log into USPS website and re-enter that name and address – AGAIN – and print out the label on expensive Avery labels ($0.48/each).
  • Go back into the ERP “Shipping data entry” and create an invoice.
  • Manually type in the tracking number from the postal web site into the ERP.
  • Print out an invoice / packing list for shipment (say $0.05 / page)
  • Go back to the Amazon web site and re-enter the tracking number – AGAIN – (or they don’t get paid).

All of this took about 10 minutes per order.  Here’s the cost they computed:

  •           10 minutes per order @ about $22/hr. (with benefits) came out to $3.67 in labor.
  •           $8.95   Order total
  •           –  $1.57   Cost of item
  •           = $7.38   Gross profit

–          $1.34  Amazon 15% commission

–          $0.10  paper for picking sheet and packing list

–          $0.48  expensive Avery label

–          $3.67 for labor to process order

  •           = $1.79 profit to cover overhead

When subtracting all of the other overhead costs, they calculated that they were losing $3.00 per order on this $8.95 item.  As they said: “We lose money on each order, but we make up for it in volume!”

Using an approach that adapts to each individual company’s process and financial requirements, OPAL enabled this company to have an adequate margin – even on this item – by truly automating the entire order process, eliminating the $3.67 labor cost per order, providing EDI communication with Amazon at no cost, communicating with their shipping carriers and processing each order in less than 8 seconds 24 hours a day, including invoicing within their ERP.

See what OPAL can do to help YOU make more money on a drop ship order.

The $0 EDI Document Drop Ship Order

Yes, OPAL will process your orders with 100% EDI compliance and zero EDI document costs – in 8 seconds or less, 24 hours a day – even when there’s no one in the office.  But maybe, even more importantly, OPAL is configured to each business’ financial needs and processes – small or large, one size and process does not have to “fit all” businesses.

As you well know, any company that sells products on-line for big box retailers or e-tailers like Amazon, Wayfair, Overstock, Hayneedle, etc., etc. need EDI (Electronic Data Interchange). It’s a hassle, forcing many suppliers to hire people just to coordinate it and keep it accurate.

Plus, you get to pay for the EDI documents needed. But did you know that this technology has been around since the 1980’s so it doesn’t provide current technology capabilities and it’s certainly not inexpensive. For example, if you were to stream a movie on your mobile device using current EDI technology transmission cost, it would be about $240,000.

However, EDI has been around so long, and is such a core piece of a supplier’s business model, that most simply take it for granted as a necessary cost of doing business. What most people aren’t aware of is that the vast majority of retailers and e-tailers have evolved their infrastructure, or built it to begin with, to enable a direct connection with them. Yes, EDI is still necessary, but there is no longer a need for a 3rd party EDI company to charge for each EDI document. 

OPAL takes advantage of the direct EDI links provided by these retailers and e-tailers enabling you to process a drop ship order with $0 cost for EDI documents – or an LTL, Full Truck Load or Container order for that matter.  OPAL downloads POs (Document 850) from retailers and e-tailers, sends back Acknowledgements (Document 997), ASNs (Document 856), Invoices (Document 810) and Product Inventory (Document 846) with no EDI charges and is 100% compliant with each retailer. It even provides EDI communication with your warehouse (Documents 940 and 945).

You can even process a drop ship order in 8 seconds or less.  By this, I mean you can receive orders from your customer retailers and e-tailers, manage all of their EDI transactions, process and invoice orders through your ERP and accounting system, create packing slips and custom branded 3rd party shipping labels and get them to the warehouse for pick, pack and ship.  It even creates fully compliant Bills of Lading and Manifests where needed for large orders. 

So, yes, OPAL will process your orders with 100% EDI compliance and zero EDI document costs. Please visit us at www.opal-llc.com or call us at 214-274-3755 to schedule a 15 minute demonstration and see what it can do for you.