Team meeting to learn more about OPAL from experts.

The Elusive “Perfect” Drop Ship Order

With an average warehouse handling cost of $4 – $7, plus a minimum of $3 – $4 order processing cost per drop ship order, it can be difficult to squeeze out a profit on many items.  And, then, when an order goes wrong everything stops! You spend an enormous amount of time and effort researching and correcting the problem and, very often, incur the expense of a call tag to retrieve the incorrect item and expedited shipping of the product that didn’t arrive when or where it was supposed to. Then, to top it all off, your Vendor Score Card suffers AND you’re a disappointment to the consumer. So, what’s really needed to execute a “perfect order?

The American Productivity and Quality Center, (APQC) defines the “perfect order” flawlessly taking and fulfilling a customer order. This includes entering the order correctly, allocating inventory immediately, delivering the product on time, and sending an accurate invoice. However, as we all know, there are many steps involved in the fulfillment of an order that can make this really difficult to achieve, including, but not limited to: inaccurate order entry, inaccurate warehouse picking, delayed delivery, inaccurate documents, inaccurate invoicing, EDI document processing errors, etc. So, what are some traits that make an order “perfect”?

  • Correct booking of the order: When the customer places an order, you need to fully define which product is wanted. For example, if the customer orders a T-shirt, you need to note the exact color, design, and size the customer wants.
  • Accurate order description: As soon as the order is placed, you need to capture complete information regarding where the order is to be delivered, along with the customer’s address, phone number, email address, etc. 
  • Timely delivery: Most importantly, a “perfect order” is an order that is delivered to the customer on time. Nothing can be more irritating, and sometimes off-putting, for a customer than a delayed delivery of their order.
  • Tracking of every step: A “perfect order” is one in which the customer is able to track each and every step of the order’s processing status. When the customer calls you, you should be able to tell him the exact status of the order.
  • Damage-free order: In a “perfect order”, the product that the customer receives is exactly what he wants, without any damage either due to the manufacturer’s oversight or the shipper’s fault.
  • Complete with documents: The order should reach the customer complete with all the required documents and paperwork, including the paper bill, warranty card, order slip, packing slip, etc.
  • Accurate invoicing: No matter how inexpensive an item is, it should be invoiced accurately, along with the shipping and handling charges, etc. All the charges added in the bill should be stated clearly in order for the customer to have a complete description about what product he or she has ordered and exactly how much was paid for it.
All these characteristics above enhance the reputation of your company and produces a higher level of customer satisfaction. OPAL is designed to overcome these challenges and help you execute the “perfect order”, while also significantly improving processing accuracy, reducing order processing cost, reducing order processing time to less than 8 seconds and eliminating EDI document charges.

The Impact of EDI and Order Processing Time on Your Business

Big box retailers like Walmart, Costco, Home Depot, Target etc. and .com e-tailers are becoming increasingly resistant to warehousing supplier products and are now requiring their suppliers to store and ship the products to consumers directly. In fact, some of these big box retailers are forcing their suppliers into being Drop Ship Vendors (DSV) if they want to continue to be a supplier.  This means that instead of shipping pallets of product you are forced to ship only one or two items to a customer. And that kills a supplier’s economies of scale – maintaining an adequate gross margin becomes VERY difficult.

In addition, all companies large or small that are selling products on-line or for warehouse fulfillment to these retailers need EDI (Electronic Data Interchange) to communicate with them.   It’s a hassle, forcing many suppliers to employ individual(s) just to coordinate it and keep it accurate.

Plus, you get to pay for the EDI documents needed. After all this technology has been around since the 1980’s so it doesn’t conform to current technologies 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.  

However, there are still some pretty good reasons to be a drop ship vendor…

  • Suppliers stand to have better margins as a DSV because in typical big box brick and mortar fulfillment, retailers beat you down on price but say you can make it up in volume – that never really happens. You end up taking lower margins due to allowances.
  • Online shopping is a powerful and lucrative force that allows suppliers to be nimble and react quickly to market demands, to observe changes and gives a better sense of real-time demand for product which makes inventory forecasting easier
  • Drop shipping becomes a suppliers bread and butter, where risk is spread across many retailers as opposed to a big box program that can end without notice at any time and leave the supplier in a horrible position with unsold inventory and a huge loss.

Yes, there are challenges, but OPAL removes them.  You can process a drop ship order in 8 seconds or less.  This means 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 – 24 hours per day, seven days per week – even when there’s no one in the office.  And, you are also able to do all of that WITHOUT ANY EDI DOCUMENT COST from a 3rd party EDI vendor.

So what does this REALLY mean to an e-commerce business?  It reduces order processing time, dropping your order processing cost per order to Cents rather than Dollars.  If you are an average business that cost is probably more than $3.75 currently.  Additionally, your 3rd party EDI document processing charges are probably several hundred dollars or more per month.  These costs are completely eliminated.