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Why Drop Shipping can be More Profitable (and Less Time Consuming)

Ultimately, every business must deliver product on time at the lowest possible cost and remain profitable.  To do that, however, you need to manage a lot of moving parts from manufacturing, to warehousing, to order processing and shipping – not to mention all of the exceptions that occur and possible, subsequent charge backs.  Plus, you get to pay for all of the EDI documents needed.  At an average of $4.00 per order that’s incredibly expensive all by itself.  

All of these things combined really hurt your business’ profitability.

The first big part of successfully solving this puzzle focuses on a dramatic reduction in order processing time, order processing cost and order errors.  The second big part is eliminating, or at the very least substantially reducing, the cost of EDI in working with your trading partners.   But how do you do that?

Here’s how: OPAL is an intelligent, self-driving drop ship and large order fulfillment software solution that brings most of these technologies together into one complete platform,  plugs into your existing ERP / Accounting software investment and truly automates the entire order process, working 24 hours a day, 7 days a week.  

IN LESS THAN 8 SECONDS, OPAL automates receiving orders from retailers and e-tailers, manages all transaction communication, processes and invoices orders through a supplier’s ERP and accounting system, and creates packing slips and custom branded 3rd party shipping labels per any retailer’s or e-tailer’s requirements.  Once shipped, it sends back tracking information and invoices to the retailer or e-tailer, as well as tracking packages and sending inventory updates.

OPAL also takes advantage of the direct communication links provided by retailers and e-tailers enabling a supplier 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 from retailers and e-tailers, sends back Acknowledgements, ASNs, Invoices and Product Inventory with no translation or transmission charges regardless of the format required (EDI, API, HTML or JASON) and is 100% compliant with each retailer.  

So where do the savings really come from?  Just compare the cost of a traditional drop ship order to how OPAL accomplishes the same thing:

Traditional Drop Shipping

2,000 orders worth $20 each

Order processing cost approximately $4 each

Shipping time of 2 days

Labor and Infrastructure cost:

  • 8 clerks
  • 8 PCs
  • 8 Desks

4,000+ EDI Transaction Charges

OPAL Drop Shipping

2,000 orders worth $20 each

Order Processing Cost of 40 cents each

Shipping Time of 2 days

Labor and Infrastructure cost: 

  • 1 Clerk
  • 1 PC
  • 1 Desk

Zero EDI Transaction Charges

So, if you employed OPAL, eliminating the cost for things like EDI document charges, EDI management and troubleshooting labor, order processing labor, reduced order exceptions to less than 5% of your order volume, and accomplished it with a total cost of CENTS rather than DOLLARS, wouldn’t that increase your business’ profitability? 

Are You a Drop Shipper?

If you sell a product, pack it, and ship it in small quantities then you are a drop shipper. Unlike bulk LTL, truckload or container orders, drop shipping can be a complicated, time consuming process for not a lot of revenue per order and 20% of your orders can take as much as 80% of your time and resources. 

The most profitable business model, of course, is Bulk Shipping.  It requires less overhead to manage processing and the revenue on each order is much, much larger.  However, for better or worse, drop shipping is the wave of the future.  E-tailers like Wayfair, Overstock and countless others are placing enormous pressure on traditional brick and mortar retailers.  Some of these, Walmart for example, are forcing their suppliers to become Drop Ship Vendors (DSV) and are expanding their e-Commerce capabilities. In fact, virtually all brick and mortar retailers are searching for ways to compete more effectively in the e-Commerce world. 

Bulk shipping won’t ever disappear; however, drop shipping by you as a supplier will become more and more necessary. 

With the right tool, though, you can simplify the impact on your business and make drop shipping highly profitable.  Automation is the key when drop shipping and to reducing its overall business cost. For example: Do you pay for EDI services? Do you receive your orders automatically? Are pick lists, shipping labels and packing slips generated automatically for the warehouse without a bunch of 3rd party software applications needed? Is your inventory automatically updated and communicated to your retail marketplace? Are invoices automatically sent? Are tracking numbers automatically sent and shipments tracked? 

Can your process do all of this and more in just 8 seconds per order, 24 hours a day, even if your business is closed?  Probably not.  

So how do you prepare?  OPAL enables you to process all (drop ship and bulk) orders within one software platform, eliminating the need for most of the 3rd party applications you may be using.  Additionally it enhances the investments you’ve made in your ERP or accounting software, automating order processing related activities.  AND…most importantly, it removes 90%+ of the overhead cost of drop ship order processing and levels the playing field with bulk shipment order processing cost.