Managing EDI and Other Financial Impacts on Drop Ship Orders

Unlike bulk orders worth thousands or hundreds of thousands of dollars, drop ship orders are problematic in terms of managing your cost components well enough for a product to be profitable, especially when it’s retail price is less than $40 or $50.

A lot of operating costs can severely impact your profitability:  The manufacturing of the product, warehousing, EDI costs associated with communicating with your Trading Partner, order processing handling by staff, pick, packing and shipping by the warehouse, and the technology investments needed like an ERP or simple inventory and accounting system, shipment scheduling / tracking tools, etc.

To complicate things, drop shipping is becoming a preferred business model for many traditional brick and mortar retailers, in addition to the many e-tailers that have already shaped the e-commerce market over the last few years.  For suppliers, this will mean an exponential increase in small orders to process, shorter and shorter acknowledgement and shipment deadlines and more and more staff to keep up with the load.  And, of course, there’s the retailer commissions charged for allowing you to sell on their marketplace.  All of which impact profitability on drop ship orders even more.

So, what can you manage?  Well, from a retailer perspective, there’s not much you can do other than ensure that they are complying with your Minimum Advertised Price (MAP) Policy to protect your margins and brand.  And I’m sure that you have already and are continuing to reduce costs in your supply chain, and have probably optimized your warehouse operations and / or negotiated the best cost possible with your 3PL.

So what’s left?  EDI charges and order processing costs!  These alone are commonly more than $5 per order!  That’s at least a 10% margin loss on a small order.

Depending on your drop ship order volume this $5+ cost can be reduced to $1 or significantly less with OPAL.  That’s a $4 gain per order without even trying.

If you are doing a great deal of drop shipping to customers and are struggling with the cost of EDI when doing business, please take 15 minutes of your time to view a demonstration of OPAL so that we may answer your questions and see how it can solve the problems you are encountering and improve efficiency and profitability. 

OPAL is an autonomous, cloud based order processing and fulfillment solution and works 24 hours a day, 7 days per week, even when there’s no one in the office.  It works with and enhances your ERP investment and automates drop ship orders – processing them in less than 8 seconds – and prepares all of the necessary information, packing slips and shipping labels necessary for a warehouse or 3PL to pick pack and ship the order.  It even tracks the order and notifies you when there’s a shipment issue.  All without any EDI costs or additional software tools.

The Future of E-Commerce Orders – Autonomous Processing

Do you ever wonder what new, unexpected changes you will face to stay current, profitable and relevant to your customers?  There are new emerging trends every day and suppliers are often struggling just to stay current with what’s happening today, much less what the future may throw at them.

Many are trying to adapt to the increasing pressure to drop ship directly to consumers by their formerly traditional brick and mortar retailers.  Many are trying to figure out how to meet retailer requirements regarding EDI technology and handling.  Many are working twice as hard to fulfill orders and deliver them to consumers in a much shorter period of time.  And many are struggling just to figure out how to optimize their operations in order to remain profitable.

All of these obstacles force them to focus on technology, something that most business owners simply aren’t comfortable with and don’t feel they can afford – but unfortunately, it’s the only available answer.  Otherwise you’re just adding more workload and more staff, but not really getting ahead of the curve.

Emerging trends indicate that it’s not very long before all vital parts of your business will have to be smart and connected – people, devices, processes and systems – everything from your factory floor to your customer.

Now, to be clear, this is not going to be a technical article.  Instead I want to focus on the advantages of technology for the business owner facing new, unexpected order processing challenges.  By this I mean technology attributes that are both cost-efficient and have a serious return on investment, enabling you to keep up with all of these changes and pressures and still have the bandwidth to grow your business.

A checklist for evaluating if any technology solution is meeting this expectation should include the following:

  •          The ongoing cost of the technology should be significantly less than the labor and overhead currently required to process an order.  It must produce a 50%+ drop in the cost of processing each order.  This would come from less staff needed to physically manage and guide the order from its receipt until it’s ready for pick, pack and ship by the warehouse. This is the basis for your Return on Investment (ROI).
  •          It must be a painless addition to your business, completed quickly while not impacting your current workload.
  •          It must work with your current in-house systems like accounting and inventory management, and make them easier to use.
  •          It must give you the ability to expand your operation, allowing you to process orders and have them ready for fulfillment by the warehouse 24×365 without the need for hiring additional personnel.
  •          It must remove EDI processing and 3rd party EDI costs from your day-to-day business worries.
  •          It must adapt to your business processes rather than you adapting to it.
  •          And it must give you the ability to grow and quickly add more marketplaces to your business whenever you can.

OPAL can meet these expectations.  See what Autonomous Order Processing really looks like.  Please visit us.