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How Successful Are You at Managing the Cost of Drop Ship Order Fulfillment?

Do you ever have difficulty achieving expected – or sometimes even adequate – profits on drop ship orders?  Unlike bulk orders worth thousands or hundreds of thousands of dollars, drop ship orders are much more problematic when it comes to managing costs well enough for an order to be profitable.  

To complicate things, suppliers are seeing an exponential increase in the small orders to process, more retailer compliance requirements added to the fulfillment process, shorter and shorter acknowledgement and shipment deadlines, more opportunities for retailer chargebacks, and more and more staff to keep up with the load.  All of which impact profitability.

So, what leverage do you have to cut costs?  

The first way is to improve order processing efficiency through cost effective order processing systems.  This reduces the cost to process an order and also allows you to deliver more on-time orders each day with the same or fewer resources.  

 

Secondly, you can maximize your warehouse’s efficiency through cost effective warehouse productivity systems.  This dramatically increases the number of shipments made each day and their accuracy.  

 

And the third way is to be compliant with a retailer’s business processes.  This includes processing a retailer’s orders, complying with all of the necessary transactions, PO pricing, packaging, labeling, shipping documentation and accurate inventory feeds.  This significantly reduces unexpected retailer chargebacks and maximizes your business relationship with them.  

The bottom line is that OPAL addresses all of this for you and more.  It combines all of your order processing and warehouse management productivity requirements into one COST EFFECTIVE, AUTONOMOUS software platform:

  • No additional Order Processing System
  • NO additional Warehouse Management System
  • NO additional Shipping Software
  • NO Retailer Portals Needed
  • 100% Retailer Compliant
  • And NO EDI Document Charges. 

 

The Pain of Drop Shipping – Why Suffer?

The rapidly expanding number of Manufacturers and Suppliers adopting OPAL all come with common business problems that they are trying to solve:

  • They are drop shipping a large number of orders daily.
  • EDI vendor cost and order processing labor is seriously impacting the profitability of these orders. 
  • Their order processing capacity is limited by their number of staff available.
  • They need to add more staff to keep up.  
  • Someone needs to perform manual steps to process each order.  This often includes things like downloading orders from a retailer portal, loading them into their ERP, going to the portal again to send Acknowledgments, Ship Notices, Invoices and Inventory Updates, creating Packing Slips, using a 3rd party application for Shipping Labels, etc.  

Then there’s the profitability issue.  With an average cost of $7 – $11 including warehouse handling and order processing labor for a drop ship order it’s really difficult to squeeze out any profit at all on some items, and it certainly impacts the profitability of ALL items.  

They also really needed to be able to execute “perfect orders”.  Essentially, everything stopped when an order went wrong, forcing them to spend an enormous amount of time and effort researching and correcting the problem and, very often, incurring 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, their Vendor Score Card suffered and they were a disappointment to the consumer. 

OPAL became their solution of choice for several reasons:  It enabled them to process a drop ship order in less than 8 seconds without an order processing intervention, to automatically receive orders from retailers, e-tailers, shopping carts and / or B2B partners, manage all of their EDI transactions, process and invoice orders through their 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.  

It even enabled them to do all of that WITHOUT ANY EDI DOCUMENT COST from a 3rd party EDI vendor.

Overall, it dramatically increased their profitability, increased the quality of their service, was configured to meet their internal business processes, eliminated the need for 3rd party shipping applications, was easy to implement and paid for itself VERY quickly. Does this sound worthwhile to you?


There are No Cost Alternatives to EDI for Business!

First, you need to know that EDI is nothing more than a format for a specific record type such as a PO, Acknowledgement, Ship Notice, Invoice, etc.  Depending on the retailer, there may be other non-EDI record formats, such as XML, CSV, etc. in which you can communicate with them.

 

So, the real question is do you need a 3rd party EDI Company or VAN (Value Added Network) to send and receive this data for you.  With a very small number of exceptions, the answer is NO. No matter what the retailer’s help line says when you request information about setting up as a vendor. 

 

Unfortunately most suppliers are just unaware of the alternatives.  As a case in point, an OPAL user recently approached Houzz about getting connected and was told that they needed to connect through SPS Commerce.  Of course, this would require the traditional monthly fees and data transmission costs of an EDI provider to do business with them.  

 

However, the OPAL team was aware that there were other options available:  Houzz also offers API (Application Program Interface) connectivity and we were able to complete the connection without the use and cost of SPS Commerce.

 

Of the nearly 90 major retailers that OPAL is currently connected with or in the process of connecting with for its customers, less than 10% actually REQUIRE the use of a 3rd party EDI Company in order to communicate with them – and this number is decreasing all the time as retailers add new connectivity options.  All others have alternative connections available such as API, FTP or AS2 which allows you to communicate with them directly. These are the methods that OPAL employs whenever a retailer allows it, and OPAL does not charge for this data translation and transmission which eliminates these 3rd party charges for Order Processing and Fulfillment.