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?

Touchless Drop Ship Order Automation. Is That for Real?

Every business must deliver product on time at the lowest possible cost and remain profitable.  However, to do that 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.

Many e-commerce businesses tackle this challenge by chaining multiple software systems together, like an E-Commerce Site, an ERP System, a 3rd Party Shipping System, and an EDI Translation / Transmission solution.  The only issue is that this still requires some degree of human intervention, the parts don’t always work well together and, consequently, they don’t provide the significant cost and error reduction that’s needed for optimum profitability.  

Now imagine if you could process a drop ship order in 8 seconds or less? By this, I mean can you 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?

Oh, and what about EDI? How about handling all of that WITHOUT ANY EDI DOCUMENT COST from an EDI Service Provider?

IN LESS THAN 8 SECONDS, OPAL automates receiving orders from retailers and e-tailers, manages all EDI transactions, processes and invoices orders through your 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.

Additionally, OPAL takes advantage of the direct EDI links provided by retailers and e-tailers enabling you to process an order with $0 cost for EDI documents.  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.

The first big part of successfully achieving profitability focuses on a dramatic reduction in order processing time, order processing cost and order errors.  The second big part is eliminating the cost of EDI in working with your trading partners. OPAL does just that for you.

Is Drop Shipping “Stealing Your Lunch Money”?

Are you a manufacturer / supplier, drop shipping 50 or more orders per day directly to consumers?  Is each order costing you more than 72 cents including EDI and labor cost?  Do you use EDI vendors for data transmission?  Is your order processing capacity limited by your number of staff and the hours in a day?  Do you need to add more staff?  Are manual touches required to process those drop ship orders?

We all know that drop shipping is challenging.  It dramatically increases not only the volume of orders to be processed, but also the speed in which they need to be processed.  The additional cost of processing drop ship orders cuts deeply into profits and revenue is lost to limited order processing capacity.  And, if you are selling to multiple e-commerce platforms, incorrect inventory presentation can lead to under or over selling of product.

If you are like most manufacturers / suppliers, all of this leads to:

•  Lower profitability per SKU,

•  Increased chargebacks,

•  A negative scorecard,

•  Increases in customer complaints,

•  Increases in the number of delayed shipments,

•  Increases in the number of cancelled orders,

•  Difficult inventory tracking and accuracy,

•  And, increases in your processing cost per order.

In 2014, Primetime Petz, a manufacturer / supplier for the pet industry, was frustrated with drop ship order processing: it was taking too long, they were re-keying data, preparing a manual shipping label, downloading the packing slip, manually updating inventory and so on.  Through this pain, OPAL was created as a drop ship platform providing the highest efficiency and lowest cost for suppliers when working with their retail and e-tail customers.

It is the first smart platform that has expanded order processing automation beyond any existing order processing capabilities in the industry.  While the most common companies in this market are EDI providers, they simply cannot adapt to the OPAL model because it is detrimental to their revenue stream.

In short, OPAL makes drop shipping viable, manageable and profitable for manufacturers / suppliers, it eliminates the need for dedicated order processing staff, eliminates EDI data transmission cost, makes order processing capacity unlimited and works for you 24×365.

Why Business SHOULD be More Profitable

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?

Many e-commerce businesses tackle this challenge by chaining multiple software systems together, like an E-Commerce Site, an ERP System, a 3rd Party Shipping System, and an EDI Translation / Transmission solution.  The only issue is that this still requires some degree of human intervention, the parts don’t always work well together and, consequently, they don’t provide the significant cost and error reduction that’s needed for optimum profitability.  

On the other hand, OPAL is an intelligent, self-driving drop ship and large order fulfillment software solution that plugs into these existing software investments 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 EDI transactions, 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.

Additionally, OPAL takes advantage of the direct EDI 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 (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. 

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?

Drop Shipping Costs versus Bulk Shipping Costs – They Should Be Similar

Wise financial managers have long resisted entering the drop ship business.  After all, it’s much more profitable to process a large LTL, truckload or container order than it is to process one order, one item at a time.  The economies of scale are enormous in bulk shipping!  Let’s take one example of bulk shipping versus drop shipping:

                              Bulk Shipping                                           Drop Shipping

                        1 order worth $40,000                           2,000 orders worth $20 each

                    Order Processing Cost of $4                Order Processing Cost of $4 each

                      Shipping Time of 2 Weeks                           Shipping Time of 2 Days

                    1 Clerk, 1 PC and 1 Desk                           8 Clerks, 8 PCs and 8 Desks

                    2+ EDI Transaction Charges              4,000+ EDI Transaction Charges

It’s pretty clear that Bulk Shipping is more profitable, right?  But does it have to be?  Not really.  What if drop shipping looked like this, instead?

                                                                     Drop Shipping with OPAL

                                                                   2,000 orders worth $20 each

                                                         Order Processing Cost of 40 cents each

                                                                     Shipping Time of 2 days

                                                                   1 Clerk, 1 PC and 1 Desk

                                                                 Zero EDI Transaction Charges

Makes a pretty substantial difference don’t you think?  And it certainly opens up a lot of new markets for your products.  But what about 3PL picking and packing costs?  Certainly these would increase when drop shipping wouldn’t they?  After all there’s more handling.  Potentially, but these can be overcome as well.  When using a 3PL, all successful drop ship suppliers have renegotiated pick and packing charges with their warehouse provider.  In addition, they often eliminate the cost of their 3PL’s Warehouse Management System by providing them with the Picklist, Packing Slips and Shipping Labels that are needed for processing, simplifying the process and reducing the cost.    

This is what OPAL gives you:  1) Efficiency – process a drop ship order in less than 8 seconds without touching a keyboard, 24 hours per day, 7 days per week, 2) Simplicity in warehouse management, providing your 3PL(s) with pick lists, customized 3rd party shipping labels and packing slips at their fingertips, and 3) No EDI Charges – execute all of your EDI transactions without manual intervention or transaction cost.

Why Big Retailers Want You to Drop Ship – and Why It’s a Good Thing

You know that big box retailers like Walmart, Sears, Target, Kohl’s, Kmart, etc., etc. are expanding their presence in the e-commerce world as a means to compete more effectively against more agile e-retailers.  So what advantages do big retailers really get out of making you drop ship?

First, no cost. Retailers don’t need to spend a single extra penny when utilizing drop shipping. All they need to do is get permission to resell your products. 

Second, convenient transactions. Retailers ask the customer to fill out an order form and then submit it to you for sorting and fulfillment. The money will be sent to the retailer who in turn pays you, the supplier. 

Third, abundance of suppliers. Retailers can opt to have as many suppliers as they desire and they don’t have to limit themselves to only one brand. 

Fourth, free storage. With drop shipping, retailers don’t have to worry about having a large warehouse to store products. All they need is a constant connection with prospective customers and, of course, to suppliers for price and availability updates.  

Fifth, effortlessness. Drop shipping is effortless. The retailer does not have to lift a finger or put any extra effort towards handling items. All they need to do is convince their audience to purchase their products. 

While this is great for retailers, there are also advantages to the suppliers working with them as drop ship vendors (DSV).

One of the biggest advantages is your risk as a supplier can be spread across MANY retailers as opposed to big box programs that can end without notice at any time leaving you with unsold inventory and a huge financial loss.

Another advantage is better margins.  In typical big box brick and mortar fulfillment you can get beat down on price with the expectation of making it up in volume.  Unfortunately, that rarely if ever happens – you end up taking lower margins due to allowances.

Lastly, online shopping is a powerful and lucrative force that allows you to be agile and react quickly to market demands, to observe changes and gain a better sense of real-time demand for product making inventory forecasting easier.

Yes, there are still the challenges of managing the internal cost components and complexities of a small drop ship order as compared to a much more lucrative and relatively simple pallet shipment.  However, there are inexpensive tools that drive errors and most of this cost out of the order process.  One example is OPAL. In less than 8 seconds, OPAL automates receiving an order from a retailer, manages all EDI transactions without the cost of a 3rd party EDI provider, processes and invoices the order through your ERP and accounting system, and creates a packing slip and custom branded 3rd party shipping label per any retailer’s requirement.  Once the order is shipped, OPAL also sends back tracking information and the invoice to the retailer, as well as tracking the package and sending inventory updates to the retailer.  So you really can reap the rewards of being a drop shipper vendor.