Retailers must offer the lowest cost of order processed compared to their competition. It’s an imperative and we see it permeating the market all the time in different ways: Walmart’s acquisition of Jet.com to improve its speed and agility, Sears removing the cost barrier of mandating CommerceHub as the EDI portal that its suppliers must use to work with them, and the list goes on.
A big part of achieving this goal for retailers is migrating their suppliers into a drop ship e-commerce model. After all, retailers don’t need to spend a single penny when utilizing drop shipping – it’s an extremely convenient transaction for them. Retailers simply ask the customer to fill out an order form and then submit it to their suppliers for sorting and fulfillment. And lastly, but critically important, retailers don’t have to worry about having a large warehouse to store products.
There are drop shipping advantages for the supplier of course, but it also creates a number of obstacles that can be very difficult to overcome:
- A dramatic increase in order volume and the speed in which they must be processed
- The additional cost of processing all of those additional orders can seriously impact profitability
- Often, there’s lost revenue opportunity due to limited order processing capacity
- And, it’s very difficult to maintain the correct inventory presentation across many retailers which can lead to underselling or overselling.
All of this can impact your key business metrics in the areas of:
- Profitability per SKU
- Number of customer complaints
- Number of delayed shipments
- Number of cancelled orders
- Inventory accuracy
- AND COST PER ORDER.
There are a number of perennial solutions to these issues such as ERP systems and / or third-part supply chain management companies like SPS Commerce or CommerceHub. Unfortunately, all of these solutions still require trained staff to manage the process AND cuts into your product profitability when drop shipping.
What’s needed is an extension to an ERP’s order processing capability so that you can truly automate order processing, sales orders, invoicing, inventory tracking and connect directly with your retailers and e-tailers without EDI translation and transmission fees and the need for trained order processing personnel.