Drop Shipping: How to Manage Fulfillment
Recall from my previous posts that drop shipping requires three major data integrations between the retailer and the supplier: product catalog, inventory, and orders. It all culminates with fulfillment and shipment from the supplier to the end consumer. I’ve explained all of this — if you’re new to drop shipping — in my 4-part series on the basics, for ecommerce.
To recap the major data and workflow integrations, managing product catalog data starts with the premise that the seller-retailer has a virtual representation (i.e., data) of a physical thing — a physical thing that the retailer will never see, touch, or control. Product catalog is the collection of descriptive data — title, brand, category, attributes, images — of that physical thing.
Managing inventory visibility tells you where the item is, how many there are, and what it costs you as the reseller. Orders are where everything comes together, when a consumer has purchased a product that a retailer was selling virtually. The retailer must send that order and fulfillment information to the supplier, who will ship to the consumer.
The retailer must send that order and fulfillment information to the supplier, who will ship to the consumer.
Assuming all has gone well to this point with the other three data integrations (catalog, inventory, and orders), fulfillment is as simple as the supplier (or a supplier’s third-party fulfillment provider) boxing up an item and shipping it to the consumer.
Here’s the basic data that a supplier should provide back to a retailer after fulfillment of an order.
- po_number. The unique order identifier generated by the retailer’s ordering system.
- package_tracking_number. The tracking number of the package, as assigned by the carrier.
- line_item_sku. The SKU of the item that was shipped.
- line_item_quantity. The quantity that has shipped in this package.
- package_ship_cost. The cost to ship the package.
- package_ship_date. The date that the package was shipped.
- package_ship_carrier. The carrier that is shipping the package.
- package_ship_method. The shipment method for the package.
Of this data, if everything ships in one package the essential fields (to complete the order lifecycle and provide shipment information to the consumer) are po_number and package_tracking_number.
One of the key differences for both retailers and suppliers in the ecommerce drop-shipping chain — compared to the more traditional wholesale supply chain — is that customers expect the ability to track the physical product they’ve purchased until it’s delivered to them. That determines which shipping companies are appropriate for both the retailer and supplier.
The other dynamic of shipments involves the customer experience. Typically, a retailer should expect “blind drop shipping,” which means that the supplier will include a retailer-branded packing slip inside of the package and won’t otherwise refer to itself as the fulfiller except for the return address.
As a general rule, retailers shouldn’t assume that they can do more branding than this. Typical fulfillment-related branding items, such as boxes with a logo or marketing-promotional inserts, are possible only for retailers with enough size and volume to justify that amount of customization and cost.
Many of the factors around the fulfillment and shipment process are driven by the relationship between the retailer and supplier. These factors need to be identified, discussed, and coordinated at the onset of the relationship, rather than after the retailer receives an order.
Some of the things to consider at the onset of the supplier on-boarding process are as follows.
- Carriers and methods. What carriers (UPS, FedEx, USPS, DHL) and shipping methods (ground, 3-day, 2-day, overnight, priority overnight, priority mail) will the supplier support? This will determine what is available to the consumer at checkout. You can’t offer expedited shipping if your partners can’t support it.
- Average time to ship. Furthermore, if you offer overnight shipping but your partner takes two business days to actually ship the product, then you’re really offering 3-day shipping to the customer. Understanding a supplier’s fulfillment timing is critical. You can then match your order processing to that timeframe, so that if a supplier needs orders in by 3:00 p.m. to get shipments out that same day, you can set up your workflow of orders accordingly.
- Shipping restrictions. Does the supplier have restrictions on shipping? Will it ship all of its products to Alaska and Hawaii? Do certain oversize products (i.e., pianos) require trucking companies? Do they have certain large “ships alone” items (i.e., televisions) that cannot be combined into one shipment and one box? All of these need to be identified for each supplier, and potentially for each product, prior to offering to the consumer.
- Fees. Does the supplier charge extra fulfillment or drop shipment fees? Can the supplier provide per-item estimates on shipping costs? Does the supplier prefer using its own account with the shipping carriers, or will it use a retailer’s account? Increasingly, in my experience, suppliers have eliminated drop shipment fees and are willing to use shipping accounts of the retailer.
The drop-shipping retailers and suppliers that have the most success around fulfillment make these details a cornerstone of their partnership. Retailers should work to pick carrier-method combinations that are likely supported across all suppliers, for consistent options to their consumers. A quick poll of supported carriers and methods across a subset of your potential suppliers will help make that choice.
The current average shipping times for most suppliers would be that they need one full business day. If you send orders at 8:00 a.m., most suppliers will ship by the end of the next day. Depending on when the order is placed by the consumer and then delivered to the supplier, it could be about a 2-day lag in the consumer’s mind until there’s a tracking number. Many suppliers are better than this; many are worse.
As far as shipping charges, the most successful retailers understand several things.
- Consumers prefer simple shipping charges, based on price, typically.
- A high percentage of ecommerce orders are for single products.
- A simple shipping fee-cost strategy is best.
Fulfillment is the culmination of the entire drop-shipping process. If managed upfront with its suppliers, a retailer will be well on its way to fulfillment success.