Drop shipping is an increasingly popular supply chain management practice. Retailers can offer their customers an endless aisle without adding the extra costs associated with holding inventory, as a third party ships packages directly to the customer. However, there are some risks associated with drop shipping. Backordering can occur if the wholesaler is sold out of a product and neglects to update the retailer. Another problem with drop shipping is if the process is not automated, you are adding costs and potential headaches.
A manual drop ship process involves the sending of a customer order via email, fax, or phone to a wholesaler, manufacturer or distributor. The order is then picked, packed, and shipped directly to the customer. The 3rd party supplier will also send an invoice and tracking information to the retailer. The retailer then sends an email with tracking information to the customer. While this method is manageable, it leaves the door open for errors and lost time.
Automating your drop ship process is the perfect solution to eliminate any drop ship risks. Choosing to use an EDI provider and integration hub will automate your drop ship process. By integrating directly with trading partners, EDI documents can flow effortlessly. Because EDI eliminates the need for data entry, the risk of human errors from re-keying is eliminated. Sending an EDI 846 document, the replacement of a paper inventory update, ensures that inventory levels are up to date, which reduces the risk of backordering. By eliminating confusion, retailers and suppliers can share a better business relationship. Automating your drop ship process allows orders to be processed quickly, which leads to a happy customer. The automation of the drop ship process also involves integrating your internal systems. Utilizing an integration hub can connect shopping carts (Magento), ERP systems (Dynamics GP), order and inventory management (M.O.M.), and accounting software, like QuickBooks. When these systems are connected, information flows between them automatically, eliminating the need for you to manually update and re-key information in each system. The seamless flow of information between these systems saves time and eliminates human error.