Retailers and suppliers both believe they’re benefiting from the practice of drop shipping online orders, according to a study from Lehigh University. Manufacturers, however, have struggled more at adapting to the needs of the practice due to the costs and complexities involved.
For retailers, linked systems and collaboration were found to help resolve issues such as quality control and returns, according to a study on behalf of DiCentral, a provider of supply chain integration services.
For suppliers, however, challenges include:
- Cost: In most cases, suppliers are asked to incur the expenses for direct-to-consumer fulfillment.
- Single-order fulfillment execution: Suppliers that have traditionally optimized order management and logistics around bulk replenishment to a handful of retailers are finding selling thousands of individual units, each with its own order and parcel post shipment, increases operational overhead without any increase in sales. Suppliers are also tasked with more order management, inventory and fulfillment responsibility.
- Retailers have the upper-hand: Retailers in the study were found to be “still setting the rules” with drop ships, including determining what information is needed, the sequence of events, frequency of transmissions, articles of data needed and treatment of orders. Individual retailers may each have different sets of rules that also add complexities.