Drop Shipping and the Supply Chain

It’s funny to think how rigid supply chains used to be. For example, before eCommerce, products followed a rigid path. First, manufacturers shipped to distributors. Then, distributors supplied wholesalers who sold to retailers. Finally, it reached the customer’s hands. These days, products don’t always follow that same path, thanks to drop shipping.

Drop Shipping: Sales without the Holding Costs

Retailers and eCommerce businesses place drop ship orders with their suppliers for products they do not hold in a warehouse. A customer buys the product from the retailer, which then places the order for that item with its supplier. Then, the supplier ships the order directly to the customer. In other words, with drop shipping, a company makes sales without the holding costs associated with inventory.

Increasing Popularity

Drop shipping seemed ready to “hit the mainstream” in 2017. Four out of 10 retailers expected to use drop ship vendors. Then an increase in demand for drop ship services hit 3PLs, raising prices on shipping. Why is it popular? First, it reduces the cost of carrying inventory, which suits pure-play eCommerce companies. Secondly, it allows retailers of all kinds to sell, again without the associated cost. And lastly, it opens doors for suppliers to reach more customers.

Manage All Fulfillment

Strictly speaking, drop shipping happens outside your supply chain. That’s because when you drop ship, you don’t buy the product or enter it as your own inventory. Nevertheless, as a part of your business, you need to track drop shipped orders. Cin7 gives retailers the ability to process drop ship orders and integrates with Amazon Dropship.