What exactly is dropshipping? This fulfillment model by which a store can offer a product that is shipped directly from a supplier to the purchaser is a compelling way for retailers or distributors to expand market reach. To fully leverage the benefits of dropshipping, however, retailers and distributors need the correct visibility tools in place to capture statuses and provide actionable insight in real-time. Let’s explore the best practices of successful drop-shippers.
Carefully select suppliers
Suppliers will become the foundation of your dropshipping business, so selecting trustworthy, efficient suppliers is important to the success of your online store. Not all suppliers make good partners. To protect against fraudulent suppliers or other questionable practices, watch for red flags such as:
- Subscription fee requirements
- Slow to communicate or respond
- Operating a retail establishment alongside dropshipping
- Requiring bulk orders in advance
Look for multiple reliable suppliers and check each of these carefully so that you can identify the supplier who should receive the bulk of your orders. With this approach, you’ll diversify your risk and could potentially minimize downtime.
Avoid relying on just one supplier. Hot-selling products can quickly run out of stock and suppliers may not be able to keep up with your growth. The pandemic highlighted this issue; some suppliers were experiencing 500-percent increases in order volumes and hit out of stock quickly.
Wherever possible try to have a category partner for every product that you sell. Even though you know that Supplier A could fulfill all your orders, split orders with other suppliers to serve as a backup in case of stocks or supplier failure.
Even the best suppliers can run out of stock – this happens often in dropshipping, especially when you are selling popular products. Your supplier should keep you updated when there are manufacturing or supply chain problems, but it’s your responsibility to ensure that your customers are able to receive their products. Dropshipping relies on the relationship that exists between a seller and a supplier!
Take charge of the fulfillment process
Choose milestones that can be used as control points during the fulfillment process. Recommended dropshipping milestones include:
- Customer order date and promised delivery timeframe
- Order acknowledgment
- Order confirmation
- Manufacture/critical material status
- Advance Shipment Notice (ASN)
- Out for delivery
- Proof of Delivery (POD)
Implement actionable and periodic performance reporting to control the drop-shipping process. Actionable reporting focuses on exceptions and critical statuses and should be exception-based to allow resources to focus on the items that need attention.
Set supplier status updates to the “clock speed” of the order life cycle. It’s important to understand that faster- and slower-moving goods can have different clock speeds.
Insist on comprehensive proof of delivery that includes electronic signatures and pictures. This helps minimize customer claims and confirms that suppliers are getting the job done correctly and consistently.
Confirm that the supplier has a concrete delivery program. Be sure to evaluate the manufacturer’s or its LSP’s driver retention, training, and technology capabilities to make sure they can consistently deliver, and electronically document, at the level commensurate with the customer service strategy.
Quickly share information with suppliers, the customer service organization, and customers. For complex goods and especially those with long lead times, the “where is my order” question comes up often. There is no reason not to automate this process and turn it into a value-added service for customers, as opposed to a potential frustration.
Use technology to automate and disseminate. Two big challenges are collecting data and data quality. Logistics networks are built for automating this work because drop shipping is a multi-party process and networks operate in real-time. Implement a supply chain visibility solution that can model the milestones and has the flexibility to change as more is learned about the drop-ship supply chain. Visibility solutions effectively link the statuses of the lifecycle of order and provide the basis for reporting. Because data sharing across all parties is a requirement for success, chose cloud-based solutions to establish real-time visibility into drop-ship activities.
Visit our DropShip page for more information or to schedule a demo.