Drop Ship – Manufacturers (also known as manufacturers drop shipping) can open new distribution channels for manufacturers, as well as distributors. However, it is a significant departure from large-scale, business-to-business/wholesale distribution.
Developing the necessary systems and procedures to run an efficient pick and pack operation needed for direct shipping from existing facilities with existing personnel can present challenges. Outsourcing drop shipping is another alternative that businesses frequently choose. Either way, consider the benefits of drop ship – manufacturers:
- By offering direct shipping retailers are provided an alternative to being either an affiliate or having a wholesale account. Retailers today would rather not invest in carrying large amounts of inventory or even the typical minimum order quantities.
- Affiliates are typically reluctant to make wholesale purchases because they frequently lack the necessary warehousing and fulfillment capabilities.
- Through the use of drop shipping businesses can make available a huge product catalog, expanding selling opportunities. With 80 percent of sales usually coming from 20 percent of products, few retailers would want or could afford to stock all the items in a truly deep and diverse product catalog. Through direct shipping businesses can capture those sales that they might not otherwise achieve.
- No matter if a company handles the fulfillment in-house or they outsource it to the third-party logistics firm, direct shipping gives more control of the distribution channel. Companies can define exclusive territories for retailers and more easily enforce those territories.
- Businesses can charge fees for providing the drop ship service.
Drop ship – manufacturers perfectly fits the “Just-in-Time” (JIT) approach to inventory management. The retailer has no inventory in stock and has zero inventory carrying costs. The retailer’s customers place orders and the retailer sends the orders to the manufacturer or distributor who ships the products to the customers directly. This approach to fulfillment is quite typical with e-commerce retailers both large and small, as well as catalog firms and other mail order companies.
Elements required to begin a manufacturers drop shipping program either internally or via an outsourced solution using a 3PL partner:
- Distribution center needs trained personnel, procedures and equipment to perform Pick/Pack/Ship a.k.a. Pick and Pack service.
- Businesses also need a system and procedures to handle returns.
- Packing teams will need boxes and packaging sized appropriately for direct-to-consumer shipping which can differ from what is needed for shipping larger B2B orders via LTL or TL.
- Shipping team will need options for overnight, next day, second day, ground (and possibly international) shipping via parcel carriers such as USPS, FedEx and UPS rather than freight services.
- Product catalogs will need to be in a dynamic format that can support electronic feeds. EDI is beneficial so that businesses, their retailers and the drop shippers have real-time visibility to product inventories.
FW Warehousing is headquartered in St. Louis, Missouri with Midwest warehouse distribution centers in Kansas City, Indianapolis and St. Louis totaling more than four million square feet. Founded in 1949 with a focus on food-grade storage, FW later broadened its services to include contract warehousing, dry storage, hazardous material and chemical storage, temperature-controlled storage, product distribution and B2B and B2C fulfillment.
FW Warehousing has more than 50 years of experience in third-party 3PL logistics and has been ranked in the top 100 Third Party Logistic Companies in the country by Inbound Logistics magazine.
For more information about the FW Warehousing 3PL capabilities such as drop ship – manufacturers, visit the FW Warehousing website.