9 tips: How to take control of your drop shipping supply chain
As drop shippers don’t handle the actual products they sell, they have no direct control over how the products get to customers. But with lack of control, what is important supply chain focuses, how do drop shippers keep a sustainable freight economy and ensure an excellent delivery experience?
Drop shipping is when a retailer or an online shop does not keep the products it sells in stock but instead transfers the customer orders and shipment details to either the manufacturer or another supplier, who then ships the goods directly to the customer, on behalf of the retailer/online shop.
This method has become popular, as a business can be started rather quickly as you don’t have to invest in a warehouse or goods to start selling products. However, as fulfillment is the be-all, end-all of a business and drop shippers have no direct control over this process, there is an extensive coordination work and supply chain management skills that need to be adapted in order to succeed with a drop shipping strategy.
Drop shipping expert, Rasmus Darre from software company Consignor, has gathered this list of 9 things that you need to be aware of in your drop shipping supply chain.
1. Use reliable suppliers
Pick your suppliers carefully and build a good relation to them, as they will be working and delivering for your brand and business. Let them know how you want the delivery experience, so it will be aligned to your standards. Even though you are not the actual sender of the online order, your customer will think that you are. If your suppliers fail to create a good delivery experience for your customer, you will be the
one who suffers, as that customer most likely will not buy anything from you again.
2. Know the stock status
You must know the exact stock status of the products you sell at your different suppliers in order to fulfill orders and keep your customers informed if items are out of stock. If you don’t know the stock status, this will cause a lot of extra work for you, as you have to contact your suppliers in order to get to know the stock and know when a product will be in stock again. You have to update your website, if a product is out of stock. Finally, you have to inform your customers with the unpleasant message that their order will be delayed, as it is not in stock.
3. Keep up with products and prices
Make sure that you know if there has been made changes to the products you sell and the prices you sell at, so you don’t get an unpleasant surprise.
4. Track orders
You need to have an answer ready if your customers ask, “Where is my parcel?”, so you and your customers need to be able to track the status of their online order. The best thing is to be proactive, so your customer does not have to contact you to track their order. By sending a tracking link and automated notifications to your customers about the status of their order, keeps them informed and reliefs you of extra work.
5. Clear responsibility agreement
You need to have a clear responsibility agreement between you, your supplier and carrier if shipments are delayed, damaged or missing. Who will cover the costs? Good relations and cooperation are important, but legal agreement like financial responsibility is nice to have in place the day you need it.
Read more: Incoterms define the roles between seller and buyer in a transport and delivery transaction
6. Negotiate freight rates
Who pays for shipping the order from supplier to customer? You or the supplier? If it is you, make sure to negotiate favorable freight rates with the carrier. Freight costs represents on average 6% of a company’s expenses. This is a lot and every penny you pay too much for freight goes directly from your bottom line, why it’s important to negotiate favorable freight rates.
7. Setup a shipping procedure
Make sure that you have a shipping procedure when fulfilling an order from multiple suppliers. Consider which delivery experience you want to give your customers. Will you gather the different products at a hub or at yourself, or should the products arrive separately to your customer?
8. Cover all freight costs on orders with multiple suppliers
Make sure that you have a plan on how to cover freight costs when fulfilling an order from multiple suppliers. It can quickly get complex if you use multiple suppliers and freight costs can get out of control fast, if you do not have a plan for how to cover these costs.
9. Setup a returns procedure
As a drop shipper, you will be the receiver of returned products from your customers. And from here you’ll need to have a procedure for what you do with the returned products, resell from your place or send back to the supplier?
When nailing these 9 things, you will have a solid foundation for your drop shipping supply chain and you can use your time to concentrate on selling, marketing, and taking care of customers.