Retailers with dropship need to improve supply chain visibility

Adopting dropship to reduce costs is well established. However, a better understanding of how the dropship supply chain is performing is critical to ensuring value is maintained. Using near-immediate sales and stock reports provides businesses with the information necessary to optimise their supply chain.

However, many retailers with a dropship operation are missing this opportunity to analyse the performance data of their dropship partners. This results in significant lost revenue for organisations that have not incorporated this into their supply chain performance measurement.

This blog demonstrates how dropship retailers could gain greater supply chain visibility and control over their dropship operations with automated data feeds and advanced reporting. Our insightful client case study included below, also offers some staggering statistics of the savings that can be achieved with EDI for dropship.

The ongoing tension between reducing costs and delivering value to customers has led many retailers to adopt dropship. This offers immediate savings and addresses many retailers’ changing business needs to maintain their market share. Including;

A retail business can operate multiple sales channels, this can include both dropshipping and eCommerce.

In fact, dropship can sit under the umbrella of eCommerce sales. This is because dropship is a form of order fulfilment. It puts the responsibility of the pick, pack and delivery of goods on a third party (such as the product manufacturer), rather than the retailer that makes the sale. A retailer can operate a dropship operation via their eCommerce sales channel, alongside a Direct to Consumer (D2C) operation.

eCommerce is defined as sales/orders that are made in an online environment, such as an online marketplace (e.g. Amazon or Wayfair) or on a brand’s own website.

Dropship, or dropshipping (these terms are used interchangeably), encompasses the delegation of order fulfilment and stock management from the retailer to the product manufacturer.

The obvious reasons why dropship is so popular amongst retailers is that it offers the optimised use of storage space, improved stock management and logistical cost savings.

However, a key challenge retailers are facing is the increased consumer demand for timely delivery (e.g. same-day and next-day delivery). This places pressure on both the retailer and dropship partner to meet consumer expectations and maintain brand reputation.

The issue here is that retailers operating dropship have limited to no supply chain visibility to show stock availability and order status across their dropship network. Therefore, being able to see supply chain data such as sales, stock, and shipping status from dropship partners provides retailers with improved supply chain performance measurement. Analytics in supply chain data such as the examples given allows retailers to take actions which mitigate the risk of unfulfilled orders and missed sales opportunities.

At Transalis, we have provided retailers and suppliers with automated EDI solutions that can process and feed critical business data directly into internal business systems. Sales, stock levels, and shipping status information from dropship vendors are processed and pushed directly into the ERP and other tools for analysis. The infographic below outlines this data flow facilitated by EDI.

With greater supply chain visibility, dropship retailers and suppliers can monitor their network performance, analyse progress and minimise unfulfilled or delayed orders in the following ways:

One of our clients, a UK retailer, had been trying to investigate the reasons behind abandoned shopping carts across a large number of manufacturers’ products.

In this case, Transalis implemented a solution that harnessed a wider set of EDI messages. This included sales and stock reporting. The sales data was automatically processed and communicated between the dropship vendors and the client’s own internal business systems. This gave both the client and the vendor a complete and near-immediate overview of the availability of products. This reporting resulted in some startling findings!

Ultimately, the inability to fulfil orders leads to customers switching to other retailers. This is far more significant in terms of the impact on brand value and customer loyalty beyond lost revenue. However, with the solution provided by Transalis, the retailer was able to identify the underperformance of their dropship partners. This in turn allowed for the setting of key KPIs for ongoing performance monitoring. Furthermore, the retailer was able to react with more agility by switching over to other dropship partners and source product according to the consumer demand.

Sales reporting, such as described in the above example, is a standard feature of both Transalis eDI™ Connect and Transalis eDI™ Connect+. Our transparently priced bundled EDI solutions are banded to suit differing business needs, from those just starting out, to organisations with large and complex networks.