Order Fulfillment and Effective Supply Chain operation is key to having a successful Dropshipping business.
What makes us who we are today? Our journey through life. In a slightly less philosophical association, a supply chain is the journey of a product – from the ideation stage to reaching the end customer as a finished product. The fulfillment process, on the other hand, is about how the order placed gets delivered and this is where dropshipping comes into the picture.
Let’s break down this complex concept into smaller parts.
What is Dropshipping?
It is an inventory-less ecommerce business model in which there are 3 parties involved: The seller, the customer and the dropshipping company.
When a customer places an order on the seller’s website, the seller notifies the dropshipping company about it who makes the product, packages it and gets it delivered. This means that the production happens only when an order is placed and the seller only has to manage the website and its marketing.
You can read more about Dropshipping here.
How Does Dropshipping Work?
A dropshipping model would look something like this:
- Customer places an order on the website
- Once the order is placed, seller informs drop shipper
- Drop shipper makes the product
- Product is packaged and delivered to end customer by drop shipper
- Payment is made by the end customer to seller which is cumulative of drop shipping charges as well as profit for the merchant.
You can read about its profitability in India here.
The Supply Chain for a Dropshipping Business Model
Manufacturers → Wholesalers → Retailers
Manufacturers are the ones who, as the word suggests, make the product. Right from the ideation stage to the final product stage, manufacturer looks after the production.
They don’t directly sell the product to the end customer instead they sell it to wholesalers and retailers who sell it to the customers.
If you are buying from a manufacturer, then the costs are comparatively lower but you will have to place a bulk order.
Wholesalers are the ones who buy in bulk from the manufacturers, might or might not make slight changes to the product and then sell them to retailers. They also have a minimum bulk order criteria but it is generally much lower than the manufacturer bulk order requirements.
Retailers purchase from the wholesalers and sell it directly to the end customer. It can be anyone who is selling (not necessarily fulfilling) and is in direct contact with their customers.
Dropshipping can come into this chain at any point because any of these parties can provide the services of dropshipping. It is an invisible helping hand that keeps the business going.
For example, if the manufacturer also provides dropshipping services, then the product will be made, packed and delivered by him under the brand name of the wholesaler/retailer.
Here, the original seller does not need to have a ready inventory at their business location.They are just outsourcing it from the dropshipping company.
The dropshipping company only stores the stock and ships it when there is an order placed.
What Is Supply Chain Management?
It is managing the supply chain process in a manner that it works effectively without any glitches or miscommunications. It is an intangible source (because management can’t be touched) more like a controller, that ensures the smooth functioning of the supply chain.
A lot of companies hire Supply Chain Management Professionals because they are operating on a huge scale and with expansion comes a lot of responsibility.
Why Is Supply Chain Management Important For Dropshippers?
With a pumping market expansion and merging of global boundaries, it is important to manage your supply chain process for a smooth business operation.
While it is an ideal option for inventory business models, it applies to dropshipping companies too. Without a disciplined supply chain management, the manufacturer would end up making too much or too less of the stock and if there is a problem in one part of the chain, everyone else is affected, including dropshipper.
Online dropshippers usually work with technology and customer relations so it is important for them to be aware of the stock requirements and be able to assess or predict market demand. The fulfillment of the order is everything that dropshipping aims for and hence a supply chain management is important.
Dropshipping business model would help a seller in terms of inventory storage, order fulfillment, packaging and of course, production. This can help an online seller be location-independent and focus heavily on the marketing and business development strategies. So, even though there is an invisible force existing in the supply chain (dropshipping), the white label services make it a credible one.