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The necessary digitization of dropshipping
By Christophe Viry
on 03 Sep 2019 9:16 AM

With online commerce expanding as well as B2B marketplaces, dropshipping lets e-commerces stay in the race and maintain direct relations with their customers. 

This collaborative process involves industrial partners, distributors and logisticians and it isn’t anything new. Around 20 years ago, companies like La Redoute or 3 Suisses that take orders online were already launching services such as '24 heures chez vous' that applied mainly to cumbersome articles for which storage was expensive (mattresses, furniture, electronics, and more!).

Today, dropshipping presents other issues. That means saving on logistics costs and seeking out a rapid ROI while also meeting strategic challenges such as company continuity, expansion, contact with customers and maintenance of a non-depreciated offer value by marketplace integration.

Dropshipping during an era of e-commerce implies a number of reference and suppliers that is much greater with major implications with respect to collaboration, sales volumes, synchronization of players and operational costs. In this context, what challenges are there for distributors? We go through the current perspectives of dropshipment and the advantages of associating it with an overall collaborative approach.

 

Dropshipping back and stronger than ever in the e-commerce sector

Unlike a traditional model, dropshipping lets distributors sell clients products that they do not hold in stock. That way, orders can be prepared and sent by a supplier who ships said product directly to the end client. The distributor can either take care of delivery directly or entrust it to a service provider. It does, however, remain responsible for managing stock until client shipment is launched. 

There do exist several variants depending on individual distributor and industrial player. These rely on a push or pull logistics system that determines whether or not it is necessary to manage stock and transportation.

This direct delivery to client model is a transformation of a concept already present in remote sales and known as the DFO process (in French, Départ FOurnisseur, or supplier departure). It is a marketing approach whose logistics model has entered the limelight through e-commerce.

 

For further reading: Dropshipping: Expand your Catalog without all the Hassles of Logistics! 

 

With this model, it is necessary for distributors to have a rock solid interface with suppliers to streamline and manage operation processing. That means being able to easily transmit orders to an industrial partner and coordinate actions from various categories of industry players, such as producers, logistics experts, transporters, and service providers.

 

Integrating dropshipping with vendor portals

Using dropshipping, e-commerce offerings can be meliorated online in order to keep clients on-site as long as possible. That way, they can improve their referencing, product ranges, and business activity, which often leads to a stark increase in the number of references and suppliers to administer. It can be common for sites to move up from 10,000 to dozens of thousands of references relying on hundreds of suppliers.

To prevent management costs from skyrocketing and enable synchronization between the many parties involved, digitization as a process is ever more necessary when an increasing number of orders is coupled with a reduced average cart amount. The most obvious solution in this case is to integrate a dropshipment process with all procedures and supplier relation digitization platforms.

Dropshipping is a process that naturally extends out from a Purchase to Pay portal with an already digitized 'stored goods' supplier relation landscape. Aside from standard management of product referencing, orders, deliveries, and invoices, the system lets distributors include a relation built between suppliers as well as logistics suppliers, transporters, and service providers (fitters, for instance) and end B2B or B2C customers. 

 

On the same topic: 7 Ways to Boost Sales Using a Supplier Portal

 

Automatization of procedures and RPAs

By integrating a dropshipment process with a collaborative platform, distributors can automate operations which were previously manual and costly: These tasks may include collecting product information, maintaining it, providing up-to-date supplier stock, transmitting orders, and digitizing inbound invoices. In this case, multiple management rules are implemented and applying them will automatically trigger various operations: This is referred to as RPA or Robotic Process Automation. The goal: inform customers about order status, validate supplier invoices, and more. Integrating dropshipping features in a supplier portal also lets distributors automatically launch some invoicing or payment operations as soon as they have obtained the necessary supporting documents from the portal, for example confirmation of delivery to a customer.

 

Guaranteeing continued traceability of an order 

Once an order has been placed by a client and transmitted to a supplier, multiple logistics scenarios are possible: some examples include direct delivery by a supplier via a transportation partner or collection of goods by a distributor marketing a pooled logistics service. Whatever workflow is selected and regardless of the number of parties involved, the requirement remains to ensure order traceability and continued supply of information to the client.

 

To go even further: 3PL: Transportation of the Future – a Pooled Resource

 

This requirement means gradual digitization of all parties involved so that all operations and transactions can be tracked. Information will then be consolidated via several online traceability, or track and trace, solutions which address several audiences: distributors who manage processes, clients who inform about processing and delivery of orders, and providers who wish to remain informed about the status of shipped goods.

 

Holding on to clients and increasing market share

Offering a wide range of express delivery products and services has become an essential issue for e-commerce companies... Dropshipment projects are not mainly driven by cost-cutting or ROI intentions, but rather by much more strategic interests: ensuring company durability and expansion, client contact, and brand development alongside an undepreciable value offering through integration in a global marketplace.

 

The need or opportunity to build new Supply Chain services

It has become indispensable to ensure expansion or an e-commerce site, offer a wide range of express delivery products and services, even for highly specialized retailers. This requires a redesign of the Supply Chain and construction of new services in order to operate the new model in a profitable manner, with extremely high levels of service.

For distributors, dropshipping has become an opportunity to sell logistics services to providers (storage, consignment, transportation) using a pooled model (pooling, multipick) that offers major money-saving measures and an additional source of income. Indeed, industrial operators are often of modest size, and lack the critical size or volumes needed to ensure logistics or transportation services for meeting emerging service and price rates.

To ensure the success of this initiative, distributors must design and offer providers new types of collaboration via Amazon’s tried and true business model.

 

Distributors are today faced with emerging issues that are not to be scoffed at. These affect the Supply Chain with regard to connectivity, agility, performance, and data processing. This presents a need to move towards a collaborative, integrated Supply Chain and master all current issues: Omnichannel OMS, extension of the logistics segment, optimization of transportation, last-mile organization, and more.

Christophe Viry

Expert in EDI, Software integration, e-invoicing…