Drop shipping is the practice of retailers selling goods without actually keeping those goods in stock. Rather the retailer will pass each order that it takes further up the supply chain – normally to the wholesaler or the manufacturer who will then ship the product directly to the customer.
Drop shipping is by no means a new technique but it is a very useful one and is considered to be a fairly modern method of supply chain management.
Drop shipping has many advantages to all parties involved but primarily benefits the wholesalers and manufacturers by allowing them to massively expand the outlets available for their products. It also has a great benefit to the retailer in that they can supply a much larger range of goods without having the increased burden of holding expensive stock – which can cause problems not only in terms of cash flow but also physical space.
The difficulty with drop shipping is the far more complex stock management that comes along with it. For the wholesalers and manufacturers who have many dispersed outlets for the products it can be a very complex task keeping track of stock levels and ensuring that there is always enough products in stock to fulfil orders. For the retailers this could cause great problems if it were not the case – for example orders could be taken only to find out that the shipper further up the supply chain had ran out of stock.
Thanks to modern computer technologies this complex task of managing stock levels that result from complex and far spread supply chains is made easy. With the Octerpus development tools for example, a stock management system can easily be deployed across an unlimited number of locations regardless of where those location’s sit within the supply chain. With this distributed stock control system in place managing stock levels across all stages becomes a simple task and you can ensure stock levels are reported correctly to all parties in real time.
Cartoon Credits to Laughzilla! Blog post is written by DavidS356 Thank you both !— July 6, 2015