With drop-ship, after a consumer places an order on a retailer’s website, the retailer generates and sends a corresponding order directly to the supplier for fulfillment. The supplier then ships directly to the consumer from their warehouse. Some retailers even provide the suppliers with custom-branded packaging materials to create an appearance of the package being shipped directly from the retailer.
So, how does the ASN help this process? The challenge with the drop-ship process is visibility. The retailer lacks visibility into when the product has been shipped and where it is in transit. There are times – e.g. during gift-giving holidays and other peak periods – when some packages will inevitably be improperly labeled, incorrectly routed or even lost. The ASN from the supplier to the retailer provides key information about the consumer’s order, such as the transportation carrier, point of origin, expected arrival date, package dimensions, content weight and the shipment tracking identifier. Once received from the supplier, the ASN data can be stored in the retailer’s system along with the consumer’s order. The shipment information is then be displayed on the retailer’s website or available to customer service personnel in the call center. Either way, all the consumer’s questions about the status of the delivery can be answered accurately and quickly using either information directly from the ASN or using the shipment tracking identifier to find out where it is in transit.
Benefits of Drop-Shipping
Drop-Shipping is a win/win for both the consumer and the retailer.
Consumers benefit from:
- Faster order receipt – Drop-shipped orders are shipped directly from the vendor’s warehouse. Otherwise, the shipment would be shipped first to the retailer’s distribution center and then to the consumer, adding days to the process.
- Lower cost – By eliminating the need to ship to the retailer’s distribution center first, shipping costs to the consumer are lower – only one carrier is needed and fewer warehouse personnel are involved.
Retailers benefit from:
- Reduced warehouse costs– The retailer doesn’t need to hold as much inventory in its distribution center. This is especially useful for infrequently ordered products that are not cost-effective for a retailer to stock; expensive products that could be costly to stock in any significant volume; high turn-over products that may be challenging to keep in stock; time-sensitive products that need to be transported as quickly as possible.
- Better customer service – Faster ship times and home-delivery options increase customer satisfaction.
- Increased response and flexibility – Enables rapid expansion and modifications to product offerings without tying up capital in inventory, resulting in a more agile business.
The Drop-Shipping Process
While most of us have had products drop-shipped after a purchase, let’s review the typical process, including the electronic documents that must be exchanged.
First, the consumer orders an item from a retailer’s website, store, or phone center. The retailer then generates and sends a corresponding purchase order to the supplier, including all pertinent address information. Next, the supplier fills the order, including all required paperwork, such as special packing list forms and return label. The supplier affixes a bar code label to the package, ships the package to the consumer and sends an invoice and ASN to the retailer prior to the receipt of goods at the consumer. The ASN includes the carrier tracking number as well as other drop-ship information. Finally, the retailer notifies the consumer of the shipment, usually via email, and provides the tracking number of the shipper (e.g. UPS, Fedex, DHL). The consumer can then link to the shipper’s site for additional status updates as needed. The consumer receives the goods and the carrier updates the shipment status as “delivered”.
So, how do you optimize ASN’s and drop-shipping?
- Electronic Document Exchange – Enable 100% of suppliers to receive electronic purchase orders, change orders and remittance information in their required format. Likewise, enable them to send electronic acknowledgments, invoices and inventory updates. Large suppliers may be enabled via traditional EDI, while Small and Medium-size businesses may be enabled using other technologies, like web forms.
- Advance Ship Notice (ASN) and Barcode Labels – Enable 100% of suppliers with the capabilities to send ASNs via EDI or web forms. Look for solutions that also allow you to generate and print the barcode labels for shipments.
- Data Quality Management – The ASN is one of the most complex supply-chain EDI transactions, so look for a service that automatically validates data according to standard rules as well as your business-specific business rules. Furthermore, your solution should provide automated cross-document comparisons to ensure that any data that is common across documents are accurate and complete – e.g. that the order quantity on the order matches the quantity shipped on the ship notice (as well as the quantity billed on the invoice). This eliminates the time and resources required to do manual matching.
- Exception Management – When exceptions occur in the drop-ship process, it’s critical that the appropriate personnel are notified so they can take immediate action before consumers are impacted. Look for a service that monitors the flow of data 24×7 and sends event-based notifications to the right people at the right time. This enables you to concentrate on only those issues that need attention, eliminating crisis management mode.
Click here to learn more about how Drop-Shipping fits into a seamless omnichannel experience, both within the enterprise and for consumers.