Improve Warehouse Drop Shipping for 3PL and other Logistics Providers

When 3PLs and other logistics providers offer drop shipping services, they’re expected to have the ability to automate tracking codes for both the retailer and supplier. As a full-service EDI provider, we help you deliver the eCommerce track and trace abilities your retail chain expects. Learn how drop shipping for 3PL works, how to get started and what benefits your business can expect.

Automate your drop ship EDI

Looking for a dropship partner?

What is drop shipping?

drop ship

Verb (used with object), drop-shipped, drop-shipping.

To send purchased goods directly from the vendor or manufacturer to a customer or retailer with no intermediate distributor, but billed through a third party.

How warehouse drop shipping works:

Drop ship is a fulfillment model that ships products directly to the consumer on behalf of the retailer.

When a 3PL is in the mix, drop shipping works like this:

Retailers will set up items on their website with the help of the vendor
The vendor provides ongoing inventory level information, though some 3PLs assist with this process when they’re part of the drop shipping process
Consumer places order with retailer
The retailer places order with the vendor
The vendor conveys the order to the third-party logistics provider
The 3PL provider ships to the consumer on the vendor’s behalf
The 3PL keeps the retailer updated with continuous order/shipment information
The retailer provides the consumer with continuous order/shipment information

Benefits of drop shipping for 3PL, 4PL and other logistics providers:

Drop shipping is a ripe opportunity for third-party logistics providers to better support their retail and supplier trading partners while maximizing the potential for profitable collaborative relationships.

Make money on single-parcel units.

Sending inventory parcel-by-parcel is more resource intensive, but retailers are also willing to pay a premium on it.

Appeal to more trading partners.

More retailers and suppliers are looking for 3PLs to help them satisfy customers with an eCommerce track and trace option.

Unlock possibilities with existing partners.

It’s likely retailers you work with already are seeking drop-ship-capable third-party logistics companies.

Improve customer loyalty.

When you’re able to ship full-load, partial loads and parcel-by-parcel in the form of drop shipping, your partners are more likely to stick with you.

You’re probably already halfway there.

3PLs are already in a position to help get products from point A to point B, from the supplier to the retailer or directly to the consumer.

New product testing.

Help retailers and suppliers test new products. Selling a product online only with drop shipping quickly lets retailers and suppliers know whether or not it is performing.

What EDI documents do I need to exchange to make drop ship possible?

EDI is the fuel and foundation for a healthy drop ship operation. Listed below are the most common transaction documents for drop ship.

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832 (Item/Catalog)

Used to obtain product information and load to the item master file for new items, item updates or discontinued product notification.

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850 (Purchase Order)

Used in drop ship for ordering products to be shipped from a vendor/supplier.

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855 (Purchase Order Acknowledgment)

Used by suppliers to acknowledge the receipt of the retailer’s purchase order.

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856 (ASN Shipment Confirmation)

Used as advance ship notice or shipment confirmation. This document is sent from the supplier to the retailer. Retailers will use this to get visibility into inbound shipments, receiving automation or proof of shipment for direct-to-consumer orders.

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810 (Invoice)

Used by the supplier to invoice for consumer shipments to the retailer. This may include shipping and handling.

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846 (Inventory Availability)

Most commonly used by suppliers to provide available and future inventory quantities, either globally or by ship from location.

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860 (Purchase Order Change)

Used by retailers to communicate order changes to the supplier.

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865 (Purchase Order Change Acknowledgment)

Used in retail to confirm acknowledgment of a PO change or order cancelation.

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Branded Packing Slip

Ensures the vendor shipments represent the retailer’s brand and have continuity between vendor deliveries and those fulfilled by the retailer for customer loyalty. Return policies and product returns procedures can also be included.

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180 (Return Authorization Requests and Approval - RTV)

Used to communicate between buyer and seller, a request for consumer returns to the supplier when applicable based on trading partner agreement between the two parties.

A partner to help with your drop ship program

“EDI is the language of drop-ship retail. Whitebox needed a trusted partner to provide EDI capabilities and the knowledge of retailer’s EDI requirements for our customers. SPS Commerce was the perfect fit and has become a valued partner.”

Rob Hahn, COO at Whitebox

Read the Case Study

Additional Resources on Drop Shipping for 3PLs and other Logistics Businesses

Enter a virtual library of information written to provide you with the knowledge you need to power your drop shipping program.

Start a drop shipping program or improve existing drop ship capabilities with SPS Commerce.

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