How to Prepare for Drop Shipping vs. Order Fulfillment From a Warehouse

by | Aug 31, 2021 | Omnichannel, Order Fulfillment, Order Management, Suppliers

Are you a supplier that needs to meet retail order fulfillment requirements? You’ve come to the right place!

In this blog, we’ll describe drop shipping vs. order fulfillment from a warehouse or distribution center. We’ll also outline typical electronic trading requirements for different types of order fulfillment.

Why are different order fulfillment models rising in popularity?

As you may know, the dynamics of fulfilling customer orders have changed. Consumers are not just shopping at stores, but they are buying more online. As a result, retailers and distributors have changed how they manage orders. Some continue to fulfill orders out of their distribution centers (DCs). Others fulfill orders from their stores, offer in-store pickup or have suppliers ship directly to the customer.

What are the differences between drop shipping vs. order fulfillment from a warehouse?

Let’s start with some definitions of drop shipping vs. order fulfillment from a warehouse.

Drop shipping is sometimes called consumer direct fulfillment. In this model, a supplier ships product directly to the end customer on behalf of a buying organization (retailer or distributor). The buyer does not carry the product in inventory. However, the shipment appears as if it comes from the buying organization. Retailers and distributors use drop shipping to expand their product assortments without the need for expanding the amount of inventory they carry in their facilities. 

Orders can also be fulfilled from a warehouse or distribution center. In this scenario, the supplier ships products in bulk to a buying organization’s warehouse. Once the buying organization receives the product, they take ownership of the inventory. Then the buying organization routes the product to its end location, which could be a store or a customer. 

What are typical requirements for drop shipping vs. order fulfillment from a warehouse?

Each buyer has different order fulfillment requirements based on their business needs. Buyers rely on receiving timely and accurate data from suppliers so they can meet consumer expectations. Requirements are likely to include item information, inventory availability, EDI documents, shipping documentation and more.

Here are some common electronic trading requirements for drop shipping:

  • Robust item information to represent the supplier’s products online
  • Regular cadence of inventory updates
  • The ability to receive electronic orders
  • The ability to send order acknowledgements and confirmations, and provide estimated time of arrival
  • The ability to manage customer order cancellations
  • Shipping documentation with retailer’s brand, including packing slips and labels, as well as shipment tracking information
  • The ability to receive electronic invoices
  • The ability to handle returns based on an agreed-upon process

Here are typical requirements for fulfilling orders to a warehouse or DC:

  • Detailed item information
  • The ability to receive electronic orders
  • Order acknowledgements
  • Advance ship notices and UCC-128 labels
  • The ability to receive electronic invoices

In addition to the above details and differences, suppliers should be prepared to see an exponential increase in the number of orders and shipments when fulfilling drop-ship orders.  

How can suppliers ensure successful drop shipping vs. order fulfillment from a warehouse?

Order fulfillment is complex. Different types of information are required at various points in the fulfillment process. Also, order fulfillment requirements vary for each fulfillment model used by each buying organization.

If you want to simplify the process, consider working with a full-service EDI provider such as SPS Commerce. They will take ownership of understanding all the requirements of your buyers  and ensuring you remain in compliance. Outsourcing your EDI operations to an expert team frees up your time, improves your relationship with buyers, and helps you avoid chargebacks and fees for non-compliance.

Many suppliers also use third-party logistics providers (3PLs) to handle time-consuming order fulfillment tasks. SPS Commerce has relationships with 1,000 qualified 3PLs that can assist with shipping and warehousing.

Looking for help with drop shipping vs. order fulfillment from a warehouse?

There are many nuances involved with drop shipping vs. order fulfillment from a warehouse.  For more information, check out our handy EDI guide, our guide to drop shipping or contact our team to learn more about streamlining order fulfillment.

Scott Bolduc
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