The supply chain is basically a path of the product, which includes the process from conception by the use of manufacturing and at the end goes into the hands of a customer. If we discuss with die-hard supplier chain experts, they will maintain a supply chain of the product reaches thoroughly to the withdrawal of the materials (like rubber and oil) utilized to produce an item. But that’s a little intense.
To get success in this business, you need to separate and understand the 3 most vital parts in the complete drop shipping supply chain & fulfillment process: Manufacturers, Wholesalers & Retailers. And to get rid of any issue, you don’t need to go at the bottom of this matter.
So, let’s start with the first part:-
Manufacturers are the people who create the product. Many manufacturers do not sell directly their products to the public. They would like to make and sell their goods with minimum purchase requirement, and there is not any retailer who will able to buy that lot.
Although it is an economical way, not every person needs hundreds of goods on his warehouse, specifically, if a retailer does not have one. In place of using manufacturer’s services, most of the retailers make use of the services of wholesalers because of the need to store the goods and then to re-ship them.
Wholesalers are the intermediates who buy products from manufacturers in bulk, mark them up to some extent and then sell them to retailers for resale to the public. Not always they need bulk products, sometimes they have minimum purchase requirement too.
Some of the wholesalers are very strict in their business; they will only sell the products to the retailers, not directly to the public.
Retailers are the people who sell goods directly to public. For instance, if you run your business and fulfill customer orders with the help of drop shipping, then you are a retailer.
Drop Shipping Is Not a Role; it’s a Service
You might have notice that, in the supply chain, there is no mention of ‘dropshipper’ as any of these three parts - manufacturers, wholesalers and retailers can act a drop shipper. Manufacturers and wholesalers both can be drop shippers and sell their products directly to the customers, just the difference here is in their pricing because the wholesaler first has to buy from a manufacturer.
If you wish to start your own drop shipping business and want to get rid of additional pricing, then you need to check that your supplier is a genuine manufacturer or wholesaler. It is not always essential that any part that is ready to ship goods on your behalf offers you the best price possible. This question will be well described in our next blog.
Drop Shipping in Use: The Order Process
Now you know the role of every part in the supply chain, let’s see the process of the order now. Here are the four steps of an order made on the example of Smart Phone Outlet - an online store of smartphones specialized in accessories. It delivers the accessories directly from a wholesaler, and that is why we call it Wholesale Accessories.
Here's a sample of how the complete ordering process might look from start to end:
Step 1: With Phone Outlet, Customer Places Orders
Mr. Charles needs new earphones for his smartphone, and he places the order on the online store of phone outlet. Once the order is confirmed, following happens:-
- Charles and Phone Outlet get a confirmation email (likely same) of the new order that is generated automatically by the software of the store.
- During the checkout process, the payment from Mr. Charles has been captured and automatically deposited into the bank account of Phone Outlet.
Step 2: Phone Outlet Places the Order With Its Supplier
The second step is all about sending an email confirmation of order to the sales representative of the Wholesale Accessories. Having the credit card`s number of our Smart Phone Outlet, Wholesale Accessories will send the bill covering the products and all the other charges like shipping and processing if any.
Note: E-mail is the most common and simplest way to place an order. Yet there is an additional way to do that by sending an XML automatic file, that is not the great way, as all the genius is simple.
Step 3 – Wholesale Accessories Ships the Order
Assume that the ordered product is in stock, and the wholesaler was able to effectively charge Phone Outlet's card, Wholesale Accessories will pack the order and ship it straight to the customer. However the shipment comes from Wholesale Accessories, Phone Outlet's name and address will appear on the return address label, and its logo will appear on the invoice and packing slip. Once the delivery has been confirmed, Wholesale Accessories will send a mail of invoice and a tracking number to Phone Outlet.
Note: The dispatch time on drop shipped orders is often quicker than you would think. A lot of quality suppliers will be capable of delivering the order in a few hours, which facilitates merchants to promote same-day delivery even when they are making use of a drop shipping supplier.
Step 4 – Phone Outlet Informs the Customer about the Shipment
Once phone outlet receives the tracking number from the wholesaler, it will send the details to the customer by email. When the order was shipped, the customer gets notified, and payment will be collected. Means, the order and fulfillment process is completed. The margin of phone outlet is the difference between the payment of Mr. Charles and our payment to out Wholesaler Accessories.
Dropshippers Are Unseen
Although the products are delivered by Wholesalers, the drop shippers are totally unseen. The customer can only see the contact details of the outlet. In any case of inaccuracy, the customer can contact only the outlet and inform about the mistake. And the retailer himself will contact the wholesaler and arrange everything to send the right products to the customers.
The dropshipping wholesaler is not available for the end customer. Its only accountability is to stock and ship products. All the other things – marketing, website development, customer service, etc. – are the merchant’s responsibility.