Drop Shipping in e-Commerce: Pros and Cons

Recently we’ve discussed the retail order fulfillment methods, which help to manage the product storage and distribution processes in e-commerce. Now we’re going to explain each of these methods in a series of articles. In this article, we’ll discuss the pros and cons of drop shipping.

So how drop shipping works? Unlike traditional retail models, merchants who use drop shipping actually don’t keep a stock of purchased inventory items. Instead, they order the products from the supplier’s warehouse or distribution center to send them directly to the customer. Let’s see how merchants can benefit from drop shipping and, on the contrary, what can make drop shipping less attractive for them.

Pros of Drop Shipping

  1. Good for startups. If you’re just starting off with your business, then drop shipping will be a perfect solution for you. As you order and sell not many items, you don’t need complex inventory management processes at this stage. Besides, you’ll need a lower initial investment.
  2. Low costs. With drop shipping, you don’t have to pay for a warehouse and warehouse management procedures. Many successful “drop shippers” run their businesses literally from home.
  3. Flexibilty. You won’t have to do a routine work of processing additional orders, because the suppliers will do it for you.

Cons of Drop Shipping

  1. Extra shipping costs. Drop shipping involves work with multiple suppliers, and this can bring more pain when it comes to shipping costs. If, for example, items in one order are shipped by several suppliers, shipping costs will increase.
  2. Low profit margins. Unfortunately, drop shipping is a highly competitive method. Many beginner businesses choose it as a quick way to make a profit and thus set very low prices, so the customers could prefer their prices over yours.
  3. Inventory issues. As your business will grow, you will face more and more inventory issues, such as inability to track the daily changes in your drop-shipper’s inventory availability. So sooner or later you’ll have to choose another retail fulfillment model.

To summarize, drop shipping isn’t perfect, but it works in certain cases and for certain types of businesses. Still, having the right inventory management tools at hand will help you to manage your inventory quickly and seamlessly, whether you manage your own inventory or you are a drop-shipper yourself.twitteryoutube

Product Storage and Distribution in e-Commerce: Overview

According to latest statistics, e-commerce is growing 23% year-over-year, and it means that there’s a constant need to optimize the product storage and distribution processes. Currently, there are several retail fulfillment methods, which help to manage these processes in e-commerce:

  1. Drop shipping. This method significantly shortens the journey of a product from a warehouse or distribution/fulfillment center to a customer. What is the secret of drop shipping efficiency? Actually, drop-shipping companies never keep their products in stock. Instead, they purchase the products from a supplier and then have them shipped directly to the customer. In other words, customers receive products right from the supplier’s warehouse or distribution center.
  2. Self-management. Unlike drop shipping, the self-management method requires that, after a purchase from a supplier, the merchant should keep the products in their warehouse and manage the inventory of these products. Such inventory management processes include counting, tracking, issuing, receiving, packing and shipping of the products, often with the help of specialized inventory management software.
  3. Third-party fulfillment services. The first two methods work great when you’re just starting off with your business. But when your company has grown to an extent when it becomes hard to manage the flow of products that you sell, hiring a third party could help a lot. How does it work? You find a logistics company that will store your products and manage the packing and shipping as well as other inventory processes.

No matter which method you’d prefer, proper inventory management is crucial for any business. With Delivrd inventory management software, you can process your orders and inventory operations in a quick, efficient, and hassle-free way.twitteryoutube

Fast Inventory Transactions in Delivrd

With Delivrd inventory management software, you can quickly update inventory for a specific product. To do it, open the Inventory List page under Products & Inventory and scan the barcode of the product on this page. If you don’t have a barcode scanner, you can manually enter the SKU, EAN, or UPC of the product in the field above the inventory list, and then click Search.

If the system finds a result, you can directly receive or issue 1 piece from inventory, or choose to receive or issue any quantity you want. You can do this with the four buttons in the Inventory Transactions column: +1, -1, Receive, or Issue.

Click the corresponding button to open a window where you can enter the transaction details. For the Receive and Issue transactions, you can enter any value in the quantity field, whereas for the +1 and -1 transactions, this field is not available for editing, as quantity of transaction is 1.

 

As always, any inventory transaction you enter into Delivrd will be displayed in the Inventory Transaction History

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Managing Inventory of Serial Numbers in Delivrd

In this user guide, we’ll describe how to manage the inventory of serial numbers in multiple locations, specifically, how to create, transfer, and issue serial numbers in Delivrd. Read on!

Creating a Serial Number
To start managing the inventory of serial numbers in Delivrd, you first need to create them. You can do it in several simple steps:

    1. In the navigation pane on the left, click Products & Inventory > Serial Numbers.

    1. In the upper-right corner of the serial number list, click New Serial.

  1. In the window that appears, choose the product for which you are creating the serial, and an inventory location for this serial.

After you choose a location, two things will happen:

    • The serial will be created in this inventory location.

  • A quantity of 1 piece will be added to inventory in this inventory location (there is no need to update the inventory separately).

Note: You can scan the barcode of your serial number into the serial number field instead of typing it.

Transferring a serial number to another location

To transfer a serial to another inventory location:

    1. On the inventory list page, scan the barcode of the serial. The inventory record of the product with the inventory location of the serial will appear. You can then either issue the serial or transfer the serial to another location. To choose the destination inventory location, click Transfer Serial

  1. In the window that appears, choose the location and add remarks, if necessary. When ready, click Save.

After you click Save, two things will happen:

  • Serial number location in serial inventory list will change to the new inventory location.
  • 1 piece will be deducted from the previous inventory location of the serial number (North inventory location in this example), and 1 piece will be added to the destination inventory location.

Issuing serial numbers

If the serial number no longer remains in any inventory location that is managed in Delivrd (for example, the serial is issued to sales order, returned to vendor, or scrapped), you can issue the serial number.

    1. After scanning the serial’s barcode label into the inventory location list search box, click Issue Serial.

  1. In the window that appears, you can add a remark to record the reason for the issue. When ready, click Save.

After you click Save, two things will happen:

  • The inventory will be deducted in 1 piece.

  • The serial will be marked as out of stock, but it will still appear in the serial numbers list.

If you try to search the inventory list for a serial that was already issued, you will get an error message:

That’s how you handle the inventory of serial numbers in Delivrd inventory management software.twitteryoutube

Delivrd Dashboard Layout

There is now a new Dashboard look which gives you more important information in one glance so you can manager you inventory better and more efficiently.

Sales Orders to Fulfill – These are orders that have been set to a Released status but still needs to be fulfilled for the customer.

Shipments Awaiting Pick-Up: The Pick and Pack step has been finished and the orders status has been set to Completed and is awaiting pickup by the delivery company for shipment to the customer.

Overdue Purchase Orders: These are orders that have not had their status changed to Released or the processing of the order has not been completed in the last 30 days and is overdue.

Inventory Alerts: Items that have reached their Reorder or Safety Stock levels and need to be replenished as soon as possible in order to continue conducting business in a timely and efficient manner without losing customers.twitteryoutube

Warehouse Bin Management

With Delivrd you can now manage Bins. Bins are the location in which your products are stored so that can be picked by your fulfillment individuals and control your inventory location.

This option can be found be going to: Partners –> Bins

The Bins page looks like this:

Adding a new Bin

To add a new Bin simply select the “+ New Bin” button.

The below page will appear.

Explanation of the fields.

Title: The name of the Bin itself.

Sort Sequence: The order is which the picker would select the items when fulfilling an order with multiple items.

Location: The physical location of the bin in the warehouse, store, etc.

Status: Active or Inactive. Is this Bin being used currently or not? For example, the Bin might not have any products in it now and is not in use, so the Inactive status would be set until it’s been resupplied with items to fulfill an order. Please note: If no status is selected the default status of Active will be chosen automatically. This can be changed later if you so choose.

It is also possible to load the Bin data via a CSV file.

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Delivrd: Inventory Management

Inventory Alerts and Stock Monitor

Knowing when your product stock is running low is an key part of inventory management.

In Delivrd is now possible to view only the items that are below their Reorder or Safety Stock levels.

In the Dashboard page you can see the Inventory Alerts box. The number shown there represents the items that have reached their Reorder or Safety Stock levels and needs to be replenished or reordered as soon as possible.

For example, shown below are all the items that are in the system currently.

Note that there are four items showing that their stock is running low; highlighted in yellow and red.

This is reflected in the Dashboard under the Inventory Alerts box.

After clicking on the Inventory Alerts box you are taken to a new page showing the exact items that require your immediate attention.

You can now view all of your products that are running low or need to be reordered soon at a single glance!!!twitteryoutube

How to Calculate Reorder Point

According to Wikipedia, a reorder point defines when to order, not how much to order. In other words, the reorder point informs you about the lowest stock level that your inventory should reach before you place a new order.

The appropriate reorder point is defined by the delivery time stock, which is the inventory that you need during the lead time, and the safety stock, which is the minimum inventory level acting as a protection against inventory shortages.

For more information regarding the reorder point and safety stock, see Reorder Point vs. Safety Stock: What’s the Difference? Meanwhile, in this post we’ll focus on the reorder point formula and how to calculate it.

So, here’s the reorder point calculation formula:

(Average Daily Unit Issues x Delivery Lead Time) + Safety Stock

Let’s take a closer look at each of these variables.

Average Daily Unit Issues

Average daily unit issues refer to the quantity of an item sold per day. You can define this variable by dividing the number of items sold during a month by the number of days in this month. For example, if you sold 650 T-shirts in January, your average daily unit issues would be 650/30 = 21.6 T-shirts a day. Please note that it’s not necessary to round to an even number.

Delivery Lead Time

Lead time is the amount of time in days that it takes from the time you order the stock until the time it arrives. You can derive this amount from your past replenishment orders, and it can be an approximate number. For example, it can be 7 days.

Safety Stock

Safety stock is a minimum amount of stock that you want to keep in your inventory, and you should define it yourself, considering such factors as delivery delays, seasonal demand, or damaged items. You can research your past replenishment orders to find out these factors. For example, it can be 30 items.

As a result, the calculation can be as follows:

(21.6 x 7) + 30 = 151.2

It means that your reorder point equals 151.2.

Wirh Delivrd inventory management software, you can easily set up both the safety stock and reorder point for your orders, so that the system can warn you when you reach these amounts.
For more information, see Reorder Point vs. Safety Stock: What’s the Difference?twitteryoutube

Picking by Order vs. Batch Picking: What’s the Difference?

There are actually many ways to pick an order from a warehouse location. However, in this article we’ll focus on two picking methods: picking by order and batch picking. You may already guess the difference from the names of these activities, but let’s explain in more detail.

Picking by order, or discrete picking, implies visiting a picking location individually per each order. For example, two customers order the T-shirts with the same SKU, and two different orders are created. As a result, when processing these orders, a warehouse employee should visit the picking location two times, to pick the T-shirts for two separate orders. This is the most common and straight-forward order picking method.

On the contrary, batch picking combines the lines from different orders into a so-called “wave” by using the inventory management software. As a result, the warehouse employee should visit the picking location only once, and it significantly saves time. After the picks of individual products is completed, products are sorted by order, packed and shipped.

Each picking method has its own advantages. Picking by order is simpler but it takes more time, whereas batch picking saves time, increases productivity, and reduces labor costs, but required two coordinated steps – pick and then sort.

You should choose the picking method based on your loads and workflow. For example, batch picking is perfect for you if the same SKU with relatively small dimensions is frequently ordered from you by different customers. In other cases it’s better to use the traditional method of picking by order. Despite the fact that it requires more time to pick, it actually speeds up the response time for order fulfillment.

Delivrd, the inventory management software, supports both picking methods to give the clients more convenience and flexibility. No matter how many orders you have, Delivrd will help you with any order profile. More details are coming soon!twitteryoutube

Barcode Scanning: A Key to Successful Inventory Management

If you stop and look around, you’ll probably notice that barcodes are everywhere. You can find barcode labels literally on every item that you use in your daily life, from food to gadgets. And it’s almost impossible to buy any item without a barcode. Barcodes rule the world! That’s why it’s important to understand how they work. Specifically, how they automate inventory management and thus help streamline the businesses.

A “toolbox” of a modern inventory manager should include not only the inventory management software, but also hardware, such as barcode scanners. Why? Let’s find out.

  1. Value for money. A barcode reader can significantly speed up the inventory management process at your warehouse. At the same time, such a device costs not that much. It’s easier and more cost effective to buy several barcode scanners than hire a hundred people to type in those SKUs and serials. Hey, it’s the 21st century out there!
  2. Speed. The faster you manage your inventory, the more efficient is your business. With a barcode reader, speed won’t impact the quality of your inventory management – it will actually improve it.
  3. No more errors. Barcode scanning reduces the “human factor” in inventory management and helps avoid mistakes, which can cost a lot. With barcode scanning, you’ll know the exact inventory numbers and avoid the low stock and overstock problems.
  4. Flexibility. There are many types of barcode readers, and you can choose the one that fits the needs of your company. There are standalone, USB, wireless, or smart scanners with an operating system; there are pen-type, laser, or camera-based readers – you name it!

Delivrd, the inventory management software, also supports barcode scanning. More details coming soon!twitteryoutube