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 e-commerce 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.

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.

Drop Shipping Program

How warehouse drop shipping works:

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

How Drop Shipping Works

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 e-commerce 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.

Streamlined processes and flexibility to say “Yes”

“SPS is the solution behind the streamlined processes and automated accuracy that make our customer experiences so exceptional. They also give us the flexibility to grow our customer relationships to embrace new retail opportunities, such as the drop shipping capabilities, that we quickly made part of our offering.”

Lynn Schwartz, Director of Account Management, Christopher Morgan

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.

i

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.

i

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.

How can SPS Commerce help your supplier, vendor or distributor business reach its goals?

SPS is more than an EDI provider. Our retail supply chain technology solutions can help your business automate, scale and grow with four key components:

Fulfillment EDI

Fulfillment (EDI)

Break down the silos between your business systems, including ERP, WMS, accounting software and more to speed up drop ship processes. Streamline and strengthen retail relationships with Fulfillment.

Learn More

Assortment

Assortment

Meet the growing demand for more detailed and accurate product information that support drop shipping. Provide all the required information needed about your products with the SPS Assortment solution.

Learn More

Analytics

Analytics

Turn data into insights that improve your drop ship program’s performance. Become a more valuable partner by offering the info needed to optimize inventory and performance with Analytics.

Learn More

Sourcing & Retail Network

Sourcing & Retail Network

Find more suppliers and get your products found by more retailers. Let them know what fulfillment and shipping services you offer. Retailers are looking for drop ship-capable 3PLs via the industry’s leading Retail Network community and Sourcing platform.

Learn More

A partner to help with your drop ship program

“The mix has certainly changed. We still do a lot of brick- and-mortar-based order fulfillment, but along with that, we are doing a lot of ship to store and drop shipping. Having SPS as a partner has enabled us to serve all those different channels without having to reinvent the wheel.”

George Hynes, President at Logistic Edge

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.

Drop Shipping 101 for Retailers and Suppliers

A helpful infographic that summarizes some of the information in this drop shipping 101 section.

See the Infographic

An E-Commerce Solution for Today’s Retail

See the relationship between e-commerce and drop shipping, and how a successful program can keep customers happy.

See the Infographic

Create Branded Packing Slips and Labels for Drop Shipments

It’s easier than you think to delight your retailer drop ship customers with packaging and insert materials that match their branding.

Read the Blog

Drop Shipping and Marketplaces Together

The advantages of combining marketplaces as a sales channel with drop shipping as a fulfillment model.

Read the Blog

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

Optimize drop ship order management, inventory, sales channels and fulfillment processes with help from the experts.