Guide to dropshipping: 6 benefits of supplier-managed shipping

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Efficiency and reliability of shipping operations have become paramount in the world of e-commerce and retail. Among the numerous business models that have gained prominence, dropshipping stands out for its unique approach to order fulfilment. This method, particularly when paired with supplier-managed shipping, offers a range of benefits that can significantly enhance operational efficiency, reduce costs, and improve supplier relationships. 

This guide explores the essence of dropshipping and supplier-managed shipping, contrasting it with traditional shipping models, and explores the various advantages it brings to businesses.

What is dropshipping? 

Dropshipping is a retail fulfilment method where a store doesn't keep the products it sells in stock. Instead, when a store sells a product, it purchases the item from a third party and has it shipped directly to the customer. This means the merchant never sees or handles the product. 

Supplier-managed shipping, also known as Vendor Managed Inventory (VMI), takes this concept a step further. It involves suppliers taking responsibility for managing their products' inventory levels and shipping processes for the retailer, ensuring that orders are fulfilled efficiently and accurately.

Traditional vs. supplier-managed shipping models

The traditional shipping model typically involves retailers purchasing inventory in bulk, storing it, and then managing the shipping process themselves when orders are placed. This model often results in higher overhead costs for storage and a greater administrative burden in managing inventory and shipping logistics. In contrast, supplier-managed shipping shifts the responsibility of inventory management and shipping logistics to the supplier. 

This approach not only streamlines the shipping process but also leverages the supplier's expertise in logistics, potentially offering a more efficient and cost-effective solution. Efficient shipping is crucial in the supply chain as it directly impacts customer satisfaction, operational costs, and the overall agility of the business in responding to market demands. In today's fast-paced market, customers expect quick and reliable delivery of their orders, making efficient shipping a competitive advantage.

Benefits of supplier-managed shipping

1. Increased efficiency in shipping management

By leveraging supplier-managed shipping, businesses can streamline their shipping process and reduce the administrative burden associated with managing inventory and fulfilling orders. Freed from these logistical constraints, companies can channel their energy into their core competencies, such as refining their marketing strategies, enhancing customer service, and innovating their product offerings.

2. Leveraging supplier expertise in logistics

Suppliers often have extensive knowledge of best practices in logistics and access to a wider network of logistic services by leveraging their expertise, businesses can benefit from more efficient shipping routes, adept handling of customs and regulatory hurdles, and overall superior logistics management. This expertise ensures that products are delivered faster and more reliably, enhancing customer satisfaction and loyalty.

3. Cost savings and financial benefits

The quest for cost efficiency is a driving force in the competitive ecommerce arena. Supplier-managed shipping unlocks the door to significant financial benefits through economies of scale in shipping costs. Suppliers, with their voluminous shipping needs, often negotiate more favourable rates with shipping companies, savings they can pass on to their retail partners. When searching for how best to to minimise shipping costs and maintain competitive pricing, drop shipping is a viable option that businesses can consider. 

4. Improved reliability and risk management

In supply chain management, reliability and risk mitigation are paramount. Supplier-managed shipping enhances the reliability of order fulfilment by entrusting inventory management and shipping logistics to the suppliers, who have a vested interest in maintaining their reputation and customer relationships. This model also shifts the burden of risk associated with inventory fluctuations, shipping delays, and logistical mishaps from the retailer to the vendor. It introduces a layer of protection for businesses, safeguarding them against unforeseen challenges and ensuring a steady flow of operations. Having such an arrangement is especially useful in managing the influx of orders during the peak holiday shopping seasons

5. Enhanced quality control

Quality is the cornerstone of customer trust and brand reputation. With suppliers directly involved in the shipping process, there's a golden opportunity for heightened quality control measures. This direct oversight ensures that products meet rigorous safety standards and comply with local and international regulations, an aspect critically important in markets with stringent standards, such as New Zealand. Enhanced quality control not only protects consumers but also fortifies the brand's credibility and customer loyalty, laying the foundation for long-term success.

6. Building strong supplier relationships

Supplier-managed shipping fosters closer collaboration and stronger relationships between retailers and suppliers. This can lead to better communication, trust, and mutual benefits over time, enhancing supplier relationship management. It also paves the way for driving innovation, cost efficiencies, and market expansion. Ultimately, this approach solidifies a symbiotic relationship where both parties enjoy stability, growth, and the ability to swiftly adapt to market dynamics, fostering a resilient business ecosystem.

Unlock growth and efficiency with with DHL Express

The transition to supplier-managed shipping within the dropshipping model presents a number of benefits. For businesses in New Zealand looking to optimise their import and export processes and reduce administrative burdens, leveraging the expertise and resources of suppliers can be a game-changer. 

DHL Express, with its global logistics network and expertise in managing complex shipping requirements, stands as a credible partner to facilitate this arrangement. We offer on-demand delivery, express international delivery options, and more to ensure that your items arrive at their destination safely and on time.

By partnering with a leader in the logistics industry, businesses can further enhance their supply chain efficiency, reliability, and customer satisfaction, ultimately driving growth and success in the competitive e-commerce landscape.