Key Components to Developing a Successful Drop Ship Program

Doug Smith, Vice President of Operations, SheplersMike Elder, President, Mike Elder Consulting Inc.

Session Summary

Benefits and Risks of Drop Shipping

Identifying Products and Vendors

Developing an Internal Structure

Choosing a Communication Strategy

Data Management

Monitoring the Customer Experience

Quarterly Business Reviews

Introductions

Benefits of Drop Shipping

Expand Your Assortment Depth

Launch New Peripheral Categories

Increase Sales

Reduced Inventory Costs

Strengthen Vendor Relationships

Potential savings on shipping costs

Lowers risk on product – perishable, trends,

etc.

Risks of Drop Shipping Increased Fulfillment Expenses

Increased Shipping Costs

Control of the Customer Experience

Lead Times to Customers/Out-of-stocks

Impacts to your OMS system

Returns issues

Unreliable inventory status

Your company’s reputation can be adversely

affected by poor performance of drop ship

partner

Identifying Products and Vendors

High Cost Items

Fringe Size Offerings

Slow Moving SKU’s

Items with Obsolescence Risk

Heavy or bulky items

Perishable

Developing an Internal Structure

Executive Sponsor

Define Roles and Responsibilities

Who Owns the Vendor

Relationship?

All Teams Need to Support the

Model

Dedicated Group to Manage the

Day to Day Operations

Communication Strategies

Mail

Fax

Phone

Email

Spreadsheets

OMS with Vendor Portal

EDI Transmissions

Integration with a supply chain service vendor

Data Management

Match Internal SKU’s with Vendor Styles

Provide Sales Forecasts at Item Level

Inventory Tracking◦ Real Time◦ Daily, Weekly, Monthly Feed◦ Lead Times for in Stock

Data interchange and timing for orders

Export/import product data to/from drop

shippers

Coordination of company pack slip information

Quarterly Business ReviewsIn Stock Performance

Fulfillment Time

Analyze Item Performance

Shipping Costs

Opportunities for improvements or

expansions

Service level commitments and

performance

Session Take Aways If well executed

◦ Increase assortment◦ Happy customers◦ Lower inventory and fulfillment costs◦ Increased revenues/profit

If not well executed◦ Assortment issues◦ Upset customers◦ Higher costs◦ Lower revenues and profit impact◦ Reputation damage

Establish clear agreement with drop ship vendors (and/or supply chain integrator), ◦ Data interchange and timing◦ responsibilities and service levels, ◦ product and service pricing

Assign a champion to own, monitor and manage