Key Components to Developing a Successful Drop Ship Program

Key Components to Developing a Successful Drop Ship Program Doug Smith, Vice President of Operations, Sheplers Mike 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 Reviews • In 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

Key Components to Developing a Successful Drop Ship Program