Drop shipping
The third-party business (also: distance trade , drop shipping , direct trade ) referred to in the logistics a particular business form of trade .
procedure
It is characteristic here that a dealer purchases goods from suppliers and resells them to customers without having physical contact with the goods. The goods are delivered directly from his supplier (manufacturer or wholesaler) to his customer. In addition to saving storage and transport costs, the customer's wish to have only one contact person for certain product lines is usually the reason for drop shipments. Alternatives to third-party delivery are warehouse delivery , cross docking and flow-through .
The third-party business, i.e. direct delivery from the supplier (a third party) to the dealer's customer, only differs from the warehouse business in that the dealer carries out the delivery himself for the latter.
Examples
- Spare parts delivery
A customer needs a spare part for a vehicle and contacts the vehicle manufacturer. He delivers and issues the invoice. In fact, however, the dispatch is carried out by the supplier or its wholesaler.
- Internet retailer
The customer orders goods in the internet shop . The internet shop operator does not have a warehouse, but wholesalers as partners. The wholesaler receives the order from the internet shop operator to send the goods (as neutrally packaged as possible) directly to their customers.
In both cases the end customer pays the dealer, who settles with the actual supplier. This avoids tying up capital in his own warehouse.
advantages
In addition to the low capital commitment for inventory and the lack of sales risk, one advantage for the retailer is the use of payment terms. This is due to the fact that the retailer receives his money directly from the customer with many payment methods (credit card, prepayment, last name). By negotiating long-term payment terms, the merchant can work with the money. Another advantage is the lower expenses for logistics such as the reduction or the complete waiver of storage space and thus also personnel costs through the reduction of activities such as pecking (removal of partial quantities), packaging and shipping of the goods.
disadvantage
The retailer surrenders a substantial part of his supply chain . As a result, he can not directly control availability, quality of packaging and delivery reliability .
Furthermore, the retailer usually has to forego volume discounts from the supplier, since the supplier delivers the goods individually. Depending on the product range, these discounts can make up a significant part of trading profits or allow lower sales prices.
Third-party business also assumes that the supplier is actually ready for individual or small-volume deliveries.
Goods from different suppliers cannot be packaged and delivered together, which can result in high delivery costs if the customer orders several different goods at the same time.
Furthermore, the dealer deals with the issue of right of return. Dropshipping providers (or wholesalers) usually do not offer return handling. Therefore, in the event of a complaint, the dealer is addressed directly, who as a rule also has to be liable for it.
Demarcation
Third-party business must be distinguished from consignment or commission business .
literature
- Joachim Hertel: ERP systems - basics and concepts . Physica-Verlag, Heidelberg 1999, ISBN 978-3-7908-1239-8 .
- Joachim Hertel, Joachim Zentes, Hanna Schramm-Klein: Supply chain management and merchandise management systems in retail . Springer, Heidelberg 2011, ISBN 978-3-642-19178-7 .