IDS Order Fulfillment or Dropshipping: The Choice is Yours

Retailers have to make many choices for how to fulfill orders, and one of those is often between dropshipping and standard 3PL (third-party logistics) order fulfillment. The difference between the two can be confusing because both offer a different way to meet the same destination: your customer through outsourcing order fulfillment to a third-party partner providing order fulfillment services. The decision to outsource order fulfillment is a big step, and IDS stands ready to help you evaluate if it’s time for your online sales company to partner with a 3PL.
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Outsourcing Order Fulfillment: The What, Why, and How

Outsourcing order fulfillment service happens when a business no longer wants to handle it in-house. Companies often face this decision once they outgrow the initial startup phase of operating end-to-end order fulfillment, including inventory management. Eventually, the business grows enough that managing inventory storage and order fulfillment is outstripping the company’s capacity to do it well. Then, a critical decision-making point has been reached. Will the company further invest the necessary resources and services to expand its inventory storage and order fulfillment capacity, or is it time to consider outsourcing? In this scenario, the business will likely look at potential third-party logistics providers specializing in order fulfillment that best serve its ideal location.

In a different scenario, however, in today’s e-commerce landscape, many retailers have an entirely virtual store rather than a brick-and-mortar storefront. Moreover, retailers aren’t making their products-they curate the products to include in their online store. If they don’t have the capital to purchase inventory, store it, and fulfill orders, they might decide that drop-shipping is the way to go.

3PL order fulfillment and drop shipping are two ways to outsource order fulfillment. Still, each method offers different benefits based on a business’s preferred selling model.

Dropshipping: What to Know Before You Sell Online

The dropshipping scenario is for people who want to run an online store but want to avoid handling the inventory or fulfilling website orders themselves. What they do instead is forward orders received directly to the manufacturer, wholesaler, distributor, or other retailer that does have the inventory of the products and will fill the order directly and ship the product(s) ordered to the consumer who placed the order through the business owner’s online store.

The seller of the product, the drop-shipper with the online store, doesn’t purchase inventory ahead of time and only serves as a middleman connecting the consumer to the product through their online storefront. The drop shipper has to mark up the retail price of products in their online store to cover the wholesale price of the product and the cost of having it shipped from the supplier to the consumer and make a profit. As with any order fulfillment method, drop-shipping best practices exist that need consideration and operationalizing – and to which you can hold your 3PL accountable.

3PL Order Fulfillment for Better Results

Outsourcing order fulfillment for online stores to a third-party logistics provider like IDS differs from dropshipping. With outsourced order fulfillment, the product seller provides the inventory to the 3PL partner, who warehouses it and then fulfills the website orders forwarded to them from the merchant. Then, the 3PL ships the product(s) directly to the consumer. In true drop-shipping, the seller does not provide the inventory to a 3PL partner; it instead notifies the suppliers when a consumer has ordered a product through their online store that the supplier can now fulfill. The seller pays the supplier for the product(s) ordered and the shipping cost, and then the supplier takes care of it. Therefore, the seller never handles any of the products. In 3PL order fulfillment, the seller is responsible for providing its inventory of products to the 3PL partner, who then stores the inventory and fulfills orders the seller forwards to them.

Drop-Shipping vs. 3PL Order Fulfillment

Once you understand how dropshipping and 3PL order fulfillment are different ways of supply chain management, you’ll need to know how 3PL order fulfillment might benefit your online business to get your products to consumers more than true drop-shipping. If your online store does dropshipping, what happens when a customer is dissatisfied with the product? Many manufacturers, wholesalers, and distributors are happy to fill orders — and will make money dropshipping — but will they process returns? What if the shipment of the product is delayed? After all, in drop-shipping, the seller will only know a little about the inventory levels at the supplier for sold online store products. Depending on the supplier, dropshipping can be a big dice roll because the seller has little control over the customer experience. You can gain a competitive advantage when you partner with an experienced, reliable 3PL vendor for outsourced order fulfillment.

Why Choose IDS as Your Order Fulfillment Partner?

If your business has grown enough in recent years that it’s time to consider outsourcing order fulfillment, or you’re dissatisfied with your current 3PL partner, here are reasons to choose IDS:

Order fulfillment expertise:

Founded in 1960, IDS has grown and evolved over the past 50 years within the ever-changing business landscape, keeping pace with industry trends and technological capabilities (see ProParcel Shipping Solution and Warehouse Management System).

Strategic locations:

Our strategically located fulfillment and distribution centers on the East and West coasts provide you with two-day shipping options to 92% of the U.S. Combine that with our real-time order management system and robotics, and you get an order fulfillment service that is accurate, on-time and provides complete visibility from fulfillment to shipping. Get the details on our IDS Distribution Center page.

Value-added services:

IDS offers a robust array of value-added services beyond just order fulfillment, including Kitting and Packing, Returns Processing, Custom Branded Packaging and Packing Slips, Labeling and Repackaging, QA Product Checks, Embroidery, Gift Wrapping, Gift Messaging, and Cross Docking for greater supply chain efficiency.

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