{"id":6095,"date":"2019-02-08T10:56:45","date_gmt":"2019-02-08T18:56:45","guid":{"rendered":"https:\/\/www.hollingsworthllc.com\/?p=6095"},"modified":"2019-06-12T11:30:05","modified_gmt":"2019-06-12T18:30:05","slug":"drop-shipping-versus-3pl","status":"publish","type":"post","link":"https:\/\/www.hollingsworthllc.com\/drop-shipping-versus-3pl\/","title":{"rendered":"Drop Shipping Versus 3PL"},"content":{"rendered":"

With the increasing prevalence of ecommerce and subscription retail, drop-shipping has become a progressively more important feature of order fulfillment<\/span><\/a>. A drop shipper acts as a third party, shipping orders to customers on the etailer’s behalf so they can outsource some fulfillment logistics. However, alternative to common belief, drop shipping is <\/span>not<\/span><\/i> third-party fulfillment and vice versa.<\/span><\/p>\n

Both drop shipping<\/a> and third-party logistics are outsourced services that enable ecommerce businesses to streamline their processes for delivery, but the way they work is quite different.<\/p>\n

[ Related: Best E-Commerce Payment Options<\/a> ]<\/p>\n

What is Drop Shipping?<\/span><\/h2>\n

Many of today’s ecommerce stores are not equipped with a full warehouse or assembly facility to process and package orders for fulfillment. In the past, big box stores and main street retailers would manage their inventory on-site or at a fulfillment facility that they owned and\/or operated themselves. With the increasing popularity of online shopping, in-house order fulfillment just isn’t as cost-effective for modern retailers, particularly in the internet shopping sector. <\/span><\/p>\n

\"Cosmetics
Cosmetics are prepared for order fulfillment via dropshipping.<\/figcaption><\/figure>\n

Enter, <\/span>drop shipping<\/span><\/a>. Instead of owning and managing inventory and order fulfillment in-house, drop shipping is a method of retail fulfillment where the retailer doesn’t ever handle the actual product. A third party manages the inventory and ships products directly to the retailer’s customer only when they order – the retailer receives the customer’s payment and then purchases the product from the wholesaler or manufacturer for fulfillment as-needed. This method is far more efficient, leaving retailers to focus on sales while an experienced third party handles the logistics. <\/span><\/p>\n

A lot of the time, drop shipping companies are also the manufacturer of the product, so the retailer essentially acts as a third party advertiser of the product, receiving their compensation for the -\u00f2referral’ as part of each sale. <\/span><\/p>\n

How Drop Shipping Works – The Process<\/span><\/h3>\n

When a retailer has a drop shipping partner for order fulfillment, <\/span>the process<\/span><\/a> follows these steps:<\/span><\/p>\n

    \n
  1. Retailer adds the product to their store online<\/span><\/li>\n
  2. Customer purchases the product from the online store & pays the retailer for the product and any applicable shipping fees<\/span><\/li>\n
  3. Retailer orders the product from the manufacturer or supplier, who packages and drop-ships the item to the customer<\/span><\/li>\n<\/ol>\n

    What is 3PL?<\/span><\/a><\/h2>\n

    3PL is the more complex of the two services. Third-party logistics, which is also often referred to as third-party fulfillment, is a classifies a grouping of <\/span>complex outsourced logistics services<\/span><\/a> that include general supply chain management. It’s a more hands-on method of order fulfillment than drop shipping, since a 3PL provider acts as a sort of middle man between the retailer and the manufacturer\/supplier. A 3PL partner will receive product or materials from the point of origin, facilitate any necessary warehousing or inventory management, and then guide orders through the assembly or fulfillment channel before shipping it to the customer or retailer.<\/span><\/p>\n

    [ Related: What is 3PL?<\/a> ]<\/p>\n

    Oftentimes, <\/span>3PL providers deliver the full-service offering<\/span><\/a> that includes everything from warehousing to assembly, kitting and packaging in addition to general order fulfillment. Drop shippers only handle the order processing and fulfillment aspects of the supply chain. 3PL providers can be excellent partners for a wide range of industries, and retailers may use only one service (such as order fulfillment) or a selection of several interrelated services. 3PL can be used to define any service contract involving the warehousing or distribution of materials – whether they’re ecommerce orders or automotive parts.<\/span><\/p>\n

    In some cases, retailers will send their inventory to their order fulfillment partner instead of having it sent directly from the manufacturer or supplier. <\/span><\/p>\n

    How 3PL Works – The Process<\/span><\/h3>\n

    When a retailer uses a third-party logistics partner for order fulfillment, <\/span>the process<\/span><\/a> follows these steps:<\/span><\/p>\n

      \n
    1. Retailer purchases product in bulk (wholesale) from the manufacturer or supplier<\/span><\/li>\n
    2. Manufacturer\/supplier delivers bulk products to the 3PL partner<\/span><\/li>\n
    3. Once inventoried, the retailer will list the products available for sale on their online store<\/span><\/li>\n
    4. Customer purchases the product from the online store & pays the retailer for the product and any applicable shipping fees<\/span><\/li>\n
    5. Retailer notifies their 3PL partner of the order details, and the 3PL partner picks, packs and ships the order to the customer<\/span><\/li>\n<\/ol>\n

      How Both Drop Shipping and 3PL Benefit Retailers<\/span><\/h2>\n

      Although they are not the same thing, drop shipping and third-party fulfillment offer some similar benefits for retailers. These solutions are centered around three areas that are critical for ecommerce success:<\/span><\/p>\n