Watch: Webinar – Distributed Fulfillment & Why it is an Essential Part to Your Retail Strategy
Retail has changed and your supply chain and fulfillment strategy has likely gone from “working” to inefficient, costly, or maybe even broken. However, executing on a Distributed Fulfillment Strategy is easier said than done.
In this webinar, Travis Mariea, CEO of Flxpoint will share his insights on what the top retailers are doing to implement Distributed Order Management processes to decrease shipping times and cost, provide added convenience to their customers, and stay ahead of the curve in this rapidly approaching “digital first” era.
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Below, you will find a transcript of the webinar.
All right. We’re about a minute past. So, I’ll go ahead and get started. Some people just come in and we can, they can join as we go. So, today we were talking about distributed fulfillment and really why it matters now more than ever. My name is Travis Mariea. I’m the CEO of Flxpoint. We are a distributed and inventory and order management system. We’re hosting this webinar today.
So, first off a quick agenda. We’re going to kick off with how changes in retail are really changing the supply chain. Not only in the recent couple of weeks and months with COVID-19 but just in general how retail is changing and the differences we’re seeing there. We’re going to talk a little bit more about obviously what distributed fulfillment is and why it’s affected by this change in retail. Who does it affect from all sides of the supply chain and even to the consumer? What to consider before implementing a strategy, to decide distributed fulfillment is a strategy for you? What to think about and how to evaluate and implement this kind of strategy? Obviously, we’ll end it with a Q&A.
I’ll go ahead and set my video as well. All right. So, talking about the change in retail and what we’re seeing. In the era of e-commerce and Amazon retailers specifically, right? This affects both the brand and the retailer side but specifically retailers have enforced significantly increase their catalog size and support fast often free shipping to stay competitive.
So, any of those retailing today know that this is very much part of the Amazon era and just e-commerce in general where your back button away from losing a customer, you don’t have someone just walking by and a captive audience from a brick-and-mortar. So, you really do need to stay competitive with quick free shipping or cheap shipping, at least, and a large catalog, having the right size, the right color, all of that factored in so you’re not losing that customer because they’ll just go to Amazon or another site that might have the same product as you if you’re retailing obviously different brands.
So, what we’ve seen from retailers to try to combat this they’re looking to increase their catalog size. The biggest challenge with that is increased inventory risk and warehouse costs, right? It sounds great. Let’s increase our catalog so we have more sizes and colors that people want. Obviously, you take on that large inventory risk when you’re buying this traditional wholesale model and the storage cost and all of that.
Supporting two to five days fulfillment like it’s so easy for Amazon to do and doing it in a cheap fashion it seems it’s great when you’re a multi-billion dollar company. Obviously, for our retailers out there that we work with, this is a struggle and figuring out how to compete in this era where two to five days shipping is basically required for a customer to checkout or expect. So, factoring those warehouse wages, shipping cost, things like that and the challenge that go along with that, and then kind of, some of that goes with this is not really talked about as much is offering these trendy niche brands that you might not be able to find on Amazon or just in general the change in a lot of the buying habits of whether it’s Millennials or any generation that’s kind of starting to look more at what can I get from your side as a retailer that’s not full on the Walmart and the Amazons of the world that’s basically a commodity purchase?
So, how do you offer these trendy smaller brands? How do you deal with the increase of vendor onboarding and just kind of managing more of that larger catalog of smaller vendors that you’re working with? These are all kinds of macroeconomic changes we’re seeing given Amazon’s push and what’s expected from the consumer as well as just e-commerce in general becoming a larger piece of the retail world.
So, speaking of that, total retail sales in general on the left here you can see, we all know it’s increasing from an e-commerce perspective but you can see here on the left, retail sales in general is 4% to 5% kind of increase over the last couple of years expecting to stay up like that through 2023 so retail in general is increasing and staying consistent in that increase. You can see here on the right that e-commerce is a big portion of at least a small portion now but growing into a bigger, bigger portion as each year goes by. Getting past that 20% mark here in 2023.
You might feel like everyone shops online but seeing that it’s really, we’re sub 20% still can show you just the growth opportunity and the change that we’re going to see and not only how people shop but how online retailers and brands work together from a supply chain perspective but also go to market and interact with our consumers.
I’ve seen people share this through LinkedIn a couple of times and it looks like Bank of America in the US, Department of Commerce did a quick study just in the recent couple months with COVID-19, the pandemic we’re seeing across the world. This isn’t just the US e-commerce penetration but you can see very quickly that we predicted around that 16% or under that 16% in that last graph, right? About 16, 14 to 16 in 2019-2020.
You can see that we shot straight up into 27 jumping, a full 10% in just the last few weeks given everyone staying at home, shopping online, not really going obviously to the malls are shut down, the department stores, just about everything was shut down there for a couple of weeks. Things are starting to open back up and we’re obviously going to see people starting to shop more in physical locations but these numbers that we looked at in the previous slide could probably be looked at conservative now.
There’s been a lot of talk about how retail and online e-commerce is really going to be accelerated given this and given the change in behavior we’ve seen and people kind of being propelled into online shopping that might not have given the pandemic. So, just something to kind of take there and think about that. It’s most likely already an aggressive path for retailers to gain market share of the overall retail market but e-commerce gained even more so just because of the COVID-19 side of things.
So, with that, we can expect that there’s going to be a change in how we do business given that online e-commerce it’s only been a small piece of retail, 10% to 15% over the last couple of years, right? You really required to keep a lot of your in-house inventory or your inventory in-house in a brick-and-mortar because a good portion of business for a lot of retailers was brick-and-mortar, it still is, right? The whole retail software landscape, the retail market has been built around this traditional supply chain and we’ve got that here on the left where the traditional supply chain is a brand or a wholesaler who’s buying in bulk or who’s selling in bulk freight to a brick-and-mortar location traditionally who’s then selling on to a consumer via local foot traffic, right?
So, that brick-and-mortar retailer they’re buying quarterly, monthly, whatever it might be, packs and cases of inventory, a very simple kind of slow process, doesn’t have to be very quick because they’re just stocking up inventory every so often. That’s been that traditional supply chain and what we’re used to and what we see a lot of still today because we’re still, like you saw earlier, still even though the COVID-19 pandemic, we’re still sub 30% of sales online.
With that, distributed fulfillment, right? What we’re talking on today, you may have heard of distributed order management. I mean it’s basically the same thing. I like to refer to as distributed fulfillment as the strategy behind really sourcing inventory from multiple different locations. You do need distributed order management to kind of manage that but the strategy of taking individual orders to be shipped after purchase from multiple locations, from multiple different parties as well, right?
So, traditionally, you’re going to have your own internal warehouse where you’re going to ship out of, looking at an online retailer here, right? So, you may have a brick-and-mortar but let’s say this retailer has an online presence. I’m mostly talking about a purchase and a sale that’s happening online. When that does happen, shipping individually from your internal warehouse. That’s still very traditional but really shipping from multiple different parties and different locations now also e-commerce enabling your brick-and-mortar location which you hear about e-commerce enabling warehouses and brick-and-mortars. That’s really the ability to ship out individual orders in an e-commerce fashion to a consumer, right?
So, not only do that from your internal warehouse, from your brick-and-mortar, now the rise of third-party warehouse is to strategically place your products whether it’s in new markets, internationally, on other sides of the United States, if you’re a US seller for quicker shipping but the rise of third-party warehousing which I’ll talk more about.
Then, the big thing that we see is obviously on the rise and something that was very much in this space is the dropshipping side as well. The brand and the wholesaler taking, keeping their inventory, their ownership of it, and selling it after your retailer sale and selling on behalf. Basically, shipping on behalf of you directly to the consumer, right? So, all of those kinds of pieces make up the distributed fulfillment and the strategy we can talk about. Some of that may make sense or may not for your individual business. So, we’ll get into that.
I see some questions. Please, ask questions as we go. There’s a good one already in here. I’m going to hit them all at the end but… Yeah. Please, as you think of them, definitely put them in the chat there.
The components of distributed fulfillment and the strategy. There’s really three that we’ll talk about today and really three in the strategy if you ask me, there’s some literature out there and definitely encourage you to go look into it, search, distribute, order management that’s what you’re going to find mostly around. But really I look at third-party logistics and warehouses, dropshipping fulfillment and implementing that model, and then the ship from the store and I’m not even going to try to pronounce the acronym but the buy online pick up in store strategy as well.
One, it’s really kind of leveraging third-party logistics. One is leveraging your partners in the dropship side in the middle here, and then one is leveraging your own brick-and-mortar if you do have one. It’s really about leveraging those to compete with the Amazons of the world and larger retailers of the world and to kind of really deliver on what consumers are expecting nowadays.
Let’s start with third-party logistics, kind of some of the benefits of leveraging them. Empowers retailers and brands, so both retailers and brands can really leverage a 3PL for more, for quicker and more efficient shipping. That’s obviously out the gate. If you have one warehouse or you don’t have any warehouses, you don’t take that approach of wanting to warehouse, you got past what you’re able to do at your garage for a smaller growing company, leveraging that third-party to actually be able to ship quickly and have two to three days shipping in all the United States or where it might be is a huge piece of that.
I talked a little bit earlier, on the slide earlier about entering different markets as well, you might have US covered but you might want to enter Europe or whatever it might be. So, third parties are great for that. Also, one of the trends we see here is it allows brands to ship direct versus sell through distributors, right? So, a lot of times brands leverage distributors in the traditional supply chain.
I didn’t put a distributor in there but a lot of times they are in between but more so in the past, not as much lately because of the rise of third-party logistics and warehouses. Brands as they hit a certain order, volume it can make sense for them to put their inventory in a third-party and they don’t have to worry about selling it to a distributor that has a whole different model of buying the inventory, taking a cut, in some cases buybacks or whatever it might be if they can’t sell through.
So, allowing the brand to have more control and power over their brand, not worry about who the distributor’s selling to. They own the relationship with the end of reseller or retailer, that’s a big thing that brands I’ve seen. That’s really the rise of the direct to consumer brand movement is because of the rise of third-party logistics among social media and different things.
Then, lastly, it enables more brands to offer dropshipping fulfillment to a retail partner. So, if you’re a brand and you’ve got Amazon really or you’ve got… Well, they’re more FDA obviously and they’re going to want you to use their 3PL but if you’ve got different companies that are working with your retail partners that say, “Hey, we want to work with you like a Home Depot but we’d love to test you out by dropshipping first, and then we can potentially bring you in full in-house.”
It now enables you to not only sell directly to consumers but getting your foot in the door with other retailers as well. So, something to think about there too. Then, dropshipping fulfillment, that model, in general, I’m sure many of you heard of it. There’s a lot of different misconceptions out there. Overall I’ll talk more about how dropshipping is a fulfillment model. It’s not buying stuff from China and flipping it in the US.
I think a lot of you probably understand that but we still see it every day. Really, what the main thing it does is empower retailers to expand their product catalog without inventory risk. So, that is one of the first points I made in this Amazon and e-commerce era that is really a huge differentiator on those that can offer a larger catalog can acquire more customers more efficiently through search, through Google shopping ads, whatever it might be, you will acquire more customers, and then we all know the game and online retailers according to customers as cheap as possible, and then increasing the average order volume where really the customer lifetime value.
So, dropshipping allows you to do that, allowing you to not only retailers to expand their catalog but even brands. I’ve seen manufacturers and brands of products who leverage other brands to just get the traffic to their site in the first place. When it’s complementary or I’ve even seen competing products. I know a kayak company who sold other kayaks initially to get off the ground to just start showing up. The kayaks were slightly different, offered to a different type of consumer. What I’ve seen dropshipping used in a ton of different ways. It’s a great way when leverage correctly to get a competitive edge over your competitors.
It also allows retailers to quickly and efficiently test product lines, brands like we talked about earlier with the brands on the 3PL side. Then, it enables brands and wholesalers to sell through more of their catalogs. So, even if you have a relationship as a brand with a retailer and they’re buying your hot item and they’re buying cases and packs of it and freight is just going out, you’ve got a new item that they’re not really sure about.
If you have that relationship, you can still put it on their website. You can still get promotion through them and you can still sell through, maybe not as popular as a brand or gain traction of a product that not might not be as popular. So, something about there as well where it’s… Yeah. Sure. You’re a traditional wholesaler, that’s what I do. I sell wholesale to retailers. Well, when it comes to expanding your product line, dropship can factor in and help you build a better business, more comprehensive catalog.
So, ship from store and buy online pick up in store so this, it’s kind of different couple of pieces here but it really allows brick-and-mortar retailers to compete better with the online, the pure digital guys, right? The large pure digital guys. So, not a lot of them. Amazon is the first and you see they’re with Whole Foods. They’re becoming more of a mixed and I think that’s the future of all retail is it’s somewhat of a mixed model for most of the large guys.
But some of this brick-and-mortar is a tough transition. I’ve been consulting brands and wholesalers and retailers for nearly a decade now and I often see the brick-and-mortar have a tough time transitioning to retail, right? [inaudible 00:16:33] online retail where the digital, your pure-play digital retailer has a tough time getting access to the right brands. It’s a different game that they’re playing and it does allow the brick-and-mortars to leverage their physical space more, whether it’s from the ship from store perspective where they can, if they can e-commerce enable their store, then you’ve got, whether its location it’s closer.
You got stuff that you don’t have to have a warehouse or pay the pick, pack and ship fee from a 3PL, you can always have little micro fulfillment stores if you have multiple brick-and-mortars depending on how large of a company you are. If you’re like some of the larger retailers, you might have a West Coast and East Coast store and if you can turn that into a micro fulfillment warehouse out the back, then there’s a lot of efficiency there.
The big efficiencies, it decreases residential shipping costs and increases margin and upsell potential. So, that’s more of the buy online pick up in store side of things. You’re not selling to residents or not shipping to residents and you’re having them come in store, that is a huge potential there. Then, significantly decreases the return, logistical challenges and cost so pretty straightforward. They can come in. Well, they feel more confident buying online because they know they can return it directly to the store, on top of that the costs of shipping it back and all that kind of factored in.
I’m sure a lot of people in this webinar today are like, “Well, that’s great for the Targets of the world and things like that.” But I’m sure everyone here, they’re not already a growing business, you’re aspiring to be growing a larger business and you may have a decision point where do I get a brick-and-mortar? Do I set up, whether you’re just a brand or a retailer, does it make sense to do it? Because you can leverage it in different ways, it’s something to consider, right? There’s a lot of added value even if you are a pure play digital retailer today. It will help your digital business as well.
So, who faces this challenge of this new distributed fulfillment strategy only being really implemented by the big boys and the smaller retailers and brands, kind of struggling to adjust to this new approach? Well, it’s retailers, for one, right? It’s the retailers that are needing to compete with the Amazons of the world, Targets of the world and like we talked about earlier, catalog size, reducing shipping costs and time.
So, with that, the new challenge has arisen, relying on suppliers to dropship and cross-dock. For those that are not familiar with cross-docking, we’ll talk more about it. But it’s essentially, bringing in inventory just into your warehouse, your brick-and-mortar for a set period of, a short period of time where it’s going right back out whether it’s being shipped out from your team quickly to the residence of the consumer or if it’s being picked up, you almost assume it’s being picked up in store as well. I don’t think that’s, typically you don’t hear about it referred in that way but you can essentially think anytime you’re bringing in a dropship order or an order that is a single order into your own physical location that’s not going to be really stored and put away like a traditional supply chain where you would store everything for sale next. That’s essentially cross-docking. I’ll show a more and a diagram might make a little more sense.
Syncing and trusting inventory quantities. This is a new concept for retailers where they were always just buying cases and packs and putting in their warehouse. They can turn around and see something on the shelf that does a big piece of it. Multi-source order orchestration sounds like a big fancy word and it really kind of is big and fancy and complex and it’s really tough to do. It’s tough to say, “I’ve got one product.”
I’ve got this t-shirt for sale and this t-shirt is in my warehouse, it’s in my brick-and-mortar, it’s also available via a dropship distributor. It’s also being developed. It’s also available via the brand directly. So, all that is very new, uncharted waters.
Invoice, payment, returns management all factors into, right? All new workflows, and then the brands on the same side they also face new challenges. They have the retail partners who want to do all these things on the left hand side here. They have the brands, they’re asking them to do all this. So, retail partners are saying, “Can you dropship? Can you cross-dock?” You’re saying, “What does cross-dock even mean?”
So, that means they have to accept daily POs. They’re not used to accepting a PO every day for an item. They want quarterly or monthly POs for both dropship and cross-docking. Pricing products and providing inventory. So, how do you price products now? You sell it, you’ve traditionally sold in case packs and you’re still doing that but you’re also dropshipping some, so how do I change the pricing? How do I factor that in? What’s the right thing to do? What’s the industry standard?
Shipping and branding packing slips, right? So, just how do I, do I ship up my account? Do I ship up their account? They want me to ship up their account with a third-party billing. First, sending me a label. How do I even get a branded packing slip in my current process? All that is new to brands, and then invoice, payment, returns management, all the same. They face the same challenges.
So, I’ll start with this kind of blank slate here where you can kind of see the multi-source approach here where an order comes in to an online retailer, there’s a lot of options, a lot of logic that needs to go into how it actually gets back to the consumer. So, if you think about it this slides all about how it affects retailers and I’ve got the second slide here on how it affects brands. But from a retailer perspective the second order comes in from your online store, you’ve got a couple of different things here to think about.
One this order came in for a certain item, where is it available? Where is the inventory? Was I displaying it properly on the website? Where am I shipping it to? What did they request when they checked out? What’s the shipping method? Then, you go into the highest margin option, right?
So, you look at your brick-and-mortar first, you look in your internal warehouse or third-party warehouse, right? You might see option A is not available, option B it’s out of stock there as well. Then, you start moving on to looking at your dropship suppliers. Okay. They’re both available kind of signified by the green there. Dropship C has it but dropship D has a better margin. So, I’m going to pick from dropship D.
So, I’ve picked my fulfillment partner now, right? I’m factored in everything from the location, the cost of the item, the dropship fee, what the shipping method is that was requested, all of that. You can even have priorities, right? So, that’s all the kind of stuff that factors in and you kind of need software to help you manage, which we’ll talk about, but this is kind of what we’re talking about when we say distributed order management. This is distributed order management, this is order orchestration and it’s basically what we’re talking about when we talk about implementing a distributed fulfillment strategy.
Then, not only do you pick the supplier A, dropship supplier A, now you have the option do I cross-dock it or do I direct dropship? A lot of times, you might think, “Why would I ship it twice? Why would I ship it directly into my warehouse and then ship it onto the consumer’s address? Why would I always dropship it?”
There’s other things that come into play here, right? Bulk POs that are sent, maybe you have multiple orders throughout the day, which you probably do, that are all going to go to that dropship supplier. One, they might not allow for dropship but let’s say in the scenario they do. You got two options. You may get a significant discount on the item and the shipping might even be free if you’re sending it to your warehouse. So, you need to factor in that. It’s all an equation and really an algorithm in the backend here that’s helping you decide all these and there’s a ton of different inputs as you can see that depending on your business model and the actual order details can vary each time. It’s just not able to be done manually at scale and that’s why you have distributed order management.
Then, lastly, updating the status, the supplier performance or at least reporting on supplier performance, reconcile this invoice, right? So, you might have cross-docked it where it’s a bulk invoice, a bulk PO that needs an invoice in bulk back on this PO or maybe it was an individual order that was dropshipped that needs an individual invoice to reconcile. There’s a lot of new data management problems that you faced here but it’s proven that this is the better approach from a customer standpoint, just looking at the Targets, the Amazons, the Walmarts of the world. It just takes a lot to get there and we’ll talk about how you can kind of bite that off in chunks as you go.
So, that’s retail, right? Just kind of looking back at that’s the main thing that you’re going to see. We didn’t really go through the inventory side, it’s kind of inherent here and is assumed, right? That you need to not only have the order orchestration working but the first thing that it’s all predicated on is the inventory needs to be in sync and we didn’t know exactly what the inventory is in there and each one of those sources, it needs to be displayed. If you’re doing a pick-up in store, it needs to be displayed and the options need to be there for you as well on your front end storefront, on your website. So, inventory and order management is really what we’re talking about.
So, from a brand perspective. They have a little bit different flow but there’s still some complexity here. It’s really them supporting that, right? There is a piece of this and this DS supplier A. Let’s assume that’s a brand. Let’s look at kind of from their side what they have to deal with.
So, brand, I’ve got here, they’re typically used to a lot of new brands which I think has been great for the industry as when to direct to consumer and have either partnered with a third-party or have figured out how to ship out of their own, maybe start in a garage and moved on to a warehouse. But they’re going direct to consumers now. First, going to distributors or even retailers and they know how to ship one or two individual orders and high-volume orders throughout the day.
So, that’s great. That’s its own flow though, right? It’s very different from a dropship flow where you’re doing on behalf of a retailer. I’ve got the wholesale line there you can see but I also have these purple lines here and really what the retailer is requesting of the brand. So, dropshipping, the difference here is that they typically will sell directly to consumers, a consumer is checking on your Shopify store or wherever and it’s automatically synced with the inventory you have on your Shopify store. That’s automatically synced with your warehouse management system, right?
Those pre-booked connections exist. It’s easy. It’s simple. 90% of these ERPs and WMS and OMS and whatever your acronym might be have that pre-built Shopify and big commerce sync. That’s easy. The hard part is now we’re working with third-parties, right? Your partners, your retailers, who want dropship because the difference is they need to now have insight into your inventory. They’re not going to go check your website every day to determine if you’ve got something in stock. They need an inventory feed. They need up-to-date inventory.
They need not only that, they need product data. They need to know what their cost is. They need pricing files. So, how do you get that to them? That’s another piece of the equation. Automated order acceptance so they’re not going to go through if you have a retail partner that wants you to dropship for them. You might be set up with an EDI perspective on that blue line with the wholesale, right? You might be on SPS Commerce or TrueCommerce or some of those, that’s fine, but if you have mid-tier retailers coming into you that don’t want to go through a large EDI provider, you have to figure out how to accept an order automatically.
They might ask, “Hey, can I send one via API or can I send you a dozen emails a day?” Or whatever it might be, you have to figure out how can I get orders in because we’re not going to check out, most of the guys that you want to work with are not going to be able to check out through a traditional B2C consumer check out if they’re sending hundreds or thousands of orders a day obviously.
Then, the invoicing side comes into play, right? For not checking out via your website, how do you make sure you get paid? Then, the brand impact it looks like they talked about. So, all of those five things we’ve got there are all things that brands need to consider and why really dropshipping has a bad name in the industry because people are, they don’t want to do this and it’s a mix between, it’s a low-risk kind of startup model but 30% of what Amazon shipping to you as a consumer is dropship, right?
It’s a fulfillment model. If you can figure out how to implement the fulfillment model, it allows you to do those things that we talked about earlier on in this presentation, whether it’s increasing catalog size, get your foot in the door with retailers like we talked about with brands and just being more efficient and having more in stock, in general, for a retailer. So, that’s kind of the brand side on what you see the challenges are and what we considered they’re feeling the challenges with distributed order management and those requests from the retailers.
Oh yeah and lastly, he also now needs to consider, well, I need to add a third-party warehouse to support the East Coast, right? So, that’s another edition there if you really want to compete in this day and age.
What to consider? There’s all these three pillars really of distributed fulfillment that we talked about being advantages, strategic competitive advantages that you can implement one of them, you can implement all three of them. It’s really up to you. I definitely would recommend implementing one at a time but let’s talk about evaluating what to consider if it’s right for you.
So, if you’re a brand and you’re saying, “I don’t know if I want a 3PL or does it make sense for me to do my own stuff out of my warehouse?” Really look at it and say, “Well, I’ll help me start dropshipping and win retailer deals. You might not be able to dropship today, you might have you and yourself or you and [inaudible 00:30:37] one or two other employees and they can easily ship out bulk case backs but you have to say no to dropshipping because it just doesn’t make sense for you.”
Can you make it make sense and what does that do downstream? Can you win more deals with larger retailers? You might not be hearing a ton of the larger guys asking for it right now, I’m sure you’re hearing a ton from the mid-tier guys but as this picks up, as online becomes more of a digital first kind of approach for the mid and higher-end retailers who are not putting a bunch of money in their department stores or anything like that, you’re going to hear dropshipping more.
I believe Macy’s is a 100% dropship now on their website and Nordstrom is really pushing it with their platform but think about that, right? Rethink dropship and how you can leverage 3PLs. What decrease in shipping times and rates can I gain [inaudible 00:31:31]? A lot of times it can be more expensive to go to 3PL because of the type of product you’ve got, the order volume you have, the pick, pack and ship fees might not make sense but they do have discounted rates. They are going to help you with shipping times. That’s usually the reason why you’re going to go there, especially if you already have a warehouse, you’re doing it strategically to add one on another coast or whatever.
So, you really have to see what’s the long-term ROI on doing this? It might not make sense in a per order now today but can I… If I get stuff to people in two days, three days, whatever, if I can enter new markets, does it make sense for me long-term? You might have to take a little leap of a leap of faith there on that.
Then, the rates, you might save money just because of their bulk buying rates. It really depends on the company in your situation. Yeah. Obviously, factor in the pick, pack fees, storage costs, all the sell through rates that you have.
So, when you’re evaluating dropship fulfillment I would definitely say start with the who are the… You might have 15 vendors you work with. I was talking from a retailer perspective that you’re considering. I would say who is my top one or two? Let’s start the process of evaluating, what would it be like to dropship with them? Let’s look at them. Let’s use them as a test case to say, “How would we start working with these vendors?”
Then, really the next question you’d ask is and you probably have to ask them, “How will we connect from an inventory quality perspective? How do I get my costs to how often my costs change? Will they update automatically? How do I send you orders? What are all the options? How do I get invoices?”
Then, based on their answers, is that reliable? Do you feel good? I know multiple, I know larger retailers that we have on our platform that their vendors are mixed between EDI, which is super reliable and it syncs all day every day, and then the same retailer is working with other vendors who say, “We’ll upload stuff via the vendor portal for you.” They just can’t rely on that person to actually go and upload a spreadsheet every day.
So, it all depends on the vendors. Know that you’re going to have a mix of both in most scenarios and depending on, we talked about this a lot, the power of the relationship between the brand and the retailer with a supplier, in general, and the retailer, what are they going to be willing to do for you versus what are they going to require you to do? You should have those conversations with one or two of your vendors and really get a feel for if it makes sense for your model. Then, you’ll want to talk through the returns and the refunds and all that.
From the ship to store and buy online, the first thing to make in e-commerce [inaudible 00:34:10] do you have somewhere to pick, pack and ship and what’s the staffing? Can you really leverage the staffing of those? Folks kind of common sense so I’ll kind of blow through it but the big thing that’s worth mentioning here is I’m assuming that most of the companies I talk to every day are mid-tier, middle-market doing a couple of million dollars a year, maybe $10 million, maybe something like that.
We’re not talking about a lot of the Amazons of the world. It’s the top 1% of retailers out there, and so if you think about it, you’re on a budget when it comes to this technology, you’re coming to a piece of software to save money, to make more, make things more efficient. A lot of times you want to leverage what you already have. No one really wants to roll out a huge new ERP and wants to run all this technology for the sake of technology. If you can make it make sense and you can do a crawl, walk, run approach, integrate directly in your POS, it can make a lot of sense.
I think I’ve seen a lot of people do it where if they want to be able to see what’s in stock in their different locations, they can integrate directly into a POS system and look at it and not only pull inventory but also place orders. So, that’s what I’ve seen most commonly as an easy quick way to be able to become a ship from a store kind of retailer.
The online pick up in store is a little bit tougher to do and that’s kind of my third point, you really do need more front-end work. So, if you’re on a Shopify store, getting this implemented is not the easiest thing. It’s not like a waste of my knowledge but if you guys see another, ping me something to chat, a quick way to just have, here’s what’s available at location X, Y and Z, right? It takes a lot more that goes into it.
It’s more of a back-end system like our Flxpoint to allow to get that inventory up, to be able to put that data, associate the multi-location data, with Shopify which I know they have the concept locations but just, in general, getting that from point A, which is where it’s actually located in the inventory that’s on hand versus displaying it on the website, and then showing the shipping cost and all that, it’s not usually an easy just install an app and you’re good to go.
So, think about that, what does it look like from a performance perspective on your website? How does it affect the experience? What is it going to cost you to develop it? That will really help you to consider, does it make sense to buy online pick up in store or not. Shipping from the store is a much easier way to implement. You just can add them as a source in your distributed order management system and start pulling inventory from a POS integration.
Cool. I see some more questions coming through. I appreciate it. Some good ones that we’ll have towards the end here. Okay. So, I guess my next thing here was… I see some people raising their hand. I’ll make sure everyone can hear me fine. I’m assuming. Looks like we’ve… Yeah. I think we’re good here. Okay. Yeah. Okay. I think we’re good.
So, the three pillars that we got here. What to consider? That all sounds great, that’s fine but… Okay. Well, I just need to implement software to help me do this. That’s probably the next logical thought. Well, really to look at kind of what it is, right? It’s distributed order management software, what are you really concerned with? If you think about it, it’s really understanding, one, how many vendors and sources that you’re going to actually pull inventory from? What’s the different file formats that you think you’ll need to be pulling in? Are you connecting to a WMS? Are you connecting to an API via your third-party warehouse? Are you connecting directly to do a POS system for your brick-and-mortars?
So, when you’re evaluating them and I’ll talk more about this, you need to think about these connections first. What is already pre-built for the distributed order management, the DOM software that you’re looking at? I would definitely recommend starting with one of these to start. This is basically the 3PL side of things. Here’s your buy online pick up in store or ship from store, and then here’s kind of more of your dropship connections.
I would pick one of those three and see what it takes to get connected because you’re going to need on-hand inventory quantities and cost. A lot of times you’re just implementing dropship for the first time. It might feel a little weird that you’d never see or touch the item and you don’t bring it in-house so you’re going to need to start thinking about how I get product data up to my store.
The rest is kind of self-explanatory, tracking, invoice, information, new orders, the taxes, the fees, all that needs the data needs to flow back and forth, and then in the middle, you need to have that visibility of inventory across multiple sources to be able to manage that, even manipulate it, even change the quantity because you want to buffer or you want something there to actually change the physical client as something else virtually and how it’s displayed online.
The order orchestration I’ve shown earlier and optimizing that, and then the vendor onboarding reporting. The reason I showed this slide here is because most the software you’re evaluating and on is probably not doing any of this and doing it very well or it’s only doing a couple of pieces of this because a lot of this software that ‘s on today is built for the traditional model. That’s why we talk about traditional supply chain versus distributed fulfillment as traditional supply chain does not have these issues.
These are new challenges that you have to face for the benefit of all the stuff I talked about. So, quarterly buying bulk freight, orders placed over email, phone, checkout process and long EDI implementations. That’s what a traditional supply chain is and what the software was built for. Very simple. It’s very hard to go from a traditional supply chain like what you see when you go and search inventory order management for e-commerce, right?
Any of those top people that show up, they were built for the warehouse [inaudible 00:40:04] inventory, I buy it in bulk quarterly and I send it to my Shopify store. It’s tough to bolt on distributed fulfillment workflows. It’s tough to bolt on high-volume daily orders and the syncing that goes into that, the orders placed over multiple disparate systems, smaller one to one frequent invoices between trading partners.
The shift in inventory ownership. That’s a big piece in general because product data is usually not an issue. If you’re buying everything in-house, you’re looking at it, you’re taking a picture of it, you’re doing things that a very manual one-off base where you’re adding it directly to your Shopify, your BigCommerce store, and then you’re syncing back to your warehouse or vendor, whatever it might be, you’re not loading in large amounts of products and data that’s constantly changing, right?
So, they’re not really built for that, the traditional inventory order management systems. Then, you’re not really, the small, our trading partners too. So, the vendor onboarding and all that, they don’t really have those built-in knowing that there’s AR risk as you bring on smaller trading partners and more on high-volume.
It’s easier to build a system around this and the new model of fulfillment, and then allow for things like transfer orders and like bulk POS and B2B checkout. That part’s easy. The hard part is all of this because it’s intensive. It’s data intensive. It’s integration intensive across multiple disparate integration points and there’s a lot that goes into the processing of it and the accuracy of it.
So, you’re going to be disappointed with a lot of the traditional supply chain or traditional inventory in order management. That’s really why we built Flxpoint to support this new way of distributed order management.
So, to kind of help you evaluate it, like I said, I’m putting logos up here, I’m not going to try to clean because every software platform is evolving and changing. It’s tough to speak to who does what well, but think about these kinds of questions as you look for… If you decide that distributed over management at some point is going to make sense for you and you want a system to scale up to that eventually, there’s three different pillars, like I said, I’ll kind of go through how you evaluate each one. Look at this, evaluate the software at least for being compatible with this strategy.
So, what a lot of these guys do have down are, it’s easy to just build a pre-built integration with a 3PL, right? So, that I will say, if you plan on just doing a 3PL and you sell on Shopify and sell on Amazon, most of the big names you find out there in inventory management are going to work for you. That’s fine. As long as you don’t have specific data that you want to transfer that’s not in that pre-built vanilla integration, we’ve actually done consulting work and built integrations on top of the pre-built or, at least, in place of the pre-built integration that platform already had, when into the platform and the pre-built will offer to do it for free, we charge a consulting fee and they went with us because they wanted to get it done right, they wanted to make this [inaudible 00:43:02] the data was going into what places it need to be and it was passed the what you would think of a pre-built, just kind of out-of-the-box integration.
So, that it is good to have it start there. If you do have a platform or you do have a 3PL that they picked out and mine, having the integration pre-built is great but then definitely look at it, look at the integration, to any data you get behind, talk to a solution engineer and run through some scenarios because we’ve seen issues with people who aren’t able to get country of origin and they needed that to come through to their ERP or OMS through the 3PL or they needed the components of a kit or a bundle didn’t really map up properly and if you sent an order, it wasn’t going to map and split the order up properly.
These little things like that I would run through order scenarios to really vet that integration, even though it’s pre-built, it might not work for you. A lot of these guys have moved to pulling their pricing off and just selling you before you can actually get a free trial or a demo or at least a trial or kick the tires.
So, look at that. Also, look at the API, try it. Like I said you might not be the most technical person but work with the team to figure that out on what’s available and what you may or may not need to pass from a data perspective. Think about your unique needs, and then if you do need customization have that conversation with your 3PL and your ERP or OMS or if you go with someone like a distributed order management system, right? So, have that discussion, see what it takes.
So, the dropshipping side if you are saying, “You know what? The 3PL doesn’t make sense to me. I’m more of, I want to get focused on dropshipping.” What you’ll need to be focused on there to start is adding dropship vendors. What is self-service versus customer fee as you look at DOM systems or just a traditional inventory order management, they are really not good at this part.
The dropshipping side of things is a whole new workflow. The transaction between trading partners is not really, it’s very tough. Almost all will admit it, they’ll say, “We left dropshipping to other people.” That’s where we come in but the problem is that to make it part of your flow, you kind of need to have it all managed with one place.
So, I will say if you’re into the dropshipping, dig in on how do you integrate new vendors? What does the onboarding process look like? What do you have to pay for each time versus like in Flxpoint we’ve got this self-service tool where you can easily connect into the majority of vendors you work with, which is a CSV file and easily kind of pull that in, whether it’s email, it’s a Dropbox file or whatever it might be.
Look at that, understand the total cost of ownership of the software platform. If it’s not a file and you need to integrate API and EDI and all that stuff with your vendors, what’s the fee look like and what’s the team look like? Ask about who’s on their team, right? What’s their experience there? You can definitely ask that. If you’re not going to get straight answers there, it’s probably not the right team for you and the right product if you’re dropshipping.
How is my unique inventory? So, look at your inventory and order workflows, make sure that they’re supported, fully vet that, and then this is a big part that gets missed a lot, how are your vendors supported? So, you might have a dozen vendors that are mom-and-pop shops, small brands, whatever it might be and you might need help with getting them on board and talking to Tech Talk and helping them, consult them on it. A lot of these software platforms, they’re not willing to do it or it’s an extra fee or whatever, ask, “Hey, will my account manager, will they actually help my vendors if I loop them into an email and support them?” That’s something to help you evaluate it. Look, that’s a big piece of it.
Last part of that, what’s your experience? Right? Do they have a vendor portal? Not all these platforms are going to have a place that your vendors can log in, right? So, that’s going to save you time and money if they can log in and view orders and details.
Ship from store, pre-built integrations on my store OMS, pretty table stakes there, right? It’s a pre-built that makes things easy. The shipping label generation process, this is really about what happens when I do get an order into my POS system? Is there a way that I can now generate a label? If I’m going to e-commerce enable my store and start shipping out of it, what’s that process look like?
Is my new shipping order management software, can they just pull in the POS information and manage the orders there as far as inventory, pulling the POS inventory management order is there, and then print a label? Just really walk through that workflow. It’s going to be evaluated based on what you’re using for in-house inventory and order management in your store and what DOM or traditional inventory management system you pick.
The buy online portion, this is a big thing. Is there an API or is there ability to expose the actual location inventory, right? So, a lot of times that’s taken for granted, you just might assume, of course, I’m going to know what the inventory is at each location. But to get it from the location on that left-hand side of the diagram, we show all the way to the front-end and the visitor on your website seeing that actual quantity, can you get that there if you have two custom-built or whatever? Is it that data point exposed?
It’s a big question to ask, and then really what, how easy is it to get that even exposed in the first place? Like I said it can be tough sometimes. It’s not a simple app so what integrations are there to show that and to support that from a website perspective?
Cool. All right. So, we got done with 10 minutes left which is perfect because we got some questions here. That is the presentation, guys. So, if you do have any more questions, please add them in. I will start answering a couple that came through as I was talking. I’ve got my email there, feel free to email me. I will respond to everyone, at least, get you in touch with anyone that, whether it’s a solution consultant on our side or whatever it might be, feel free to email me.
Also, go to the contact form if you want to see a demo, just go in and hit contact us. We’ll get in touch with someone to give you a demo of Flxpoint, which I said, like I said earlier, is built for this. If you are playing on distributed order management, and planning this fulfillment strategy, that’s exactly what we built Flxpoint for.
So, first question. How do you determine shipping costs and still make a profit as a new retailer? So, the big thing here is if I have a diagram, so looking at this and I’ve got a better diagram for it but just to stay in the presentation, if you look at the dropship supplier, right? They do provide a lot of the larger ones, distributors, at least, and even the smaller ones you can ask them to provide you an invoice, and that’s really it’s a different flow now where every single order you send, it might be one individual e-commerce order from your consumer is now mapped to one individual purchase order to your dropship supplier, which is then mapped to one individual invoice of from your supplier, from a reconciliation accounting standpoint, right?
That’s why it’s so different from traditional where it’s like, “Wow. There’s really one PO to one invoice for every single e-commerce order.” That’s kind of how it works. That is how it works. You can obviously bubble that up in the larger statements and reports but that’s how you can reconcile. Charge me this much on my Amazon account, my seller central account with fees, everything, here’s how much I received for that order for my consumer, here’s how much it cost me to now send a purchase order, here’s my purchase order I sent and that purchase order should reconcile back with invoice you get from your supplier.
With that, once you get that, Flxpoint, this is one of the big things we want to solve because that’s one of the number one questions we’ve heard over the last 15 years is like, “How do I even know if I’m profitable, I’m not getting an invoice for another couple days after, maybe even a week after?” We have the ability to automatically import invoices as a CSV. It automatically imports in the same way we pull an inventory. It’s a PDF.
We work with a third-party service that’s an additional fee but they can even convert PDFs, and we have a report that we call the proper billing report because it’s super unique and creative naming. But it allows you to see the actual cost and the profitability across that whole chain of things. So, it’s not easy. We had to build the platform just for it. We were running US Direct. We had no idea how people ran their business. We had all these crazy spreadsheets and it really helped us build out the Flxpoint features.
I hand selected my inventory from various suppliers, how do I factor shipping cost from all over? So hand select inventory from various ship suppliers. Okay. So, if you hand select, that’s great. As far as shipping costs, we have a couple of ways when it comes to shipping costs to factor that in. You have your shipping costs that you set on your [inaudible 00:52:11] your shipping price I guess on your Shopify store, Magento, BigCommerce, whatever your platform.
Let’s say it’s free shipping because you got plenty of margin in these just to make it simple. Got plenty of margin on these products, you don’t need to charge shipping. You want to make it free and easy to check out, right? So, an order comes in, now you have any shipping cost. Your suppliers don’t care what you charge on your website, their cost of the shipping that they’re going to charge you is separate from that and it could be from multiple different suppliers.
You might have one order that now needs to go to supplier A and it also routes a purchase order to supplier B, we do a couple of things. One, we can integrate, we have an integration with ShipEngine, which is in the backend, ship stations API to rate shops and give you a cost estimate and really send, one, to the cheapest supplier, and two, just with the cheapest rate. So, you can factor that in and you can use our rate shopping is what we call it to kind of integrate with the carrier rates. So, that helps you right there.
Secondly, once you actually do depending on how you ship, you might ship from your own carrier, and then we integrate with UPS or whatever, to get the actual cost but if you’re getting, if you’re a supplier, which in a lot of cases they are, are shipping off their account, a lot of the larger distributors, at least, are shipping off their account, then you’re getting charged for shipping later. That, one, you’ll have to just understand who is, what’s their policy? Do they have a flat rate? Is it after the fact? If they charge you after the fact, which a lot of the large distributors do, you just have to kind of wait and see what the average charges are and that’s what the invoice reconciliation is about.
They’re going to put the shipping cost on the invoice. We’re going to pull it in. You’re going to be able to look at the profitability report and determine if it’s proper or not and filter down from a ton of different criteria. Hopefully, I answered your question because there’s a lot of different ways and a lot of are factors in there but, in general, it can be accomplished in one of many different ways, at least, to get close to understand what the shipping is going to be.
All right. So, if you were dropshipping several different products, kinds of products, would you recommend that dropshippers be focused on one or a limited amount? So, the split order scenario I talked about earlier, is not ideal, right? It’s not ideal to pay for shipping twice on one single order. So, if you can find a large… Here’s the issue that people face.
You can find a large distributor of multiple, of a large catalog, that’s usually the best from a shipping perspective if you plan on having multiple items on an order, right? Someone plans on checking out from your store with multiple items that might go to two different locations, it’s good to have that come from one place and one shipping label. It’s a good experience to have come in one box. It’s also very rare to find a distributor that has a super large catalog when you’re across several different kinds of products.
Like you said, that’s going to have much margin, right? You’re going to have the best margin by working directly with smaller brands or smaller niche wholesalers that… That’s the benefit, right? That’s the benefit of the distributor is that they give you that access to all their large catalog which it’s just from one warehouse. Then, they take all that margin. So, it’s really kind of just to evaluate.
I would say this much. I like the idea of distributors, starting with a distributor large one, whatever, getting that dialed in, getting the flow that we’re showing here dialed in, and then from there starting to source some brands, right? Getting your sales up, seeing what people are buying, all that kind of stuff. Then, you can move on to smaller brands and you can negotiate shipping with them because you already have sales, not only that, you know what sells, right?
You’ve got to be a marker for a certain product. You’ve got the data and you can start bringing those products in-house that sell more often. That’s part of the process of optimizing. It’s not only from an order orchestration perspective but just your business, in general, and buying wholesale what you know you can sell.
All right. Looks like those are the questions we’ve got for right now. All right. So, we’re going to be sending the recording out, guys, looks like super great attendance. I love seeing as many people show up for our webinars. My people stayed all the way through. It looks like we had double at the end at what I saw when I first got started. So, a lot of people joined. Yeah.
We’ll send this out. We’ll have it. You guys know where to find us if you’re interested in a demo. Last thing I will say is that we are probably partnering with one of our WMS providers to do another in-depth, tactical, how to set up distributed order management, all the way from using Flxpoint to the warehouse management system, to even connecting with a 3PL.
I do plan on having something more along those lines. So, we’ll send out some more information to be able to look out for that. Besides that, feel free to ping us with any questions. Happy to answer anything that you guys have. Thanks, again, for joining.