What is a Drop Shipment?
It is a supply-chain-management method where the retailer takes orders from the customer and processes it to the manufacturer or original supplier with the order and shipment details. Then, the manufacturer or the original supplier directly sends it to the customer. In this method, the products directly reach the customer without passing through the distributor or retailer although it is the retailer who generates the order.
When is Drop Shipping Used?
Network marketing firms and online retailers most commonly use this method to process their orders. The customers watch the product online and order it on the site of the retailer. Then the retailer sends the details to the original supplier or manufacturer and they ship the product to the end customer directly. Physical brick and mortar store can also use this method by displaying an item at their shop or by keeping a product catalog. A customer may order the item choosing from the display window or the catalog and the shop owner sends the details to the manufacturer or supplier and they ship it to the customer. This method minimizes the cost of inventory and administration.