Drop Shipping
Use Drop Shipping to Expand Your Market
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Drop Shipping: Use Drop Shipping to Expand Your Market
By Andrei Kossyrine
© Xpress Software Inc. - All Rights reserved
http://www.xssoftware.com
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Making manufacturing more profitable is not a "one size fits all" solution. This change in thinking and operations is also not accomplished in a single step or procedure change. The following is one of a series of topics designed to enhance the profitability of manufacturing in general.
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The financial cost of holding inventory is a major factor in running any business. Normally, that cost has added overhead costs associated with inventory management, insurance, rotation, and inventory order processing. Even worse, these inventory costs can be aggravated by obsolescence of the inventory itself. Product competition also forces prices down, and overhead inventory costs are there as well to undermine profitability.
To help with these issues, many manufacturers have allowed their resellers to easily make direct shipments to the reseller's customers. This means resellers can reduce their own inventory and overhead costs substantially. Customers get prompt delivery from the factory that is assured to be the latest version of the product. Inventory obsolescence disappears and a reseller's time and transportation costs are saved.
Resellers, with the practice of drop shipping, are also able to maintain a "virtual inventory" by means of a website or catalog and greatly expand their product offering to their customers. They are also able to have a smaller showroom and become potentially more profitable themselves by not having to stock a wide available inventory. By spending less time focusing on inventory management, resellers can focus more on their own product knowledge of a fewer number of options and increase the level of customer service that they offer to their clients.
Therefore, the drop shipment scenario both saves the reseller money and allows the reseller to concentrate on adding value by supporting their customers with installation and applications help.
In the past, resellers often felt the need to take the product into their shops for test and burn-in before shipment to the customer. With today's technology, this isn't always necessary. Components are generally more reliable and manufacturer quality-assurance standards are high. Software also allows products to be checked for defects as they move down to production line. Processes such as these allow the reseller a further opportunity to concentrate on adding value, as well as selling service and applications support.
The practice of drop shipping also lends itself to a better partnership between the manufacturer and the reseller. By lines of communication are bound to be more open when a drop shipping agreement is in place, as the manufacturer will need to know "what is selling" and the reseller will want to order more of what is selling and less of what is not. With the sophisticated logistical support of companies like UPS, FedEx and Yellow, desired inventory can be shipped almost instantly with very little "wait time" for the customer to endure before receiving their ordered product.
In short, manufacturers' drop shipments to resellers' customers is becoming normal supply chain practice. The results are proven. Resellers preserve margins by reducing inventory and overhead costs and the customer gets quick, reliable delivery of the latest product.
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Since 1996 Xpress Software Inc. has provided
technical assistance in lean manufacturing methods,
computer systems and business process automation
to maximize manufacturing profits.
Visit its website www.xssoftware.com or contact
Andrei Kossyrine at andrei@xssoftware.com.
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