Do you know about - Sales Without inventory
Fashion Merchandising Major! Again, for I know. Ready to share new things that are useful. You and your friends.Now there's an oxymoron. Many of us who cut our teeth in the sell and catalog trade know that you have to own list to make sales. In fact, it's the largest balance sheet asset in many businesses.
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In the late 1990s, dot.com businesses with their "virtual inventory" idea tried to convert all that-and guess what? That business model has never in fact gone away; it remains with numerous occurrences in both large and small businesses of many distinct types.
There are two scenarios that we see for running businesses with tiny or no inventory. The first is the primary vendor drop ship which businesses have used. The other is to build a business colse to a just in time list model which may contain some added stock which is warehoused for fulfillment.
Vendor Drop Ship
Here are a few examples. One of our clients is a sell specialty division store that has direct sales of over 0 million. In the holiday season, their direct business approaches 20% of net sales. Holiday assortments which are dropped shipped contain a wide array of food, specialty items, wreaths and garlands, along with daily big label items together with furniture, rugs, draperies and other home products.
Another business we are working with sells unusual hardware. They keep best sellers in stock and drop ship the slower provocative products, which can all be sourced and shipped within a 7- to 10-day window. That may not be the top level of customer service, but then again, they don't have a major fulfillment installation and the attendant inventories, concern for forecasting with required tight accuracy, or the important overstock and liquidation problems coarse to other direct businesses.
A third business that specializes in business supplies has a small internal list and extends its assortment offering 80% by drop shipping directly to the customer. I've also seen a mega retail/direct sporting goods business improve its line tremendously to contain many slower selling products that could not "break even" in the catalog's merchandise selection process. The point is that with drop shipping you can open up a much broader assortment to your customers than you could construe for inclusion in print media and internal Dc stocking.
What do these businesses have in coarse that makes this strategy effective?
Systems functionality. Their web site and call center order supervision systems contribute connectivity to the major vendors participating in vendor drop ship programs. These systems validate, reputation and process the orders out to the vendors. The better ones download customer orders throughout the day or in batches. The systems are linked to terminals and printers in the vendors' Dcs to process all during the day. As orders are viewed and printed by the vendor, the drop ship theory controls the process and gives the retailer visibility into the assorted order statuses. As the vendor prints the pick tickets and the order is ship confirmed to the system, those confirmations are sent upstream to customer aid files on-line or in batches. The retailer eliminates all the precious by hand processes that normally make drop ship a bad dream and lead to poor customer service.
Domestically sourced product. Imported product, exclusive and long lead time products are not candidates for vendor drop ship because of the length of time required to get them. True fashion goods is not a candidate because the retailer gets only one chance to purchase product, and perhaps one reorder; by its very nature the goods is new, with no selling history and tiny reorder ability. This idea generally works best where the replenishment is short: 1 to 10 days. This way you can continue to contribute higher customer service, but without the attendant list and installation costs.
Vendor reliability. Since the vendor is shipping directly to your customer on your behalf, they have to be as good or better in terms of accuracy than your internal fulfillment. This, I'm afraid, eliminates many vendors that do not understand the direct industry. Additionally, the retailer must make and inflict vendor compliancy standards for processing orders, accounting paperwork for Pos, invoices, possible returns processing, etc.
Just In Time
We are finding more and more businesses offer goods that has shorter lead time to replenish or fulfill more frequently. Any companies we work with also hold some list that is longer lead time or exclusive; and they may also use some vendor drop ship programs.
With these just in time programs, clients are trying to achieve in expanding to lower list costs:
Reduction in the amount of packages received by the customer
capability to insert business materials
Use cartons and labels with the business name
reduction in the freight costs from fewer shipments.
Like the vendor drop ship scenario, the vendor has to be responsive and reliable. They have to be willing to hold list to cover your expected customer orders.
Consider both of these in your strategic thinking. Think how they can build your sales without you carrying the most precious asset-inventory-and reducing the occupancy and labor costs to process goods and fulfill customer orders.
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