Fulfillment, or perhaps Dropshipping?

Choosing a logistics model is a very important element that contributes to efficient and comprehensive order processing. Choosing one of the available models is quite a challenge for e-commerce companies.

Comparison of dropshipping and fulfillment as logistics models

Let’s start by explaining what the aforementioned logistics models are all about. Dropshipping is a model in which the responsibility for order fulfillment and shipment of goods is taken over by the supplier/manufacturer of the products. The role of the store is limited to promotional activities, building a consistent brand image or customer acquisition. On the other hand, fulfillment is a service that involves the handling of orders by a third-party operator, which may cover the entire order process, or only a part of it. When a company decides to use the fulfillment service, the entire process of warehousing and shipping is taken over by the logistics operator, and the store owner can focus on activities such as product promotion. Of course, the highlighted models are not the only ways of order fulfillment that an e-commerce company can use.

The cooperation of an online store with a product supplier/manufacturer or logistics operator is very similar. In both models, the e-commerce company does not focus on warehousing and fulfillment elements, so it does not need to hire additional employees, arrange couriers and saves time on packing the order, which from the perspective of the company means a significant reduction in costs.

Fulfillment, or perhaps Dropshipping?

Advantages of fulfillment and challenges of dropshipping in order fulfillment

What do the different models look like in practice? Fulfillment is based on an integrated system through which the order information goes directly to the logistics operator, who handles the order fulfillment process. Invaluable in this model is the WMS system, which allows to connect the interface with the online store and/or courier system. Thanks to integrated operations, the e-store can track the entire order fulfillment process in real time. Such a solution also allows inventory monitoring, so that information on the amount of products in stock is available. A very big plus in the case of fulfillment is the turnaround time of the order, which can even be shipped the same day. In dropshipping, on the other hand, the order information is provided by the store to the supplier/manufacturer, which, in the case of offering multiple products from different companies, can result in misinformation and a very long lead time, which, as a consequence, can involve refunds to customers.

The most important difference that exists between the two models is that in fulfillment, the e-commerce company has much more access to information and control over the various stages of order fulfillment. In dropshipping, this control is very limited. It may be that the supplier/producer of the products may not pay much attention to the form of packaging of the products, without taking into account the guidelines and personalization of packaging, which in turn will have a negative impact on building a consistent brand image and creating strong and lasting relationships with customers.

Undeniably, warehousing costs for small, newly established online stores can prove to be a huge problem. At the beginning of the business, companies can handle the entire order process on their own, but as the business grows, they will face a decision regarding the choice of a logistics model. The assistance of a specialized logistics company may prove to be the golden mean and a guarantee that products will be properly complimented, packaged and delivered on time to the customer.