Drop Shipping Part 1 – Overview of EDI in Drop Shipping

This post is the first in a four part series. Stay tuned over the next 3 weeks for posts on inventory updates, branded packing slips, and drop shipping using SDQ (Store Destination Quantity) orders.

Drop Shipping on the Rise

Drop shipping is being employed by more and more companies. One of the best known examples is Amazon. The Internet retail giant has its own warehouses, but a significant number of suppliers ship directly to the consumer after an order is placed, with Amazon only working as the retail interface through which the supplier and consumer do business.

Other retailers are following suit. Drop shipping allows retailers to offer a broader assortment of products, speed up shipping by using one carrier instead of two carriers, reduce warehousing and inventory carrying costs, and reduce packaging labor.

Products that are ordered infrequently and high-dollar value items are obvious candidates for drop shipping. However, offering a larger array for choices to consumers while managing the entire supply chain efficiently are also motivators for increasing drop shipping programs.


Accurate order communication and visibility into the location of product are necessary for reliable drop ship programs. EDI (electronic data interchange) services provide significant advantages because accurate and timely communication with suppliers are prerequisites for drop shipping to work effectively.

Here is how EDI in drop shipping works:

Purchase Orders and Purchase Order Acknowledgements

EDI Purchase orders are invaluable for quickly sending accurate order information. Purchase order acknowledgements are also important. This form is sent from the supplier to the retailer alerting them that the supplier does have the requested items and that the merchandise will be shipped as requested.

Advanced Ship Notice

One advantage of EDI in drop shipping is the ability to generate and send an advanced ship notice to the retailer when the shipment is partially or totally complete. These notices advise the customer of the expected delivery date, the shipping method, the items being shipped and contain tracking numbers for the shipment, so consumers can trace their delivery’s progress.

The retailer then forwards the pertinent information to the consumer, while the drop shipper completes the order.

Order Status Report

An order status report can be required when there’s a need to send updates on the progress of an order and its fulfillment status. This is particularly true with custom products or orders that involve a significant amount of lead time.

Inventory Inquiry Documents

On-hand inventory tracking and visibility are very important in the drop-shipping process. Without clear information regarding a supplier’s inventory, retailers cannot reliably offer products to consumers.

EDI platforms can provide notification of on-hand inventory through an inventory inquiry document. This type of form can be sent as many times as necessary to keep the retailer apprised of inventory levels, which is of especially significant benefit during peak shopping seasons and other times of high product demand.

Part 2 of this series on drop shipping will cover inventory updates in more detail.

Federal Express and UPS

The two most commonly used shipping solutions for drop shippers are FedEx and UPS. The problem that many drop shippers find is that they cannot automatically integrate their shipment orders with FedEx or UPS’ systems.

However, with the right EDI solution, this is no longer a problem. Automatic EDI order integration with both UPS and FedEx is now available, which eliminates not just one more step in the shipping process, but also saves additional time and money.

With automatic order integration, drop shippers can ensure that all the information needed is automatically entered in their preferred shipper’s system and potential manual entry errors are eliminated.

The Rise of Electronic Retail drives the adoption of EDI

More companies are doing business electronically every year. The rise of the Internet as the retail environment of choice for many consumers makes it vital that any retailer or supplier hoping to capitalize on this trend have a robust, flexible EDI platform. The right EDI system ensure fast and accurate communications and a streamlined order and tracking process. Without fast and accurate information through EDI, the system breaks down and becomes unmanageable.

Only with EDI can retailers and their suppliers provide today’s consumers with the reporting to which they’ve become accustomed. Order tracking and shipment alerts have become expected by most consumers. Failing to provide them with this information can cripple any retailer and their supplier relationships.

Drop Shipping Part 1 – Overview of EDI in Drop Shipping by

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