Inventory Fulfillment

Written by Linda Alexander
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If you are an online business, there are several ways to handle inventory fulfillment: drop shipping, keeping inventory, or using a fulfillment house. Drop shipping is very popular among e-tailers and has some strong advantages. First, there are no inventory costs, as the drop shipper owns the merchandise. Therefore, there is no risk or cost to you to keep inventory. Also, they integrate seamlessly with your business; your customers will never know that you never handled the products. The drop shipper will use your company name and logo when shipping the products to your customers.

With drop shipping you will make less of a profit than if it were your own product because the drop shipper takes a commission on what you sell. So be careful that the products you choose have a high enough margin for you to make a profit. Also, you have no control over customer service--just in case something goes wrong, it's your reputation that is at stake.

Traditional Inventory Fulfillment: Maintaining Inventory

With traditional inventory fulfillment, you manufacturer the item, or order it from a manufacturer, and keep it in stock until you use it to fill an order. This allows you to ship the product immediately, keeping customers delighted. You can also provide excellent customer service, since you will be in control of the whole process. However, this type of inventory fulfillment has disadvantages. One is a large capital investment--inventory can sit on your shelves for a long period of time, and if it doesn't sell, you have lost money. You also need an efficient fulfillment system like mail order companies use. Most retailers are used to shipping full pallets; now they must fill single orders by themselves, which is an entirely different process.

Your third distribution choice for inventory fulfillment is to use a fulfillment center. This is a company that will handle some or all of the services involved with delivering products to your customer. Fulfillment centers will keep inventory for you, and pick, pack and ship products, using your labels. Some even offer order processing, web site hosting, and customer service call centers. You can run an entire virtual business online, this way, never touching the product. Keep in mind that this method, while convenient, can also be a costly solution.

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