June 3, 2004, 12:00 AM

Picking up drop shipping

(Page 2 of 3)

Still, some retailers say they’re not optimistic that the process will ever get fully automated. QVC Inc.’s QVC.com, for example, is able to take automatic electronic feeds from vendors to update inventory control and it gets some electronic feeds on product descriptions that it can review and install on its web page. But Steve Hamlin, vice president of operations for QVC.com, believes his company will always require some manual intervention on product descriptions. “We usually need several people to review changes, including someone from the legal department, so I doubt we’ll ever get to the point where the copy is never touched by human hands,” he says.

But while help appears imminent to improve the ability retailers to communicate with vendors with regard to product descriptions, it may be more challenging for them to improve issues associated with order fulfillment.

Today, many retailers e-mail orders to their drop shipment vendors, expecting immediate shipment. But if a customer calls to ask about order status, the retailer may not be able to determine whether it has been shipped or when, or how it is being sent, where it is now and when it is expected to be delivered. That information is generally easier to access if the retailer shipped the item itself.

Complicating factors

Complicating this issue is the fact that many retailers work with numerous vendors that have different ways to communicate with retailers. “J.C.Whitney has 1,200 different vendors that it communicates with,” says Shawn Boler, category manager for J.C. Whitney Inc., which sells automotive components and accessories online. “To deal with this, we have developed an in-house system that has integrated the communications between our customers and our vendors. The system takes the product feeds we get from the customer and sends them out as orders to the vendors.”

J.C. Whitney uses drop shipping for customized orders, such as automotive interior accessories where customers request that their initials, special colors or unusual designs on the items. It also uses drop shipments for specialty items for which it does not receive a lot of demand. For commodity orders, the retailer stocks inventory and ships the items itself.

But communicating electronically with vendors can be difficult. While most of Cooking.com’s vendors can accept electronic orders, the company works with some that still require Cooking.com to print the order and fax it. Even those that take electronic orders use different computer standards that require Cooking.com to convert the orders to different standards for each vendor. Cooking.com uses software from Kewill Solutions North America to do this.

Several companies have sprung up to develop technology or services to deal with the needs of retailers working with multiple vendors. Commerce Hub, for example, serves as a middleman to develop connections to thousands of vendors and then connects via one link to the retailer. “Different vendors are often on EDI, XML, Cobol or even Quickbooks. We support which ever way they do it,” Poore says.

Another way to deal with the communication issue is to use special software such as that designed by Marlborough, Mass.-based Kewill. Such order management software provides the conversion abilities so that retailers and vendors can effectively talk to each other regardless of the type of operating systems they are using. In addition to sending order and product information between parties, the software allows retailers to log into the vendor’s database to check on the status of orders that it originated.

No more faxes

The development of such third-party solutions has helped retailers expand their use of vendors. “Commerce Hub’s middleware solution has helped us communicate with our vendors in a more efficient manner,” says QVC’s Hamlin. “Before, we had to fax some orders and we’d find out later that the order didn’t arrive because the vendor’s fax machine was out of paper. When we’d use EDI, we had difficulties getting our systems to talk to each other. We’d end up with a lot of files that were dropped as well as duplicate orders.”

Also, by having a middleware that can talk to vendors using different type of systems, QVC has been able to expand the list of potential vendors because it has not had to limit its business relationships to vendors that had compatible technology, Hamlin says.

Other retailers are working on the communications links with vendors so they can offer the same service through drop-shipping that they offer through their own distribution centers. “We’re working on getting the messaging specifications in place so that we can offer overnight shipping on drop-shipment items,” says Kent Anderson, CEO of Macys.com. “We have to deal with some internal issues in order to do this.” Macys.com currently offers overnight shipping on items it carries in stock. The company discloses on its web site when an item is not available for overnight delivery.

Key to the success of the technology-based solutions, experts say, is the transparency associated with tracking the order. Even with its current system, when Baby Universe.com gets an inquiry at its call center asking the status of an order, it sometimes has to send an e-mail to the drop shipper to check where the order is. Typically within 24 hours, it gets an answer back and it can then get back to the customer. Epstein says the delay has not caused problems.

But many experts say 24-hour responses are not good enough for many retailers. “If a shipper wants to provide first-class service, it has to have complete visibility to fend off customer service calls,” says Ira Grossman, vice president of Kewill’s professional services group. “A customer service representative needs to be able to check the status of an order when the customer is still on the phone.”

Reducing the WIZMO calls

Not only does that provide good customer service, but it also reduces costs. Each where-is-my-order call costs at least $2. Being able to fend off a few hundred calls a week can save a retailer significant money.

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