Private equity firm Apollo Global Management will take Rackspace private in the all-cash deal.
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For larger companies, more costly systems can offer additional advantages. Supply chain software provider Sterling Commerce, a unit of AT&T; Inc., offers an order management system within a business software suite that lets retailers instantly view the profit margins of individual drop-ship items to determine whether to offer special drop-shipping services, says Jim Bengier, Sterling’s global retail industry executive.
If an online shopper indicates she wants to buy a $300 outfit but also wants matching shoes not currently in the retailer’s stock, the retailer could instantly pull information from drop-shipping suppliers to determine which supplier has the shoes and how much it would charge to drop-ship them to the customer’s address. If the profit margin met the retailer’s goals, the merchant could offer to immediately drop-ship those shoes so they arrive with the outfit, Bengier says.
He would not disclose the cost of the Sterling order management system, but says it’s aimed at retailers with at least $250 million in sales.
A good fit
An order management system can also play an important role in managing drop-shipping when integrated with complementary technologies. That’s been the case at web-only retailer PetsUnited, which sells through sites including Dog.com, Horse.com and Camping.com. It relies on a supplier web portal integrated with its order management system to manage the 10-20% of its orders that get drop-shipped, Frenchu says.
The VendorNet DropShip Manager portal integrates with PetsUnited’s order management system from Escalate Retail. With a primary vendor designated for each item, PetsUnited has set business rules in the Escalate order management system that automatically forward orders through the VendorNet portal to drop-shippers via e-mail, XML (a system for transferring data via the web) or electronic data interchange.
PetsUnited has drop-shipping arrangements with about half of its more than 600 suppliers, and many of them, such as horse bridle providers from Amish communities, do not have sophisticated electronic systems for sharing product and shipping information. The VendorNet portal, which sits on the retailer’s own web servers, enables small suppliers to enter product data, order confirmations and shipment status information through a web browser. Larger suppliers can send their information through automated XML-based system-to-system communications.
Eventually, PetsUnited expects to expand on this system to build more flexibility into routing orders among the most appropriate drop-shippers. “Now, if a drop-shipper doesn’t have the inventory, they notify us through VendorNet that they have us on back-order,” Frenchu says. “Eventually, we’ll be able to take that order and see if we can resource it from another distributor.”
The more sophisticated e-retailers get at managing drop-shippers, the less likely they are to drop the ball in terms of satisfying their customers.
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