Shop Direct

1. C hr is H aighton
H ead of Outbound Logis tic s
Optimising proposition, range and stockholding through
drop-ship

3. What is drop ship?

4. What is drop ship?
• “Drop shipping is a supply chain management method in which the retailer
does not keep good in stock but instead transfers customer orders and
shipment details to either the manufacturer, another retailer or a wholesaler,
who then ships the goods directly to the customer.” source: Wikipedia

5. Drop ship is fundamental for Shop Direct
• Products across every category
• Over 300 suppliers supporting:
o 9.2m despatched items (20%)
o 8.1m parcels (29%)
o £720m of sales
• Some highly seasonal lines
o Over 40% of all despatches are made in Q4
o Some supplier volumes increase 50x at peak

6. Why drop ship?

7. Why drop ship? extended range
• Offer a much extended range
o No dormancy risk for retailer
o Frees up the pick face for faster moving lines
o Partnership with category specialist
• De-risks highly seasonal lines
o Flowers/perfumes/hampers
o Dressing up - halloween, world book day
• Personalised/bespoke products
o Jewellery, football shirts
o Curtains

8. Why drop ship? a lean supply chain
• Enables the supplier/manufacturer to supply little and often
o Reduces the cashflow impact on manufacturer and retailer
o Shortens lead times
o Minimises dormancy risk
o Minimises exposure to pilferage
o Operationally efficient for the supplier
• Delivers speed to market
o Supported by IT-light implementation

9. Why drop ship? non-compatible SKUs
• Minimises storage requirements for bulky products
o Upholstery
o Filled products (pillows/duvets)
• Allows a wide tail for products with large numbers of SKUs
o Lingerie
o Window (blinds/curtains)

10. Why drop ship? leverage supplier capability
• Personalisation
• Specialised storage/delivery
o Ambient/chilled products
o Perishable/hazardous products
o Gas cooker installation
o Oversized products (e.g. sheds, SBS fridges)
• Delivery of services
o Software downloads
o Product assembly
o Experience days

11. What do you risk when you drop ship?
• Loss of collation
• Loss of control/visibility
• Reduced proposition:
o Supplier capabilities
o Same day despatch
o Late cut-off

12. Optimising your drop ship model

13. Technology and management
• Technology underpins the operation
o Must be flexible to the capability of the supplier
o Lead times and real time stock updates at SKU level
o Real time order & status updates
o Integrated with Carrier Management System
o Management by exception
o Query management process
o Added value services
• Supplier field management team
o Technology vendor can deliver training, support, compliance
o …but you still need the operational relationship

14. Drop ship as an invisible extension of your operation
• Technology underpins the operation
o Branded despatch notes
o Customer visibility
• Product catalogue
o Faster to market
o More accurate product information
o Value to both parties
• Shared outcomes

15. Suppliers aligned to your outcomes
• Service drives sales
o Delivery proposition
o Competitive lead times
• Plays into sort order of search results
o Good local relationship between your supplier and your carriers
o Solid MI shared with suppliers – supplier dashboard
o Despatch on time is key
o Quality/customer – experiential measures
• Accurate forecasting
o Drives availability
o Enables joint mitigation activity

16. Supplier partnerships – it’s all about trust!
• The supplier is delivering your customer promise
o Alongside their own business processes.
• The supplier needs to invest to integrate
o But integration drives long term relationships.
o And the drop ship model allows you to take it one step at a time
• Like any relationship, you get out of it, what you put into it!

17. The future of drop ship

18. Drop ship heritage
• We have offered drop ship for decades
o Supports very long term supplier relationships
• “28 days for delivery” to next day
• The products have changed but not the benefits

19. The future of drop ship – significant growth
• More virtual products
o Digital downloads
o Services
• More range extension
• Wider use of multicarrier – better proposition
• Leverage improving supplier fulfilment capability – Just In Time
• Leverage international supply chain
o Access unique products across the globe

20. Any questions?
@ShopDirect
www.shopdirect.com