Using a 3PL vs. Drop Shipping

Drop Shipping vs. Third Party Logistics

One question we come across quite a lot when speaking to our clients is: What is Drop Shipping and is it the same as using a 3PL? The short answer is that they are different but in this article we are going to look at some of the distinctions between these services.

What is Third Party Fulfilment?

Third-party fulfilment is an outsourced fulfilment solution where you engage with a service company to store merchandise, pick and pack orders and handle the logistics of shipping to customers on your behalf.

The key to understanding third-party fulfilment is that the seller buys his or her inventory in bulk and then contracts a fulfilment warehouse to handle all of the aspects of fulfilling that order.  This is a good option for a seller who doesn’t have a warehouse of their own but would like to keep their own inventory.

You can then use B2BGateway’s EDI solution to receive orders automatically from buyers and send them directly to your 3PL  who can then fulfill these orders on your behalf.  This really frees up your time, eliminates errors and improves the accuracy of the data being sent to and from your partners.

What is Drop Shipping?

Drop Shipping is a retail fulfilment method where a store doesn’t keep the products it sells in stock.  Instead, when a store sells a product using the Drop Shipping model, it passes the order to a third party and that service has it shipped directly to the customer.  As a result, the seller doesn’t have to handle the product directly.

Drop Shipping reduces inventory, warehousing, packaging, labor and shipping costs for retailers by enabling them to pass orders and ship to information along to the manufacturer or wholesaler. B2BGateway’s EDI solutions can help Drop Ship Trading Partners not only by providing integrated order, invoicing and shipping solutions, but by also providing the EDI 846 transaction set.  Otherwise known as the Inventory Inquiry / Advice (INVRPT in EDIFACT).   The EDI 846 is used by manufacturers and wholesalers to notify retailers and trading partners of stock and inventory levels so that the retailer doesn’t commit to sales where not enough stock is available.

The biggest difference between Drop Shipping and 3PL fulfilment is that the selling merchant doesn’t stock or own inventory.  Instead, the seller purchases inventory as needed from a third party which is usually a wholesaler or manufacturer, to fulfill their orders for them.

View a list of our 3PL partnerships