The Difference Between Order Fulfillment and Drop Shipping Companies

The most significant difference between order fulfillment companies and drop shipping companies is that order fulfillment companies handle third-party logistics for clients that design and create their own products, and drop shippers act as third-party vendors for clients who handle virtually every other aspect of the product’s life-cycle, including creation, storage, and shipping. Order fulfillment companies are a good option for retailers that have confidence that their product will meet or exceed margin, retailers that can afford to invest long-term, up-front capital, and retailers that either cannot or do not want to invest in their own third-party logistics – including warehousing and shipping. Octochem provides a comprehensive array of order fulfillment services and third-party logistic services that can help retailers store and ship their products with reductions in costs and shipping times.

The Benefits and of Order Fulfillment

Clients of order fulfillment companies retain full control of their inventories, dramatically reducing problems such as back-orders as a result of low or depleted stock. Order fulfillment also allows retailers to offer lower prices to their customers since they control cost-cutting measures such as buying materials in bulk. Both order fulfillment companies and their clients can leverage their geographical locations to provide shorter shipping times to their target customers. Storage and staffing expenses associated with order fulfillment are flexible since the client rents the services instead of purchasing them. And order fulfillment companies are a relatively-inexpensive solution for clients that cannot afford to purchase and maintain their own warehouse services.

Issues Associated with Order Fulfillment

Order fulfillment operations have limited product flexibility, which can cause problems when a product undersells or when demand outpaces supply. Order fulfillment operations also require significant up-front capital. This capital is often tied to the inventory and cannot easily be recouped until – or unless – the products are sold.

The Benefits of Drop Shipping

Drop shipping requires less up-front capital since retailers are not buying stock until after the purchase is made. Drop shippers have greater flexibility with the products they sell since they do not own inventory. Drop shipping also provides a safer environment to test new products and marketing strategies.

Issues Associated with Drop Shipping

Drop shippers receive smaller profit margins for their sales. This is because the manufacturer bears the brunt of the risk and therefore takes a higher percentage of the profit. Drop shippers also have no tangible control over inventory. This can cause problems when a drop shipper sells a product that is out of stock or discontinued.

Octochem provides high-quality, low-cost order fulfillment services to companies in North America. In addition to standard services such as storage and shipping, we provide additional services such as product assembly, daily report generation, and repackaging services.