Key Components to Developing a Successful Drop Ship Program Doug Smith, Vice President of Operations, Sheplers Mike Elder, President, Mike Elder Consulting Inc.

Session Summary Benefits and Risks of Drop Shipping Identifying Products and Vendors Developing an Internal Structure Choosing a Communication Strategy Data Management Monitoring the Customer Experience Quarterly Business Reviews

Introductions

Benefits of Drop Shipping Expand Your Assortment Depth Launch New Peripheral Categories Increase Sales Reduced Inventory Costs Strengthen Vendor Relationships Potential savings on shipping costs Lowers risk on product – perishable, trends, etc.

Risks of Drop Shipping Increased Fulfillment Expenses Increased Shipping Costs Control of the Customer Experience Lead Times to Customers/Out-of-stocks Impacts to your OMS system Returns issues Unreliable inventory status Your company’s reputation can be adversely affected by poor performance of drop ship partner

Identifying Products and Vendors High Cost Items Fringe Size Offerings Slow Moving SKU’s Items with Obsolescence Risk Heavy or bulky items Perishable

Developing an Internal Structure Executive Sponsor Define Roles and Responsibilities Who Owns the Vendor Relationship? All Teams Need to Support the Model Dedicated Group to Manage the Day to Day Operations

Communication Strategies Mail Fax Phone Spreadsheets OMS with Vendor Portal EDI Transmissions Integration with a supply chain service vendor

Data Management Match Internal SKU’s with Vendor Styles Provide Sales Forecasts at Item Level Inventory Tracking ◦ Real Time ◦ Daily, Weekly, Monthly Feed ◦ Lead Times for in Stock Data interchange and timing for orders Export/import product data to/from drop shippers Coordination of company pack slip information

Quarterly Business Reviews In Stock Performance Fulfillment Time Analyze Item Performance Shipping Costs Opportunities for improvements or expansions Service level commitments and performance

Session Take Aways If well executed ◦ Increase assortment ◦ Happy customers ◦ Lower inventory and fulfillment costs ◦ Increased revenues/profit If not well executed ◦ Assortment issues ◦ Upset customers ◦ Higher costs ◦ Lower revenues and profit impact ◦ Reputation damage Establish clear agreement with drop ship vendors (and/or supply chain integrator), ◦ Data interchange and timing ◦ responsibilities and service levels, ◦ product and service pricing Assign a champion to own, monitor and manage