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Drop-shipping is a kind of retail business method where to fulfill customers’ orders or to deliver wholesale freights, 1st subsidiary company, a drop ship supplier (neither a manufacturer nor a wholesaler)picks the items from the manufacturer/merchant (2nd subsidiary company), packages it, labels it and delivers it to the customer or desired location.
In context of retail domain, drop-shipping business requires very less investment as you need not to put up a warehouse to keep items. With no physical store, it makes you flexible in terms of location as from everywhere with internet you can manage your business. You can receive high profits against your principal amount. You can put up variety of products as connecting with various sellers.And with minimum efforts and money, the risk factor is very low.
And moving forward in the business, as one can start selling multiple products for higher profits and sales, connecting with more merchants/ manufacturers. Thus, the main subsidiary as drop ship supplier starts doing business with many subsidiaries. This can be addressed as intercompany drop ship in retail business.
While it brings loads of profits, intercompany drop ship also has its complexities to manage. Some of the major difficulties, experienced by the retailers are listed below:
- Wrong shipping
- Separate shipping cost calculation
- Incorrect Inventory Management
- Inaccurate pricing display
Managing a retail business, where the tasks are divided among the subsidiaries companies is a daunting task. Printing of invoices for the orders to be processed, accurate pricing & rankings of the items listed and inventory management of the items are hard to tackle. To end the struggle of intercompany drop ship, NetSuite has designed a feature “NetSuite Intercompany drop ship” which aligns all the processes of the subsidiaries automating them.
As you enable the automated Intercompany drop ship feature, it sets the accounting preferences. These settings are necessary and fixed throughout to allow intercompany drop ship workflow function correctly. It helps in managing the intercompany drop ship in the following way:
- NetSuite Intercompany Drop Ship feature manages all the paperwork containing invoices and receipts from one source sending the relevant papers to the subsidiaries.
- It allows to set restrictions in the settings window which controls the correct pricing and amount on linked transactions on both subsidiaries.
- With generating automated tracking numbers and barcodes, it helps in correct shipping of the items from the subsidiaries to the customers.
- Before initiating the process, it locks the inventory quantity and if there is a mismatch on the both subsidiaries, it won’t process further.