Drop shipping is a popular fulfillment model that requires sophisticated integration with suppliers. This guide covers drop shipping automation strategies for Magento-NetSuite integration.
Drop Shipping Automation in Magento-NetSuite
Automating drop shipping workflows reduces manual work, improves order accuracy, and enables scalable fulfillment without inventory investment.
Drop Shipping Overview
- Customer orders from Magento
- No inventory held by merchant
- Order forwarded to supplier
- Supplier ships directly to customer
- Merchant never touches product
- Merchant intermediary (takes markup)
Supplier Management
Supplier Configuration
- Supplier company information
- Contact details (email, phone, fax)
- API connection details
- EDI setup (if applicable)
- Commission/margin percentage
- Product mapping
- Pricing agreements
- Payment terms
- Performance metrics
Multi-Supplier Management
- Map products to primary supplier
- Identify backup suppliers
- Compare pricing across suppliers
- Load balance orders
- Manage inventory per supplier
- Track supplier performance
Drop Shipping Order Workflow
End-to-End Process
- Customer orders in Magento
- System identifies drop ship products
- Verifies supplier inventory
- Creates purchase order in NetSuite
- Sends PO to supplier (API/EDI/Email)
- Supplier confirms receipt
- Supplier ships to customer
- Tracking provided to customer
- Shipment delivered
- Supplier invoice received
- Invoice reconciled and paid
- Order marked complete
Inventory Management for Drop Ship
Virtual Inventory
- No physical inventory held
- Inventory records in NetSuite
- Supplier-provided quantity available
- Updated periodically from supplier
- Prevent overselling
- Handle out-of-stock situations
Inventory Synchronization
- Pull inventory from supplier daily/hourly
- Update Magento product availability
- Mark as drop ship products
- Show expected delivery timeframe
- Handle stock-outs and backorders
- Reserve inventory when order placed
Pricing and Margin Management
Pricing Strategy
- Supplier Cost: Purchase price from supplier
- Markup: Percentage or fixed amount
- Retail Price: Cost + Markup
- Promotional Pricing: Temporary discounts
- Volume Pricing: Bulk order discounts
Pricing Updates
- Receive supplier price list
- Apply markup formula
- Update Magento product prices
- Notify customers of changes
- Manage price history
Purchase Order Generation
Automatic PO Creation
- Create PO when customer order placed
- Include customer shipping address
- Add supplier part numbers
- Include product quantities
- Add special instructions if needed
- Assign PO number
- Link to customer order
PO Transmission Methods
- API Integration: Automated submission to supplier system
- EDI/EANCOM: Electronic data interchange
- Email: Formatted PO sent via email
- FTP/SFTP: File transfer protocol
- Web Portal: Manual entry in supplier portal
Fulfillment Tracking
Order Status Tracking
- PO acknowledged by supplier
- Items picked and prepared
- Shipped with tracking number
- In transit to customer
- Delivered to customer
- Issue resolution if needed
Tracking Integration
- Receive tracking number from supplier
- Add to Magento order
- Send to customer
- Poll for delivery updates
- Auto-confirm delivery
- Handle delivery exceptions
Returns and Refunds
Return Process
- Customer initiates return
- System generates RMA number
- Return label provided to customer
- Customer ships back to supplier
- Supplier receives and inspects
- Supplier issues credit
- Credit applied to account
- Refund processed to customer
- Inventory restored
Return Authorization
- Verify return eligibility
- Generate RMA number
- Provide return shipping label
- Specify return address (supplier)
- Include RMA number on package
- Track return shipment
Billing and Reconciliation
Supplier Invoicing
- Supplier sends invoice for orders shipped
- Match invoice to PO
- Match invoice to delivery confirmation
- Verify quantities and pricing
- Process for payment
- Create accounts payable record
Cost Tracking
- Track supplier cost per product
- Calculate margins realized
- Monitor supplier pricing changes
- Benchmark against competitors
- Negotiate better rates
Supplier Performance Metrics
Key Performance Indicators
Common Drop Shipping Challenges
Best Practices for Drop Shipping
- Clear Contracts: Define terms, pricing, SLAs
- Inventory Accuracy: Sync frequently to avoid oversells
- Communication: Establish clear communication channels
- Performance Monitoring: Track key metrics regularly
- Backup Suppliers: Don’t rely on single source
- Automation: Automate as much as possible
- Customer Experience: Maintain quality standards
Actionable Takeaways
- Set up supplier master records in NetSuite with commission rates
- Configure virtual inventory synchronization from suppliers
- Implement automatic PO generation on customer orders
- Establish supplier tracking and delivery confirmation
- Set up return RMA workflow with supplier
- Track supplier performance metrics (accuracy, speed, quality)
- Maintain backup suppliers for critical products
- Reconcile supplier invoices against orders and deliveries
