Drop shipment
Also called drop ship, direct ship
Reviewed by Dasha ShakovVP Marketing, Proton
Updated
What is drop shipment?
A drop shipment is an order the distributor sells but has the manufacturer ship straight to the customer, so the goods never pass through its warehouse. The distributor still takes the order, invoices the customer and owns the relationship.
How it works
The distributor sends the supplier its own purchase order with the customer’s ship-to address, and tracking and proof of delivery come from the supplier. Suppliers may charge drop-ship fees, and sales tax follows the delivery address, which can call for a resale certificate between supplier and distributor.
In online retail, “dropshipping” names a store that sells goods it never stocks; for a distributor, a drop shipment is just one delivery route. A special order may or may not be drop shipped, and a 3PL is different again: the distributor’s own stock in someone else’s warehouse. Many distributors report direct-ship sales separately, because costs and margins differ.
Drop shipment example
A jan/san distributor sells three commercial floor scrubbers to a school and has the manufacturer ship them straight to the school, then invoices the school once the supplier confirms delivery.
Related terms
- Special orderA special order is an order for an item the distributor doesn’t keep in stock, bought from the supplier specifically for one customer.
- Third-party logistics (3PL)A third-party logistics (3PL) provider is a company hired to handle some or all of another company’s warehousing, order fulfillment and shipping.
- Proof of delivery (POD)Proof of delivery (POD) is the record that a shipment reached the customer, such as a signature, photo or timestamp captured by the driver or carrier.
- Resale certificateA resale certificate is a form a business gives its supplier to show it is buying goods to resell, so the supplier doesn’t charge sales tax on them.
