Drop shipping integration connects your webshop, ERP system, suppliers, and customers through automated document exchange. A drop shipment is any order a supplier fulfils directly to your customer on your behalf, without you holding the stock. Instead of managing inventory, your business focuses on orders, invoices, and the customer relationship. By automating document flows with EDI, businesses can reduce manual work, improve visibility, and efficiently manage large product portfolios without maintaining stock.
What is drop shipping?
Drop shipping is a fulfilment model where products are shipped directly from the supplier to the customer. Your business sells the product, but you do not need to purchase or store inventory before a customer places an order.
Once an order is received, the supplier fulfils the order on your behalf while your business remains responsible for the customer relationship, invoicing, and order management.
Why do businesses use drop shipping?
Drop shipping is often used by businesses that want to offer a large range of products without investing in inventory or warehouse space.
This model is particularly attractive for companies with many suppliers and extensive product catalogues, allowing them to expand their offering while reducing inventory risk.
How does a drop shipping flow work?
The flow below illustrates how documents move between all parties involved in a typical drop shipping setup.
Step 1: Order Received from the Webshop
The process begins when a customer places an order through a webshop.
The webshop sends a sales order to your business, which is received and processed by your ERP system.
Step 2: ERP Creates a Purchase Order
If the product is not held in stock, the ERP system automatically creates a purchase order (PO) and sends it to the supplier.
The PO includes the customer’s shipping address, allowing the supplier to ship directly to the end customer.
Step 3: Supplier Receives the Order
The supplier receives the PO and prepares the shipment.
Although the goods will be shipped to the customer, your business remains the commercial partner and continues to manage the transaction.
Step 4: Supplier Sends an Order Acknowledgement (ACK)
The supplier sends an Order ACK confirming they can fulfil the order.
This information can then be shared with the webshop to keep order statuses updated.
Step 5: Supplier Sends an ASN
Before the shipment arrives, the supplier sends an Advanced Shipping Notice (ASN).
This document provides shipment details and can be used to inform the webshop and customer that the order is on its way.
Step 6: Supplier Sends an Invoice
The supplier sends an invoice to your business.
Although the supplier fulfils the order, the commercial relationship remains between your business and the supplier.
Step 7: Webshop and Customer Receive Updates
Using information received from the supplier, your business can send:
- Order Acknowledgements
- ASNs
- Invoices
This helps keep both the webshop and the customer informed throughout the fulfilment process.
Which Documents Are Used in a Drop Shipping Integration?
| Document |
Purpose |
| Sales Order (SO) |
Order received from the webshop |
| Purchase Order (PO) |
Order sent to the supplier |
| Order ACK |
Confirmation from the supplier |
| ASN |
Shipment notification |
| Invoice |
Billing document |
| Catalogue |
Product information and pricing |
| Inventory Status |
Product availability updates |
How do product catalogues and inventory updates work?
Many drop shipping businesses rely on catalogue and inventory data from suppliers.
Suppliers can provide catalogue information and stock availability updates, which can then be shared with webshops to keep product information accurate and up to date.
This helps ensure customers see accurate product information and stock levels when placing orders.
What challenges do businesses face with drop shipping?
While drop shipping eliminates the need to store inventory, it can introduce new operational challenges.
- Common challenges include:
- Managing large numbers of suppliers
- Updating product catalogs manually
- Maintaining accurate inventory visibility
- Receiving supplier information through PDFs instead of structured data
- Managing suppliers that do not support EDI
- Handling invoice and order status updates manually
In some industries, such as fashion, businesses may work with many smaller suppliers that have varying levels of digital capability. This often results in manual document handling and additional administrative work.
How EDI Automates Drop Shipping for Suppliers and Retailers
EDI helps automate communication between your webshop, ERP system, and suppliers.
Instead of manually exchanging documents, EDI can automate:
- PO creation
- Order acknowledgements
- ASN communication
- Invoice exchange
- Catalog updates
- Inventory status updates
This helps reduce manual administration while improving visibility across the drop shipping process.
For suppliers that do not yet support EDI, businesses typically manage these documents manually, which is why EDI for drop ship suppliers is increasingly a supplier onboarding requirement rather than an optional capability.
Key Takeaways
- Drop shipping allows suppliers to ship products directly to customers.
- Your ERP can automatically create POs when webshop orders are received.
- Common drop shipping documents include SOs, POs, order acknowledgements, ASNs, invoices, catalogs, and inventory updates.
- EDI helps automate communication between webshops, suppliers, and ERP systems.
- Businesses can expand their product offering without increasing warehouse capacity.