Purchasing & suppliers
Drop Shipment
By the Supply Chain Manager team · Updated October 16, 2026
A drop shipment is when the supplier ships an order directly to your customer, so the goods never pass through your warehouse.
You still sell to the customer and buy from the supplier, but you skip receiving, storage and picking. It suits bulky, slow-moving or made-to-order items you would not want to stock.
Drop-ship orders still need tracking: the supplier's dispatch confirmation and delivery proof should come back to you, because the customer will call you, not the supplier, if something goes wrong. Many distributors keep a short list of reliable drop-ship partners and use them only for the lines where that reliability is proven.
Drop shipment example
Illustrative: a customer orders a large industrial cabinet you sell twice a year. Rather than stocking it, you raise a PO with the manufacturer, who delivers straight to the customer's site.
Why drop shipment matters for distributors
Drop shipping lets a distributor offer a wider range without holding the inventory. The trade-off is less control over delivery time and packaging, and thinner margins on some lines.
Common drop shipment mistakes
- Counting drop-ship sales in warehouse demand, which inflates stock forecasts.
- Promising delivery dates without confirming the supplier's lead time.
Examples on this page use made-up round numbers to show the calculation. They are not benchmarks or results from real businesses.