Most sellers on eBay and Amazon are familiar with retail arbitrage and drop shipping models of fulfillment. But just in time fulfillment is a fulfillment and inventory management model that may be more attractive to some sellers.
Like drop shipping, just in time fulfillment allows sellers to quickly expand their product catalog without large investments in inventory or warehouse space. Unlike drop shipping, just in time fulfillment gives sellers more control over the product that customers receive.
We’ll go over the advantages and disadvantages of JIT fulfillment in this article.
What is just in time fulfillment?
With JIT fulfillment, merchants place the order with their suppliers only when a customer places an order with the merchant.
For instance, you’d list an item for sale on your own website or another marketplace like eBay or Amazon. When a customer purchases that item, you turn around and place an order from the supplier. But you have that item shipped to you for repackaging before you ship it to the customer.
This fulfillment strategy is different from drop shipping because items are delivered to the merchant, not directly to the customer. JIT fulfillment allows for several advantages, as we’ll see below.
- No need to store and process large amounts of inventory
- Fewer issues related to stockouts, expirations, or deadstock
- Lower capital investment needed because there’s no need for bulk inventory purchases and storage
- Flexible cash flow because of reduced inventory and storage requirements
- Can easily expand product offerings since inventory storage isn’t needed
- Some marketplaces have strict requirements about drop shipping, so JIT fulfillment allows merchants to abide by marketplace dropshipping rules
- Since you’re repackaging the product, you can remove all documents with the supplier’s information and include your own
- This can mean marketing material, packing slip, invoices, or any other document that identifies the supplier
- Ensure that the customer receives the product he ordered in the condition that he ordered it
- Need strong relationships with vendors in order to fulfill orders on time
- Poor relationships can lead to canceled orders, long shipping times, or other mistakes
- Usually lower profit margins than drop shipping since there’s an extra shipping step involved (from supplier to you and then from you to customer)
- No control over the fulfillment process from the supplier to you
- Potentially longer shipping window
- You’ll need to monitor your prices carefully and adjust for the fluctuating prices from your suppliers and for increasing shipping costs
There are many reasons why the JIT fulfillment model is better than drop shipping. Perhaps the biggest reason is that JIT fulfillment meets one of Amazon’s requirements about drop shipping: that you identify yourself as the seller on the packaging and inserts.
When you drop ship an item, you don’t have control over what the supplier does, but with JIT fulfilment, you’ll be able to remove all supplier information and put your own materials in there.
For instance, if you drop ship from a distributor to Amazon and the distributor sends the customer the product in its own branded box and inserts, your account would be put at risk for violating Amazon’s drop shipping policy.
Drop shipping isn’t as lucrative today as it was a few years ago. Many consumers today know about Alibaba, Aliexpress, or any number of Chinese websites selling consumer goods for super low prices.
In fact, many of those same Chinese suppliers now sell on eBay and Amazon, so you may be competing directly with them. This can really hurt you if they suddenly increase prices to force out their competition and harm your metrics.
In addition to competing with the suppliers themselves, perhaps hundreds of courses, workshops, and self-proclaimed Youtube gurus have pitched drop shipping as the next “get rich quick” business idea.
Just in time fulfillment allows you to better control the product and process for your customer, but it’ll cost you extra in shipping and time. Consider JIT fulfillment if you’re also considering drop shipping to see what works best for your business model and goals.