CPIM Practice Exam

What does it mean to "drop ship"?

1. To hold inventory temporarily

2. To ship inventory directly to a customer

3. To handle all stock and deliveries

4. To transfer ownership without physical handling of products

The correct answer is: To transfer ownership without physical handling of products

The correct understanding of "drop ship" refers to the idea of shipping inventory directly to a customer from a supplier, rather than the retailer handling the inventory directly. In a drop ship model, the retailer never physically handles the product; instead, the product is sent from the supplier to the customer on behalf of the retailer. This process allows retailers to expand their product offerings without the need to invest in inventory space or upfront costs associated with purchasing products. It streamlines the supply chain and enables businesses to focus more on sales and customer service instead of inventory management. The other choices could lead to confusion about what drop shipping specifically entails. Holding inventory temporarily relates to traditional inventory management practices, while handling all stock and deliveries typically describes a scenario where the retailer is fully responsible for inventory and shipping logistics. Lastly, transferring ownership without physical handling might refer to various transactional operations but does not encapsulate the core essence of drop shipping, which involves direct shipping from supplier to customer.