A large upscale national retailer has asked me to consider being a drop ship provider of goods to their catalog.  I am interested in finding out if anyone has experience with this kind of arrangement.  I am a small business and am having trouble wrapping my mind around a few issues:

1.  Wholesale pricing - either I get paid 1/2 or they double my regular retail price (or something in the middle).  I get this when I ship a large quantity to one location, but as a drop ship provider I will ship "on demand", smaller batches than my usual custom order minimum, directly to their clients using packaging I purchase.  They pay for the shipping.  I can't figure out how this works even slightly in my favor - either I get fairly compensated and the cookies are outrageously expensive or I don't get paid well enough.

2.  Demand - this is a new product offering for them so they don't know how much demand there will be for my product - how do we shape an agreement that won't have me blocking off time for work that doesn't come or having more work than I can handle?  Because I do lots of weddings and corporate events, I often have weeks where my maximum capacity is booked well in advance.

There are some other issues, but these are the biggies that I would really appreciate some feedback on.

Many thanks in advance!

These kinds of accounts sound better than their practical application. You clearly understand a major issue - the unpredictable nature of this arrangement. If you can hire occasional workers, have enough production space, and quick access to ingredients, it might work. Ask to see a contract. (There might be hidden gems.) 

There was a thread about this same issue on cookiersrus forum...you could search for that, it got a lot of responses.

Good luck!

Thanks so much for the resource!  The thread on cookiersrus was great. :)