When you are at the "adding product" stage of building your website these are a couple of questions that without a doubt will cross your path.  One of the biggest mistakes dropship business owners make when adding products is just adding all the products without categories.  The supplier usually has the best outline when it comes to categories.  I would suggest just following what they have.  If you feel the need to change a few of the category names around, feel free, but do your best to keep the same structure. 

Here is an example of how "not to" set up your categories:  If you are selling electronics, and even more specifically - DVD players, if you add all of the DVD players under the main category of DVD players and forget to separate the DVD players into brands and then list them that way (DVD Players > Brand Name > Model Number) it could cause you problems down the road. 

You could even take it a step further and separate the DVD players into single and 5 disc categories too.  It is very important to make it easy for people to shop.  If you walk into a big electronics store, you will see how they have all the single disc dvd players in a certain section, then you will also see the 5 disc players (for example).

My main suggestion for categorizing products would be "Product Type" > "Brand" > "Model" (DVD Players > Sony > DVC-500).  If you are setting it up this way, it makes it easy for those that only like Sony brands, (or whatever brand) to find the exact product they are looking for.  Most of the time this is the way  the supplier has it layed out on their back end system. 

Just think of how you like shopping and what would be the easiest way for you to shop inside a store.  The easier you can make the online shopping experience, the more sales you are likely to make.