Hi Sean and welcome to the forum,
The previous set up that you mention sounds exactly like drop shipping actually, only difference was that they seem to be shipping to you direct, rather than shipping direct to your customer. Now typically you aren't going to make that type of margin on your average dropshipped product unfortunately.
Have you spoken to your supplier about the quality issue?
With that type of margin available on such a low volume purchasing agreement, I would be doing what ever I could to stay with the supplier if I were you. So if you haven't discussed the quality issue, it might be well worth approaching with them before looking elsewhere.