Running an eCommerce business can be busy. From creating the goods, you sell, marketing your products, running the business, managing employees… you get the picture. It can be challenging to make sure you are doing all of that and also providing a good experience for your customers. When people place an order online, they know that they won’t have the items immediately, but they do expect to receive their products on time. That’s why having a good order fulfillment process is key to running an online store and ensuring customer satisfaction. Read on to learn what order fulfillment is, the different strategies eCommerce businesses employ, and how to select the right order fulfillment strategy for your business.
What Does Order Fulfillment Mean?
Order fulfillment is more than just packing and shipping an order out for a customer. The term order fulfillment includes the entire process that happens once an order is placed all the way through delivery to the customer. More than one person or company is involved in this process, including the retailer, the third-party fulfillment center, and the carrier. A successful order fulfillment process and order fulfillment provider is critical for eCommerce companies to keep their customers happy and coming back for more.
Order fulfillment includes three main steps, but keep reading to see a more detailed view of the steps involved in order fulfillment. The three keys to working with the ideal order fulfillment company include receiving, processing, and shipping. When each of these steps is met, the order can get successfully completed. Without all elements of order fulfillment, an order isn’t finished until it gets to the customer. There are multiple ways to get there, though. All eCommerce businesses can fill orders in-house or use a third-party provider.
What is an Order Fulfillment Strategy?
There are two primary order fulfillment strategies. Typically, eCommerce businesses choose to either fill orders in-house and use their own resources, or they decide to outsource orders to a third-party logistics provider (3PL).
In-House Order Fulfillment
Companies need to have good CRM software or customer relationship management software that tracks and organizes customer data when going with an in-house fulfillment strategy. While this type of software is most often used for marketing and sales, personalizing communication and messages to customers, it also helps process orders once they have been placed. It stores the shipping and tracking information and manages the transaction documents.
Other steps that need to be completed with in-house order fulfillment include inventory management, which often has its own software programs and tracking systems. In addition to inventory management programs, you will need the space to store all of your inventory and a system to organize the products on your shelves effectively. You need a shipping system, including relationships with the shipping carriers, to develop processes for in-house fulfillment. Beyond the systems and methods for order fulfillment, you need the staffing to get the job done. You need the people who can find, package, and ship the items for your customer’s orders.
Outsourcing Order Fulfillment
Because of all of the steps, programs, and personnel required for managing order fulfillment in-house, many small, mid-sized, and large companies outsource their order fulfillment needs to a third-party fulfillment center. By partnering with a 3PL provider, you can leave some or all order fulfillment to people with the time and expertise to get the job done.
Some of the services a fulfillment center can offer include warehousing of inventory, packaging, shipping, and distribution of products. They can often handle returns or customer concerns with an order.
Using a 3PL provider means that you won’t have to invest in warehouse space or specific technologies. Those technologies will come with the fulfillment center’s costs. In addition, you can save on payroll because the employees pulling and packing orders will not be working for your business but for your fulfillment center.
Considerations for Fulfillment Strategies
The order fulfillment strategy that works for one company — even your biggest competitor — might not work for you. That’s why it’s so important to consider all of the order fulfillment strategies and what is truly going to be best for your business. Here are a few of the key considerations when weighing your options for order fulfillment strategies for your eCommerce business.
Business size and order volume:
- Number of SKUs your business sells
- Order volume that ships each month
- Predictions for future order volume growth
Sales channels and technology:
- Where you sell online (marketplace, eCommerce website, both?)
- What platform you use (Shopify, ShipStation, other)
- Where your customers are located (local, East Coast, West Coast, etc.)
- How many international customers you have
- Transit time expectations for your orders
- Special packaging options
- Kitting or bundling
- Personalization, such as handwritten notes
Steps in Order Fulfillment Process
There are three main steps to order fulfillment: receiving, processing, and shipping. However, more goes into these three steps than meets the eye. Let’s take a closer look at the three steps and what actually happens in each of these areas to make order fulfillment successful for your customers.
Step One: Receiving
Your fulfillment center needs to have inventory on hand to fulfill an order. This step is called "receiving", where you send the products to your fulfillment center so that they can get ready for their next step.
Also included in the first step of an order fulfillment service is the organization and storage of the inventory, which involves documentation and intake of items into inventory. Depending on the warehouse, products are stored on shelves, bins, or pallets.
Step Two: Processing
The second step is processing orders. Once the fulfillment center receives an order, it is assigned to the picking team, who gets the packing slip with the items, quantities, and locations on the warehouse shelves. The picker then collects the items for that order.
Next, the order is packaged once all the items have been picked. Items are securely packaged in a box or mailer that is the optimal size for the items picked. This is critical to customer satisfaction because no one likes to receive poorly packaged items that may have been damaged in transit.
Step Three: Shipping
After the order is picked and packed, it is ready to be shipped. Some fulfillment centers have specific carriers they partner with, while others have a variety of carriers that customers can choose from at the time of the order. This helps to ensure affordable pricing whenever possible for customers. After the shipping label is affixed to the box or envelope, it is most often sent to the loading dock, where the carrier will pick it up. Once the order ships, your business, and the customer receive the order’s tracking information.
How To Choose the Right Order Fulfillment Strategy
Choosing a 3PL provider for your order fulfillment can be challenging, especially when you need to narrow down your options to just the one you will work with. You need to find the right partner you trust to handle inventory management, accurate order fulfillment, and positive customer experiences. You want to grow your business, and an order fulfillment center is one way to do so. Here are the six questions you should ask any third-party fulfillment services you are considering working with:
- What type of order fulfillment services do you provide?
- How does your technology work?
- Which eCommerce platform integrations do you support?
- Where are your fulfillment centers located?
- What types of shipping do you offer?
- How can you help me provide a best-in-class customer experience?
What’s Involved in Order Fulfillment?
Order fulfillment might sound simple. You get an order, and you fill it, right? But there are actually many different things that go into making a successful order fulfillment strategy for your company. To keep customers happy, eCommerce businesses need to get the order right and get it to customers when they expect it. Order fulfillment is more than just sending out the order. A few things need to occur first to get there, so the customer gets exactly what they need or want.
First, whoever is conducting the order fulfillment for your business — often a warehouse or fulfillment center — needs to receive the inventory. Your business would send goods ready to be sold in the next few weeks to the fulfillment center. They would then input that into their system, cross-checking that what you said you sent is actually there. They would organize it on their shelves, bins, or pallets so that the fulfillment workers can easily access what they need when filling an order.
After the inventory is received, it becomes available for fulfillment. When an order comes in from your customer, a packing slip gets created at the order fulfillment center, whether a printed out, physical copy or a digital version on a tablet or other piece of equipment fulfillment staff uses. An order picker is assigned to gather the items in that order. Then, they package up the order to get it ready for shipping. This includes ensuring all the items are securely packed and safe for transit. After the items are packed, the box or mailer is labeled and sent to the shipping area, where carriers collect the orders to get them out the door.
Order fulfillment can also include processing returns, an inevitable component of the eCommerce business.
4 Order Fulfillment Challenges
Like with any aspect of a business, there are challenges associated with order fulfillment. They can range from inventory management issues or shortages to logistics challenges and shipping errors. Here are the main challenges that many eCommerce businesses face when it comes to order fulfillment.
- Inventory management: What this means is basically running out of stock in certain items. Sometimes inventory tracking can be inaccurate, but these challenges can be reduced or eliminated with a solid system and technology in place. Customers are never happy to find out an item they already ordered and paid for is now out of stock. Still, you can reduce this risk by employing proper inventory management tactics.
- Demand planning: If you send too many holiday or seasonal items to your fulfillment center too early, then you have a risk of the products not selling in a timely manner, often increasing the storage or carrying costs as the items sit there. It’s important to plan for the appropriate timing of sales of certain products and get the inventory there just in time so that it does not just sit on the shelves for months on end.
- Logistics planning: Sometimes, shipping carriers are just busier than other times. Slow or missed deliveries can be frustrating for customers, but so can damaged packages or broken items. All of these come down to the final step with the shipping carrier. Still, if there is a relationship between the fulfillment center and the shipping carrier, the fulfillment center can improve communication to plan for these challenges.
- Supply chain: The supply chain covers many different business areas, from where you get your products (or parts for the products) to the boxes the fulfillment center uses to ship your goods and even to the employees at both your company and the order fulfillment workers. Ensuring that there is a good strategy in place to handle the occasional challenge with the supply chain can improve the flow of business. Whether that is a global pandemic that causes massive supply chain issues or a winter storm that temporarily causes brief delays, knowing where items are coming from and where they are going is essential. Inventory management, order management, and an order management system can help alleviate concerns with the supply chain.
Tackle Challenges With Order Fulfillment Centers
Order fulfillment centers from an outsourced fulfillment company are set up to approach these challenges and tackle them for eCommerce businesses. They have the tools, systems, processes, and people to address warehouse and logistics concerns. By partnering with a company like Rakuten Super Logistics, you know your orders are filled on time, keeping your customer expectations high and your business running smoothly. Reach out today to get a quote and see how we can help solve your order fulfillment challenges.