38% of customers say that a negative delivery experience prevents them from working with a brand again. Are you that brand?
Order Fulfillment is the most critical component of an eCommerce business.
It is the process of receiving, processing, and shipping customer orders through your online store. A smooth and reliable order fulfillment process will not only ensure customer satisfaction, but it will increase your revenue by building brand loyalty.
Today, we will take an in-depth look at order fulfillment. We will explore the meaning of order fulfillment, its various models, and share some best practices for handling fulfillment.
- What is Order Fulfillment
- How Does the Order Fulfillment Process Work
- What is Order Fulfillment Processing Status
- What is the Order Fulfillment Strategies
Unless it’s a brick and mortar store, where the customer walks into the store, selects the products they want to purchase, pays for them at a cash register, and walks out with their items in hand, all eCommerce businesses must have an order fulfillment process.
Order fulfillment are the steps taken by a company to complete an order after the customer pays for it. This includes receiving, processing, packing and shipping customer orders, to give you an overview.
Order fulfillment can be complicated to manage, taking into account that there are several touchpoints in the journey from receiving an order to delivering it.
In its simplest definition, to fulfill an order means to complete the process of receiving the order, verifying inventory, processing, picking, packing and shipping an order once you have received it.
This means that companies must have a fulfillment strategy to ensure that the entire process takes place smoothly and efficiently, with minimal manual intervention. You’d want the process to run on autopilot while you focus on getting more business.
Ecommerce is the buying and selling of goods or services using electronic systems like the internet or other computer networks. This includes retail websites, marketplaces and mobile apps.
Order fulfillment in an ecommerce setting is more complex than a traditional business because it requires the ability to streamline orders from different parts of the country/world, store inventory sometimes in different locations, monitor inventory levels for each product, pick, pack and be efficient with shipping costs.
The faster that products ship, the better chance an ecommerce company has to win over a customer and retain them for future business. Everything from how quickly an order is received and processed to how quickly it is shipped and delivered, impacts the customer experience.
Supply Chain Management is the entire lifecycle of a product that begins with the manufacturer. There are several touchpoints, vendors, services and resources that come into play when sourcing, manufacturing and distributing.
This process is complicated by the fact that there are so many players involved in producing goods, transportation of products, and processing orders. There’s the manufacturer, the wholesaler/supplier, the retailer, the 3PL fulfillment and the logistics company.
Order fulfillment is just one part of supply chain management.
Regardless of the business model, there are 5 key steps to the order fulfillment process:
The retailer/ecommerce business will receive the inventory from the distributor, vendor, or manufacturer. Depending on whether you are fulfilling orders in house or outsourcing it, a shipping manager will receive inventory and complete the necessary paperwork.
They will also verify that the inventory received is complete and not damaged before it’s labelled and appropriately entered into the system.
Related reading: Top 5 Inventory Management Software for Shopify
Storage is the process of accurately slotting the inventory into the warehouse. Depending on how big your facility is and what kind of space you have, you may store products based on size, dimensions, weight, value, expiration dates and other relevant information.
Generally, items from the same SKU are placed together, or inventory is stored in shelves where it can be easily accessed and doesn’t need to be sorted during pick and pack.
Picking is the process of selecting the products for each order from warehouse shelves. Pickers use picking slips (which are like lists) to collect the items that need to be fulfilled. Modern day ecommerce companies will use automated systems to generate the picking slips so that order accuracy is amplified.
For instance, many 3PL companies use Kit assemblies or Kitting to automate the picking process.
When pickers go out to collect inventory, they are essentially completing a pick list which is a list of all the items that need to be picked for a specific order. As much as you automate, picking is one of the phases where manual error can creep in.
Packaging is the process of placing products into boxes, bags or other applicable materials depending on what they are being sent in. Additional considerations may include addressing labels, invoices, inserts or other information that needs to be included for order fulfillment.
Many ecommerce companies will label the boxes themselves and make sure that the package is ready to ship before sending it to a shipping company.
The final leg of the order fulfillment journey is shipping. Shipping generally involves working with more than one shipping partner. The ideal one is selected based on price, efficiency and reach.
There are several ways to distribute products around the world including via air, ground, sea or a combination of all three depending on the size, dimensions and nature of the product itself.
Many ecommerce companies will select a longer delivery time to cut costs, but keep in mind that this may decrease your customer service ratings. You should select a shipping service depending on the competition, the target market and the overall cost.
Right from the moment the order fulfillment begins, it undergoes several statuses on its way to delivery. Order fulfillment processing status is an umbrella term used to describe the multiple stages that the order will go through before it is shipped. It is used by ecommerce businesses to track the progress of each order fulfillment.
The statuses can vary depending on the business and extent of automation, but we will take a look at some of the common ones.
One of the first statuses that you will see on the backend is ‘Ready for fulfillment’. This means the customer has paid for the order and the order is ready to be picked and packaged. However, the fulfillment company or the 3PL has not begun the picking or fulfillment process yet.
It’s just that the order has been processed and sent to the 3PL or the supplier and is waiting to be fulfilled.
Once the fulfillment center or the 3PL begins the fulfillment process, technically the order is in fulfillment. It can be any one of the steps before shipping.
So, it could be pick or pack. The ecommerce software will rarely tell you which one it is. It may take up to a day before the order status changes and reflects whether it has been shipped, depending on the process the ecommerce company is using.
Fulfillment complete means the order has been picked, packed and shipped and is on its way to the customer’s location.
This status will reflect in your ecommerce software once the package is shipped. However, it can be updated to Fulfillment canceled if the shipment has been returned or refused.
No, it does not. Order fulfilled or shipped merely means that the order has been sent to the shipping company or the customer’s address. It does not take into consideration whether it has reached its destination yet.
For example, if you place an order with Amazon and the status says fulfilled, it doesn’t mean that your product has been delivered to you yet. You can track it and ensure that it reaches you through FedEx or any other courier service the ecommerce company uses.
There can be many hurdles in the shipping process itself. So, never consider it as done until it reaches your customer and everything is fine.
The Order Fulfillment rate is a Key Performance Indicator that shows the efficiency of your ecommerce business in order fulfillment. It is also known as the Fill rate.
It is calculated by dividing the number of orders fulfilled by the total number of orders. For example, if your ecommerce company has shipped 10 orders out of 50, your order fulfillment rate is 20%.
Some ecommerce companies use a metric to track the number of successful deliveries in the first attempt, as the fulfillment rate.
Every ecommerce and retail business will have an order fulfillment strategy in mind before beginning business. If you don’t, it’s time to think and strategize by looking at your target market, competition and ROI.
Some of the most popular order fulfillment strategies are as follows.
Dropshipping is a method of order fulfillment where ecommerce companies and retailers do store inventory, nor fulfill orders themselves. Instead, the onus of order fulfillment is generally on the supplier, who ships the goods to the end consumer.
The advantage is that the entire business model is hassle-free and cost effective. You do not need to invest heavily in inventory, nor pay for fulfillment. The caveat is that you have little control over the supply chain, including the availability of goods and must rely on your suppliers completely.
If the supplier runs out of inventory during peak business season, you will be left in the doldrums with angry customers breathing down your neck.
That’s why experienced dropshipping entrepreneurs prefer retaining control. They invest in inventory and will outsource the order fulfillment to third party companies that are able to take care of pick, pack and delivery. Sometimes it may not be as cost effective as dropshipping. But definitely more sustainable.
The conventional dropshipping business model is a popular strategy for small businesses and works best for retailers who have a limited budget for marketing and advertising.
This is a step up from dropshipping and involves the ecommerce company fulfilling the orders themselves. It is generally reserved for large brands who have the overheads required for such a set up.
When you do this, you will have complete control over the order fulfillment process and can bring down costs by delivering goods to your customers directly.
In-house fulfillment, however, is not cost-effective for all kinds of businesses. It is recommended only for those who have the funds to invest in infrastructure and manpower to oversee the fulfillment process.
Also, you will have to manage everything from inventory storage, warehouse management, order picking and logistics.
This is the best option for businesses that have neither the budget nor the expertise to manage order fulfillment in-house.
Outsourcing your ecommerce order fulfillment is cost-effective and allows you to focus on your core business while the fulfillment company takes care of everything else.
It’s also a great strategy if your ecommerce business is selling a wide variety of products from multiple brands and manufacturers, as an order comes with its own unique requirements for storage, transportation and delivery.
Related reading: A Completed Guide on Fulfillment Services Best Fulfillment Center Provider for Your Shopify Store Top 7 Fulfillment companies in China for Dropshipping
This is the perfect option for large retailers who need to manage their supply chain efficiently.
The hybrid fulfillment model enables brands to take advantage of both dropshipping and in-house fulfillment, depending on the product’s or customer’s needs.
For instance, you might want to fulfill a few of the products using the Dropshipping model, while fulfilling orders for other products in-house. You can also outsource the fulfillment for products that require specialized storage and delivery.
A lot of brands these days use the hybrid fulfillment model to maintain high order fulfillment standards, while managing costs and resources efficiently.
Smooth and efficient order fulfillment the hallmark of a successful ecommerce venture. Every ecommerce company’s goal should be to maximize productivity at each stage of the order fulfillment process, while ensuring customer satisfaction.