When running a business that requires you to take orders from your customers, there is a process that comes with receiving, making, and fulfilling orders.
When customers buy a product or service from a business, there are many steps in the process. When the customer pays for and places an order to when the customer gets the final order on their doorstep, the overall process is known as “Order Fulfillment”
For businesses to achieve the highest satisfaction from their clients, a business must have a smooth sailing order fulfillment strategy. This process is where 3PL (third-party logistics) can come into play. This article will learn about order fulfillment meaning and how to create the best strategy.
What is Order Fulfillment?
Order fulfillment is the process of receiving, processing, packing, picking, and shipping an order to your customer. It’s a complex business that requires a skilled third party to complete for you. If done incorrectly or poorly will have serious consequences on your eCommerce online store success. For this reason, it’s important to understand fulfillment best practices so that you can be confident in knowing what needs to be done from start to finish.
An integral part of getting an eCommerce business off the ground is to make sure that you have a successful retail order fulfillment strategy in place. This will allow your company to stay competitive and even help it build customer loyalty over time.
How Order Fulfillment Works
While all businesses function differently, there are five main steps in order fulfillment for a 3PL. This will help answer the question of ‘what is fulfillment?’
Before a 3PL can do anything to fulfill an order, a customer must place an order. In e-commerce businesses, when an order has been made online, inventory for an ordered product is affected.
Online businesses and retail companies need to have an up-to-date, high-functioning website for handling online customers’ shopping habits. The better an e-commerce website can run, the smoother an order fulfillment process will be. Inventory is essential, which brings us to the next step.
Step 2: Inventory
For a 3PL to properly fulfill an order, it must have the property inventory documentation for a company utilizing the 3PL service. The company that sells the products online should provide the correct information for a 3PL to receive and manage inventory to select, pack, and ship products.
If your 3PL has more than one distribution center, you are likely working through a warehouse to receive and store inventory for an online company. Keeping track of inventory is essential in ensuring that each customer gets paid for and eliminates the need for refunds.
Step 3: Warehouse Picking
Warehouse picking is what happens after a customer has placed an order for a specific product. Once a customer has made their order, the desired product will be tracked down for retrieval.
Many 3PL companies use warehouses to store inventory that is available for sale online. Warehouses are a great way to keep all products safe while also maintaining products organized and easy to access.
Once a customer orders a product, that product will be located within one of the warehouses and begin the stages of preparation for being packaged.
Step 4: Packaging Products
Once a product has been selected from a warehouse, the next step is to pack the item. One of the biggest complaints of customers from online companies is not necessarily with the product itself, but the condition the product comes in.
One in every ten online orders is delivered to a customer in a damaged condition. As a result, online companies, retailers, and 3PL businesses are continuing to take steps to avoid customer dissatisfaction. And the best way to ensure that a product makes its way to a customer in good condition is to pack it correctly.
Depending on how your 3PL business runs, you may charge your clients for packaging materials. Many 3PL companies tend to include packing materials in their services’ overall price, as packing is one of the most significant steps of order fulfillment.
While some online companies prefer to use their own branded or custom materials for packing, most of the time, standard bubble wrap and packing materials will be used to protect products from damage.
The best way to pack a product is to make sure there is enough material to protect the product without wasting extra material. Wasting packaging material is a waste of money and an unnecessary stress factor for the environment.
It is essential that, as a 3PL, a product is carefully packaged and safe from bumping or mishandling. A damaged package can bring the product’s overall quality down, whether or not the product itself is damaged.
A big reason why online retailers and companies use 3PLs is for packing and shipping. Many 3PLs will handle the tedious parts of the shipping process, such as shipping costs, labels, and the delivery process.
When shipping through a 3PL, delivery carriers such as UPS and FedEx will handle orders directly from the warehouse or distribution center to deliver to the customer. The 3PL will then be able to track the order’s delivery process, which they will share with the merchant, who will share the information with the customer.
It is vital as a 3PL to ensure full transparency of where the order is at all times. Whether you are running the 3PL, a merchant, or the paying customer, tracking the order is essential to diagnose a problem should one come up in the shipping process.
Fulfillment Order Strategy
When scaling your online store fulfillment, there is no one-size-fits-all strategy. It’s important to keep some factors in mind when creating the perfect solution for you and your business.
1) Business Size and Order Volume
How many SKUs does your business currently sell? How many orders do you ship each month, and how much more will you be shipping next month?
If you are new to eCommerce, your fulfillment strategy will not likely be the same as that of Walmart Marketplace and Target. Your number of products sold and monthly order volume play a big role in finding suitable solutions for fulfilling orders.
If you have a limited product variety and are only shipping few orders each week, it may be more cost-effective to keep fulfillment in-house. If this is the case for your business, there’s no need to invest in an inventory or warehouse management system that can handle hundreds of products at once.
If your business is growing quickly and the average order value is steadily increasing, you should consider when to outgrow the fulfillment strategy. It’s important that eCommerce fulfillment strategies can scale with businesses as they grow.
Where are you selling online? Are you on an eCommerce website, a marketplace or both? What is your e-commerce platform of choice?
Order fulfillment software that integrates with your eCommerce platform and online marketplaces can help you manage the entire process more efficiently. This will make it easier for you to get orders out without doing any development yourself, which is important because this work should complement what’s already possible on those channels instead of complicating them or requiring extra effort from their end as well.
Also, ensure your technology streamlines the order fulfillment process, not complicate it. Your online orders should be pushed to you as they are placed and then automatically go through picking, packing, and shipping in a timely manner.
Furthermore, eCommerce businesses need to leverage technology that connects upstream and downstream activities of purchasing, manufacturing, sales, and product demand. This will help make more accurate business decisions. By having full visibility into inventory quantities across fulfillment locations with a system in place to prevent stockouts you can ensure better results for eCommerce companies.
Some questions you may ask yourself when determining where to place your distribution center are:
Are your customers located in and around one region? Or do they span across the country, creating challenges of managing time zones? Do you have a large international customer base that requires knowledge of different languages, customs & regulations?
Customers don’t want slow shipping. According to a survey, 24% of customers would cancel an order if the delivery was too slow and 73% expect affordable fast deliveries. To provide quick and reliable shipping without hurting your wallet, you should minimize how many different zones packages have to travel through when they are shipped out or received by their destination address.
A new way to save money on shipping is by centralizing your warehouses. By concentrating all of your shipments in one area, you can use ground shipping more and avoid expensive expedited fees for moving products across the country or even internationally.
This solution was created because it will help businesses that are currently sending out orders from rural areas reduce their costs significantly without compromising timeframes at all.
4) Customization
Are your products made to order? What about customization?
If you sell custom items like gift-wrapped or fragile objects, consider a more hands-on approach to your shipping supply chain. You have the freedom and reassurance when it comes to customization this way.
Where outsourcing fulfillment means giving up control over every detail of your order, being able to pack all orders yourself gives you flexibility and ensures that each item will be exactly how it’s supposed to be.
There are many different ways to fulfill orders for an eCommerce business, but the three most common methods include outsourcing to a third-party fulfillment provider, merchant fulfilling your own products through your own warehouse and shipping them yourself, or using dropshipping.
1) Third-party Fulfillment
Third-party fulfillment is defined as the outsourcing of different tasks involved in fulfilling an order to another company. These processes can include: inventory management, generating optimized picking lists, packing boxes and shipping orders out; managing returns.
If you can’t handle fulfilling all of your orders yourself, working with a 3PL can help automate time-consuming tasks. By freeing up the time taken by order fulfillment and allowing you to focus on growing your business instead, outsourcing allows retailers like yourself more flexibility in how much they want to outsource or manage themselves.
3PLs have not only the inbound and outbound logistics expertise that your business can leverage, but also an infrastructure capable of handling larger order volumes. They are invaluable when scaling or increasing delivery accuracy quickly is important to you as a business owner.
Merchant fulfillment, otherwise known as fulfilling orders in-house and self-fulfillment refer to an eCommerce seller completing the entire order fulfillment process without a third party. In other words, they own their inventory and ship it from home or through another location instead of giving these tasks over to companies that specialize in this service. When first starting out online brands often opt for merchant fulfillment because outsourcing can be costly but also hard to scale when you are growing your business at such high rates.
When fulfillment volume gets high, you have two options: expand your merchant operations by investing in infrastructure or outsource to a 3PL.
For many businesses, this is simply too expensive for the investment it requires so they opt to go with outsourcing instead.
3) Dropshipping
Dropshipping is a more hands-off approach to both manufacturing and order fulfillment, allowing you to produce inventory without having it on hand. When an order comes in from a customer, the details are forwarded to your manufacturer who will ship directly out of their warehouse for delivery to consumers.
One of the major downsides to dropshipping is that you have very little control over your supply chain. This means if there are issues with inventory management or order fulfillment, it’s almost impossible as a merchant to fix these problems yourself and instead must rely on manufacturers for help.
Order Fulfillment and 3PL Pricing Models
When it comes to eCommerce fulfillment, there is no one-size-fits-all solution. Each business has different needs and budgets that need specific attention when looking for a custom pricing model.
Questions to Ask When Choosing the Right Order Fulfillment Service
If you’ve decided to outsource order fulfillment, finding the right provider can be a difficult task. Options seem limitless with unclear pricing and dated processes included in many of these services. It is important that your 3PL will allow you to grow your business by providing positive experiences for both customers and yourself as well as handling inventory correctly so nothing goes missing or gets damaged during shipment.
Here are 5 questions to ask a potential third-party fulfillment company to make sure you find the right partner for your business:
How are you different from a traditional pack-and-pick 3PL?
How does your technology work? Which eCommerce platform integrations do you support?
Many 3PL companies strive to expand into working for large businesses and retailers. 3PL companies are a hidden part of what allows millions of customers every day to get their products in good condition and promptly.
For a 3PL to be a successful company, a reliable order fulfillment strategy must be put into place to ensure customer and merchant satisfaction. All steps of the order fulfillment process must be treated equally and completed to the highest quality.
While the order fulfillment process and strategy may seem simple, there are a lot of details to look after in order to keep all clients involved happy.
As a 3PL company, your order fulfillment strategy may change depending on your resources. But committing to a routine that works for you and your clients is the best way to be reliable and consistent.
Leave It to the Experts
Need help with order fulfillment?
YourLogistics is a professional, reliable, and affordable warehousing service that stores the inventory for eCommerce businesses of all sizes. We can pack boxes to your specifications and ship orders quickly in the most cost-effective manner possible.
