Everything You Need to Know About Order Fulfillment in 2018

Think about the last time you ordered something from an online store and had a less than ideal delivery experience. Maybe your package was lost, late, or damaged.

Are you itching to buy from that seller again?

If not, you’re not alone. 38% of customers say they’ll never shop with a retailer again following a negative delivery experience.

Preventing that outcome for your own ecommerce brand comes down to one thing: your order fulfillment strategy.

What is order fulfillment?

Order fulfillment is defined as the complete process of receiving, processing, packing, picking, and shipping an order. Online order fulfillment can be done in-house or outsourced to a third-party order fulfillment services provider.

A successful order fulfillment strategy is vital for ecommerce businesses to stay competitive and build customer loyalty.

How to determine your order fulfillment strategy

There’s no such thing as a one-size-fits-all order fulfillment strategy. Here are some important factors to keep in mind when scaling fulfillment for your online store.

1. Business size and order volume

  • How many SKUs does your business sell?
  • How many orders are you currently shipping each month?
  • How many orders do you predict you’ll be shipping next month? Next year?

The number of products you sell and your monthly order volume play a big role in finding a fulfillment solution that works for you. If you’re new to the world of ecommerce, your fulfillment strategy is likely to look very different from, say, Walmart or Target.

Low order volume may make it more cost-effective for you to keep fulfillment in-house, as opposed to outsourcing. If you sell a limited variety of products and are shipping just a few orders each week, you probably don’t need a full inventory or warehouse management system to keep track of your inventory and operations.

If your business is growing quickly and your order value is steadily increasing, keep in mind when you’re likely to outgrow your fulfillment strategy. It’s important to make sure your order fulfillment strategy can scale with you.

2. Sales channels and technology

  • Where are you selling online?
  • Are you selling on an ecommerce website, a marketplace, or both?
  • Which ecommerce platform are you using?

Your fulfillment strategy should complement and support your online sales channels, especially from a technology standpoint. Fulfillment software that already integrates with your ecommerce platform and online marketplaces can help you manage the entire order fulfillment process more efficiently without having to do any developer work.

This is especially important if you’re selling across more than one channel; your technology should streamline the order fulfillment process, not complicate it.

This means that as soon as an order is placed on any of your sales channels, it should automatically be pushed to your fulfillment operations. Then it can be picked, packed, and shipped in a timely manner.

Choosing a fulfillment service with the right inventory management software is also critical. You should always have full visibility into inventory quantities on hand across fulfillment locations, as well as a system in place to prevent stockouts.

Overall, ecommerce businesses need to leverage technology that connects the upstream activities of purchasing and manufacturing to the downstream activities of sales and product demand to make more accurate purchasing and production decisions.

3. Location, location, location

  • Are your customers centrally located in one region, or are they spread across the country?
  • Do you have a large international customer base?

Where you ship to and from are two of the most important aspects that should inform your fulfillment strategy. Customers want ecommerce delivery to be quick and without a high price tag: 73% of shoppers expect affordable, fast deliveries, and 24% of customers cancel an order due to slow shipping.

To make sure you can deliver on customer expectations, try to minimize the number of shipping zones your average package travels. This can reduce shipping times and costs, leading to happier customers.

If you’re currently shipping orders from more rural areas, you’re probably incurring unnecessarily high shipping costs. Instead, consider fulfilling orders from more central, urban location(s).

Shipping from multiple locations near your customers can also drive down costs and shipping times. This helps you leverage ground shipping more often, which is significantly cheaper than expedited air and faster than ground shipping from one side of the country to the other.

4. Customization needs

  • Are your products made-to-order?
  • Is customization a key selling point of your brand?

If you sell items that are custom-made, specially gift wrapped, or extremely fragile, you may want to choose a more hands-on approach to your entire supply chain.

Outsourcing fulfillment means giving up control over every custom detail. Being able to pack items yourself gives you the freedom, flexibility, and reassurance that customization will be exactly right each time.

Order fulfillment options

It’s clear that different ecommerce businesses have different needs. With all of the factors above in mind, the best order fulfillment option for your business might not be the same as your competitors.

The most common order fulfillment methods are merchant fulfillment, dropshipping, and outsourcing to a third-party fulfillment provider.

Merchant fulfillment

Also called in-house fulfillment and self-fulfillment, merchant fulfillment refers to an ecommerce seller completing the entire order fulfillment process without the help of a third party.

Many online brands choose to fulfill orders in-house when first starting out. This often means storing inventory and packing orders from home.

Merchant fulfillment offers more control over your supply chain than outsourcing the same processes, but it can also be costly and hard to scale as your business grows.

When your order volume gets too high to keep fulfilling orders from home, you have two options: Expand your merchant fulfillment operations by investing in the fulfillment infrastructure, including warehousing, labor, equipment, and more, or outsource to a 3PL.

The former can be an expensive endeavor. which is why so many businesses choose the latter.

Dropshipping

Dropshipping is a much more hands-off approach to both manufacturing and order fulfillment. Inventory is produced, stored, and shipped by the manufacturer.

When a customer places an order, the order details are forwarded to the manufacturer. The product ships directly from the manufacturer to the end consumer.

Low barriers to entry and minimal overhead make dropshipping an attractive option to many new ecommerce businesses. However, manufacturers are often located overseas, which means that shipping takes significantly longer and is potentially more expensive than fulfilling orders domestically.

Overall, dropshipping offers merchants very little control over the supply chain, especially when it comes to inventory management and order fulfillment.

Third-party fulfillment

Third-party fulfillment is defined as the outsourcing of fulfillment logistics to an external partner. These processes can include inventory management, picking, packing, and shipping orders, and managing returns.

Many ecommerce merchants partner with a third-party logistics (3PL) partner to outsource the fulfillment-related tasks that can often be too unproductive, costly, or complex to manage in-house.

If you no longer have the bandwidth or space to fulfill orders yourself, working with a 3PL can help automate time-consuming tasks. Freeing up the time taken up by product fulfillment allows you to focus instead on growing your business.

3PLs have logistics expertise that your business can — and should — leverage. They also have the infrastructure needed to ship larger order volumes, making them invaluable as your business scales or needs to ramp up quickly.

How does the order fulfillment process work?

At this point, you may be considering outsourcing order fulfillment to a 3PL — but what exactly does that entail? What goes on in a fulfillment center may seem like a mystery, but it doesn’t have to be.

Here’s what happens at a 3PL’s fulfillment center once a customer submits an order on your online store.

Step 1: Receiving

Your 3PL needs your inventory in-hand in order to start fulfilling orders. Receiving refers to the acceptance and storage of incoming inventory at the fulfillment center.

Each 3PL has its own processes for receiving and storing inventory, often involving documentation submitted by the merchant. This keeps things organized and timely, meaning your orders can start shipping sooner.

Once the 3PL receives your inventory, the items are then stored in dedicated storage locations, such as shelves, bins, or pallets.

Step 2: Picking

The order fulfillment process begins with picking.

When an order is pushed to your 3PL’s order fulfillment system, it is assigned to the picking team. The picking team receives a packing slip with the items, quantities, and storage locations at the facility to collect the ordered products from their respective locations.

Step 3: Packing

Once all items in an order have been picked, it’s time to get them securely packed up.

Some 3PLs will charge for packing materials, while others include them as part of their fulfillment services. Your 3PL will choose packing materials that will both protect your products and add up to the lowest practical dimensional weight.

These materials can include boxes, bubble mailers, poly bags, packing tape, bubble wrap, and air fill.

If you’d prefer to keep your brand front and center, some 3PLs allow you to stock your own custom boxes or otherwise use plain brown boxes.

Step 4: Shipping

Once the order is packed, it’s time to ship.

Most 3PLs will purchase shipping labels from shipping carrier(s) on the merchant’s behalf.

Some fulfillment providers have preferred carriers with whom they partner, while others compare shipping costs from a variety of carriers. The latter helps ensure the most affordable pricing possible for any given shipping option.

One big benefit of outsourcing fulfillment is that major carriers pick up orders directly from the 3PL’s fulfillment centers to ship.

Once the order ships, you receive package tracking information. Depending on the 3PL’s technology, you can either automatically or manually share this info with customers.

Top order fulfillment company: 3PL pricing models

Different 3PLs price their fulfillment services in different ways. Here’s how ShipBob prices our order fulfillment services.

Note: Order fulfillment pricing depends on your business’s specific needs.

Fulfillment service How it’s priced
Receiving Flat rate
Storage Per bin, shelf, and pallet
Pick and pack fees Included in total fulfillment cost
Standard packaging Included in total fulfillment cost
Shipping Carrier pricing passed directly on to client

Read more: Order Fulfillment Costs and 3PL Pricing Models: Everything You Need to Know

Just like there is no one-size-fits-all fulfillment solution, there is no one pricing model that fits all ecommerce businesses. Above is an example of ShipBob’s simple fulfillment pricing. Reach out to our team for a custom fulfillment quote that takes into account your business’s size, needs, and budget.

5 questions to ask when choosing the right order fulfillment service

If you’ve decided that outsourcing order fulfillment to a third-party logistics provider is the right choice for your ecommerce business, choosing a 3PL can be a harrowing task.

The options can seem endless, with confusing pricing and outdated processes.

It’s important to find an order fulfillment provider that you trust to handle your inventory, provide a positive experience to your customers, and ultimately help you grow your business.

Here are 5 questions to ask a potential third-party fulfillment company to make sure you find the right partner for your business:

  1. How are you different from a traditional pack-and-pick 3PL?
  2. How does your technology work? Which ecommerce platforms does your order fulfillment software integrate with?
  3. Where are your fulfillment centers located?
  4. Do you offer same-day and 2-day shipping?
  5. How can you help me offer a best-in-class customer experience?

How to choose a 3PL for your ecommerce business

The above are just a few of the things to keep in mind when choosing a 3PL.

We know there are a ton of options and lots of information out there, and it can be hard to decide what next steps to take. That’s why we created a free guide, “How to Choose a 3PL for Your Ecommerce Business,” to help you find the right partner for your business.

This guide covers:

  • How to find a fulfillment company you can trust to help your ecommerce business grow
  • The right questions to ask a potential 3PL to make sure you’re a mutual fit
  • What technology and features to look for to achieve faster, more affordable order fulfillment
  • And much more…

Download the Guide