Thanks in large part to Fulfillment by Amazon (FBA), which powers Amazon Prime shipments, digital fulfillment has become the new standard for modern ecommerce stores. Fortunately, it’s never been easier to implement a digital fulfillment strategy through an optimized supply chain and order fulfillment process.
Below we explore the differences between traditional and digital fulfillment models so you can better understand what digital fulfillment can do for your business and how you can partner with a digital fulfillment provider without having to do the work yourself.
Traditional vs. digital fulfillment
Many traditional third-party logistics (3PL) providers lack sophisticated technology. At ShipBob, we think of the supply chain as a network of organizations working in sync to improve the flow of materials and information across the production process. The goal of an effective supply chain should be to cost-effectively coordinate upstream and downstream production entities to achieve high customer satisfaction.
We know the traditional 3PL model isn’t enough. That’s why we provide modern ecommerce fulfillment that’s integrated with the systems you use to provide actionable ecommerce data to make your supply chain more responsive.
Traditional fulfillment (old way)
Traditional fulfillment is fulfillment that hasn’t been fully digitized. Here are some of the common characteristics.
Single or unoptimized inventory warehouses
A traditional fulfillment center may function as a storage facility in the middle of nowhere to store large quantities of finished inventory. This is unlike a modern 3PL that both has an integrated network of fulfillment centers in locations and regions that help optimize delivery, and provides tools that help you order only the inventory that you will sell through so you don’t hold on to more than you need for a higher inventory turnover rate.
Forecasting is an afterthought
Traditional order fulfillment fails to provide manufacturers and suppliers with knowledge of customer demand signals and insight needed for decision-making. It is disconnected from the upstream activities of purchasing and manufacturing, as well as the downstream activities of sales and reducing the delivery lead times.
Thus, the working capital of the ecommerce company is being used to produce ecommerce inventory and then store that inventory in the 3PL’s warehouse. If the product fails to generate demand, the company will have to write off all of the leftover inventory. At the end of the day, sales are at odds with production and manufacturing, leading to longer lead times and high warehousing costs.
No omnichannel capabilities
In today’s ever-changing retail environment, there are online marketplaces and websites, social media channels, brick-and-mortar stores, and other selling opportunities. With traditional fulfillment, there is no ease of fulfilling orders across channels or visibility into inventory levels available.
Digital fulfillment (new way)
Digital fulfillment uses integrated technology and automated order processing to improve the efficiency of logistics operations and speed up the supply chain. The integration of a digital solution also provides business owners with the necessary data and analytics to improve the entire customer experience.
Unlike the traditional supply chain, this becomes a “demand chain,” where customer demand initiates a coordinated process and flow of information shared among all stakeholders. Here are a few traits of a digital fulfillment solution.
Distributed and connected warehouses
In the modern world, many businesses have adopted the distributed inventory model for the storage and distribution of products. In it, stock is divided up and stored in different locations based on historical order data to be near the end customer.
When a customer places an order, the system in real time checks for the location with the required products that’s closest to the shipping destination and automatically sends the order to that fulfillment center to be fulfilled.
ShipBob, for example, has a global network of fulfillment centers that ecommerce businesses can take advantage of and choose which they store inventory in by using the data ShipBob provides. Our proprietary warehouse management system powers our entire network and is connected to our merchant fulfillment software, which shows real-time inventory counts, order status, and much more.
This works together to keep locations stocked with the right amounts of inventory while reducing shipping zones, costs, and delivery times for your customers.
Software and integrations to help you stay ahead of the competition
A modern 3PL will have an app store with native integrations to all the tools you use (and even new programs for you to utilize through them), and built-in digital inventory management software to track products across sales channels.
This provides businesses with better insights into customer demand so you can pinpoint which products are selling out fast and which aren’t performing as well. You can react faster, outperform competition, and keep customers coming back.
Information flows between the upstream and downstream business processes, and activities are based consumer demand to help you prevent stockouts, ship faster, and have an omnichannel fulfillment strategy.
Advanced analytics and inventory reorder points
A digital fulfillment tool kit is not complete without inventory forecasting tools. An end-to-end fulfillment solution like ShipBob notifies you when it’s time to replenish inventory through automated reorder points.
Additionally, ShipBob’s free analytics tool show you the following at a glance:
- How quickly products are selling and which items are slow-moving
- How many days of inventory you have until you are expected to run out (based on SKU velocity)
- Where your customers are located vs. where you’re shipping from (with the ability to compare current and ideal distribution locations)
- Profitability by order, how much you are spending on shipping, and the average order amount that customers are spending at your store
- How current demand compares to previous time periods and how sales are affected by different seasons and months
- A breakdown of transit times and average cart value by shipping method (to see which shipping methods are most attractive to your customers)
- How many orders are held up, where they are located, and which items are driving a backlog (so you can prioritize the replenishment of stock that are affecting sales)
Clear benefits of digital fulfillment
Digital fulfillment optimizes the supply chain at each stage in powerful ways using integrated technology. Here are the top downstream advantages it offers.
Faster and more accurate shipping
Digital fulfillment systems automatically process and verify customer orders placed online and then generates picking lists with optimal picking routes to speed up processing in the fulfillment center. Digital fulfillment revolutionizes not only what occurs in the fulfillment centers to improve operations but also determine optimal shipping routes and carrier services.
Lower shipping costs
Last-mile delivery can be an expensive part of the supply chain, and digital fulfillment can help you cut costs significantly and deliver orders more cost-effectively with greater agility. By shipping orders from warehouses that are closer to the shipping destination (and splitting inventory across locations as you grow), you can further reduce shipping costs.
Digital fulfillment empowers your customers by giving them more visibility into order tracking, the ability to manage and receive subscription orders how and when they want, and helps make shipping costs more affordable. Best of all, it helps you manage surges in demand with the ability to scale up or down while providing a best-in-class customer experience.
Demand forecasting is the process of predicting future demand by using historical sales data to make informed business decisions about everything from inventory planning and warehousing to running promotions. A digital fulfillment provider gives you the data you need.
For example, ShipBob aggregates transit times, cart values, shipping methods, and ecommerce shipping destinations to help you optimize your costs and test different shipping price strategies. We also help you understand how much inventory to order and keep on hand — without running out of stock or over-spending on manufacturing or warehousing.
ShipBob: The modern solution for digital fulfillment
ShipBob is a leading 3PL and the ultimate digital fulfillment solution. If you hand over inventory and shipping to ShipBob, our team can help improve your digital fulfillment process and grow your business through our integrated technology, network of fulfillment centers across the world, and best-in-class fulfillment services and support. By owning the full tech stack (merchant-facing dashboard and the WMS used in all of our fulfillment centers), we have data on every point in the order fulfillment cycle that can grant our customers visibility into their fulfillment even though it is outsourced.
Contact us to learn more about our ecommerce fulfillment services and to discover if ShipBob would be a good digital fulfillment partner for you by filling out the form below.
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Common questions on digital fulfillment
Many ecommerce brands are looking to make the move to digital fulfillment because of how it speeds up the order fulfillment process, keeps information top of mind for all stakeholders, and keeps brands ahead of the competition. Some common questions that people have regarding digital fulfillment include the following.
What is digital fulfillment?
How is digital fulfillment changing online businesses?
What are some benefits of digital fulfillment?