Note: This article was originally published on October 18, 2018 and last updated on February 17, 2022 to present a more modern approach to order fulfillment in 2022.
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. 37% 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.
Main takeaways (TL;DR)
- When your business is growing, make sure your fulfillment strategy can scale with you. We recommend answering the 10 questions below for a better approach.
- The order fulfillment process has 4 main steps, from receiving to shipping.
- How to choose an order fulfillment option depends on a few factors such as the bandwidth, time and space you may have to fulfill orders yourself, or the control you want over the supply chain.
- If you decide to outsource your order fulfillment process, there are 5 questions you can ask a third-party logistics provider in order to choose the right one for your order fulfillment strategy (on locations, platform integrations, 2-day shipping, etc.).
What is order fulfillment?
Order fulfillment covers the complete process from when a sale takes place all the way through delivery to your customer. Successful order fulfillment depends on a third party to complete the order fulfillment steps for the ecommerce online store from receiving, processing, packing, picking, and shipping an online order to customers.
A successful retail order fulfillment strategy is vital for ecommerce businesses to stay competitive and build customer loyalty.
Order fulfillment explained (Video)
How does the order fulfillment process work? (4 steps + infographic)
At this point, you may be considering outsourcing ecommerce 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 warehousing storage locations, such as shelves, bins, or pallets.
Step 2: Picking
The order fulfillment process begins with warehouse picking.
When an order is pushed to your 3PL’s order fulfillment system, it is assigned to the picking team. A picker 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.
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 order tracking information. Depending on the 3PL’s technology, you can either automatically or manually share this info with customers.
Order fulfillment process: 3 tips to do it right
Your receiving processes are key
If you’re owning the receiving part of your order fulfillment processes, you want to make sure that it is optimized so you can act fast. Any shipment should be processed as quickly as possible so that your customers can enjoy a fast delivery.
Have a backup strategy in place
When it comes to shipping products, there are a lot of external factors that you won’t have control over. Goods can be damaged, carriers may decide to increase their fees, exceptional weather conditions might impact your delivery, etc. Having a good backup strategy for your order fulfillment can help you prevent late deliveries.
Use everything you can to anticipate demand
Keeping an adequate amount of supplies in your inventory is essential to keep up with the demand. If it’s not your first year running your business, you could start by analyzing your data (orders, inventory, etc.) from the previous year to understand if there is any seasonality in your market.
Order fulfillment strategy: 10 questions to determine yours
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 Marketplace 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 average order value is steadily increasing, keep in mind when you’re likely to outgrow your fulfillment strategy. It’s important to make sure your ecommerce 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. Order 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.
“ShipBob was the obvious solution for us. They align very well with Shopify and don’t have older, archaic technology like other 3PLs.”
Greg MacDonald, CEO & Founder, Bathorium
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 online 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 costs and times, 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 logistics costs and shipping times. This helps you leverage ground shipping more often, which is significantly cheaper than expedited shipping and faster than ground shipping from one side of the country to the other.
For example, ShipBob is a global fulfillment company with several locations in multiple countries
“We partnered with ShipBob to scale up operations in the United States. We’ve seen a reduction of 70% on shipping costs in the US, which helps keep conversions high.”
Greg MacDonald, CEO & Founder, Bathorium
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.
“Fulfillment is one of the areas that we were super keen to outsource to a partner who’s been doing it for a while and knows how it’s done. We can trust ShipBob to support and handle fulfillment for us, so that we can focus on the strategic side of our business, helping us grow and develop much faster.”
Adelina Zotta, Co-Founder of NutriPaw
Order fulfillment options: what are they (and how to choose one)
It’s clear that different ecommerce businesses have different needs. With all of the factors above in mind, the best order fulfillment strategy for your business might not be the same as your competitors.
The most common order fulfillment methods are outsourcing to a third-party fulfillment provider, merchant fulfillment, and dropshipping.
Third-party fulfillment is defined as the outsourcing of fulfillment logistics to an external partner. These processes can include inventory management, generating optimized picking lists, packing boxes, and shipping orders, and managing returns.
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.
“Working with ShipBob has allowed us to focus on the important parts of running our business and lets someone else take care of the shipping.”
Brett Miller, CEO, BRIK
3PLs have inbound and outbound 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 and deliver orders accurately.
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 retail supply chain than outsourcing the same processes, but it can also be costly and hard to scale as your business grows.
“ShipBob can process things more quickly than we could in-house and at scale. These time savings translate into cost savings as well.”
Sarah Chalos, Co-Founder and President, I Heart Keenwah
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 fulfillment infrastructure, including warehouses, 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 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.
- You no longer have the bandwidth or space to fulfill orders yourself? Outsource to a 3PL provider.
- Your order volume gets too high to keep fulfilling orders from home? Invest in fulfillment infrastructure or outsource to a 3PL.
- You want a hands-off approach to both manufacturing and order fulfillment? You might consider dropshipping (read the pros and cons above).
Order fulfillment and 3PL pricing models
Different 3PLs price their fulfillment services in different ways. Here’s how ShipBob prices our ecommerce order fulfillment services.
Note: Order fulfillment pricing depends on your business’s specific needs.
|Fulfillment service||How it’s priced|
|Inventory 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|
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, strategy and budget.
5 questions to ask when choosing the right order fulfillment service & strategy
If you’ve decided that outsourcing order fulfillment to a third-party logistics service 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:
- How are you different from a traditional pack-and-pick 3PL?
- How does your technology work? Which ecommerce platform integrations do you support?
- Where are your fulfillment centers located?
- Do you offer two-day shipping?
- 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 ecommerce order fulfillment
- And much more…
Order fulfillment FAQs
The order fulfillment process doesn’t need to be difficult, but knowing some common questions can help out when choosing a fulfillment partner.
What does it mean when an order is in fulfillment?
If your order is “in fulfillment” that most likely means that it’s been processed and is currently being prepared for shipment. Once fulfillment is completed, an order has been delivered to the customer and the process is complete.
What is order fulfillment rate?
The order fulfillment rate (or order fill rate) is the number of orders that are processed divided by the total number of orders.
What is logistics fulfillment?
Logistics fulfillment is often interchanged with order fulfillment, meaning to complete the logistical process from checkout to delivery of the item.
What is the order fulfillment process?
The order fulfillment process is the steps a business takes from the moment they have received an order until it is delivered to the customer.
Leave order fulfillment to the pros
Need help with order fulfillment? ShipBob is a professional order fulfillment company that stores inventory, packs boxes, and ships orders for ecommerce businesses of all sizes.
“We are very impressed by ShipBob’s transparency, simplicity, and intuitive dashboard. Their shipping costs are very reasonable, and their platform makes fulfillment feel so easy.”
Harley Abrams, Operations Manager of SuperSpeed Golf, LLC
Get in touch to see if we’re a good fit for your business’s unique needs. Request a pricing quote below.