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 fulfilment 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 fulfilment strategy.
Main takeaways (TL;DR)
- When your business is growing, make sure your fulfilment strategy can scale with you. We recommend answering the 10 questions below for a better approach.
- The order fulfilment process has 4 main steps, from receiving to shipping.
- How to choose an order fulfilment option depends on a few factors such as the bandwidth, time and space you may have to fulfil orders yourself, or the control you want over the supply chain.
- If you decide to outsource your order fulfilment process, there are 5 questions you can ask a third-party logistics provider in order to choose the right one for your order fulfilment strategy (on locations, platform integrations, 2-day shipping, etc.).
What is order fulfilment?
Order fulfilment covers the complete process from when a sale takes place all the way through delivery to your customer. Successful order fulfilment depends on a third party to complete the order fulfilment steps for the ecommerce online store from receiving, processing, packing, picking, and shipping an online order to customers.
A successful retail order fulfilment strategy is vital for ecommerce businesses to stay competitive and build customer loyalty.
Order fulfilment explained (Video)
How does the order fulfilment process work? (4 steps + infographic)
At this point, you may be considering outsourcing ecommerce order fulfilment to a 3PL — but what exactly does that entail? What goes on in a fulfilment centre may seem like a mystery, but it doesn’t have to be.
Here’s what happens at a 3PL’s fulfilment centre once a customer submits an order on your online store.
Step 1: Receiving
Your 3PL needs your inventory in-hand in order to start fulfiling orders. Receiving refers to the acceptance and storage of incoming inventory at the fulfilment centre.
Each 3PL has its own processes for receiving and storing inventory, often involving documentation submitted by the merchant. This keeps things organised 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 fulfilment process begins with warehouse picking.
When an order is pushed to your 3PL’s order fulfilment 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 fulfilment 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 or poly bags, packing tape, bubble wrap, air fill, and other dunnage.
If you’d prefer to keep your brand front and centre, 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 fulfilment 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 fulfilment is that major carriers pick up orders directly from the 3PL’s fulfilment centres 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 fulfilment process: 3 tips to do it right
Your receiving processes are key
If you’re owning the receiving part of your order fulfilment processes, you want to make sure that it is optimised 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 fulfilment 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 analising your data (orders, inventory, etc.) from the previous year to understand if there is any seasonality in your market.
Order fulfilment strategy: 10 questions to determine yours
There’s no such thing as a one-size-fits-all order fulfilment strategy. Here are some important factors to keep in mind when scaling fulfilment 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 fulfilment solution that works for you. If you’re new to the world of ecommerce, your fulfilment 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 fulfilment 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 fulfilment strategy. It’s important to make sure your ecommerce fulfilment 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 fulfilment strategy should complement and support your online sales channels, especially from a technology standpoint. Order fulfilment software that already integrates with your ecommerce platform and online marketplaces can help you manage the entire order fulfilment 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 fulfilment 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 fulfilment operations. Then it can be picked, packed, and shipped in a timely manner.
Choosing a fulfilment service with the right inventory management software is also critical. You should always have full visibility into inventory quantities on hand across fulfilment 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 fulfilment 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 minimise 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 fulfiling 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 fulfilment 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. Customisation needs
- Are your products made-to-order?
- Is customisation 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 fulfilment means giving up control over every custom detail. Being able to pack items yourself gives you the freedom, flexibility, and reassurance that customisation will be exactly right each time.
“Fulfilment 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 fulfilment 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 fulfilment 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 fulfilment strategy for your business might not be the same as your competitors.
The most common order fulfilment methods are outsourcing to a third-party fulfilment provider, merchant fulfilment, and dropshipping.
Third-party fulfilment is defined as the outsourcing of fulfilment logistics to an external partner. These processes can include inventory management, generating optimised picking lists, packing boxes, and shipping orders, and managing returns.
Many ecommerce retailers partner with a third-party logistics (3PL) partner to outsource supply chain-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 fulfil orders yourself, working with a 3PL can help automate time-consuming tasks. Freeing up the time taken up by product fulfilment 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 fulfilment and self-fulfillment, merchant fulfilment refers to an ecommerce seller completing the entire order fulfilment process without the help of a third party.
Many online brands choose to fulfil orders in-house when first starting out. This often means storing inventory and packing orders from home.
Merchant fulfilment 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 fulfiling orders from home, you have two options: Expand your merchant fulfilment operations by investing in fulfilment infrastructure, including warehouses, labour, 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 fulfilment. 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 fulfiling orders domestically.
Overall, dropshipping offers merchants very little control over the supply chain, especially when it comes to inventory management and order fulfilment.
- You no longer have the bandwidth or space to fulfil orders yourself? Outsource to a 3PL provider.
- Your order volume gets too high to keep fulfiling orders from home? Invest in fulfilment infrastructure or outsource to a 3PL.
- You want a hands-off approach to both manufacturing and order fulfilment? You might consider dropshipping (read the pros and cons above).
Order fulfilment and 3PL pricing models
Different 3PLs price their fulfilment services in different ways. Here’s how ShipBob prices our ecommerce order fulfilment services.
Note: Order fulfilment pricing depends on your business’s specific needs.
|Fulfilment service||How it’s priced|
|Inventory storage||Per bin, shelf, and pallet|
|Pick and pack fees||Included in total fulfilment cost|
|Standard packaging||Included in total fulfilment cost|
|Shipping||Carrier pricing passed directly on to client|
Read more:Order Fulfilment Costs and 3PL Pricing Models: Everything You Need to Know
Just like there is no one-size-fits-all fulfilment solution, there is no one pricing model that fits all ecommerce businesses. Above is an example of ShipBob’s simple fulfilment pricing. Reach out to our team for a custom fulfilment quote that takes into account your business’s size, needs, strategy and budget.
5 questions to ask when choosing the right order fulfilment service & strategy
If you’ve decided that outsourcing order fulfilment 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 fulfilment 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 fulfilment 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 fulfilment centres 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 fulfilment 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 fulfilment
- And much more…
Order fulfilment FAQs
The order fulfilment process doesn’t need to be difficult, but knowing some common questions can help out when choosing a fulfilment partner.
What does it mean when an order is in fulfilment?
If your order is “in fulfilment” that most likely means that it’s been processed and is currently being prepared for shipment. Once fulfilment is completed, an order has been delivered to the customer and the process is complete.
What is order fulfilment rate?
The order fulfilment rate (or order fill rate) is the number of orders that are processed divided by the total number of orders.
What is logistics fulfilment?
Logistics fulfilment is often interchanged with order fulfilment, meaning to complete the logistical process from checkout to delivery of the item.
What is the order fulfilment process?
The order fulfilment process is the steps a business takes from the moment they have received an order until it is delivered to the customer.
Leave order fulfilment to the pros
Need help with order fulfilment? ShipBob is a professional order fulfilment 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 fulfilment 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.