Table of Contents
- 1 What is order fulfillment?
- 2 Ecommerce order fulfillment process: How Does It Work
- 3 How to create a Successful Order Fulfillment Strategy?
- 4 Order fulfillment costs
- 5 How do you choose the best order fulfillment service
What is order fulfillment?
It’s the procedure of receiving the goods and later processing and delivering the orders to the customers. The process begins when a client places an order. It ends when they receive the item. Order fulfillment handles the return transaction if the customer wants to return a purchased item.
Here’s a brief overview of the ordering fulfillment process steps:
- Receiving inventory shipment
- Storage of inventory
- Processing orders
- Returns processing
Ecommerce order fulfillment process: How Does It Work
The process of fulfillment occurs at one of the distribution centers. It typically includes managing inventory and supply chain management. It also includes the process of processing orders, control over the quality, and assistance for customers who need to report issues or request returns or exchanges for products.
The fulfillment of orders takes place through these five different steps.
Products may be purchased from a third party, an additional department within the company, or a company warehouse; a pipeline (as with fuel, oil, water, or another fluid product) or as data from a database or in various formats from outside or inside sources.
In all cases, the received inventory should be weighed, examined, and inventoried to ensure the correct amount was received and the quality is satisfactory. Bar codes or SKUs printed on the arriving products are utilized in the storage and receiving processes to retrieve items from storage facilities later.
After the items are received at the fulfillment center and inspected, they are logged and distributed immediately or transferred to long-term or short-term storage. Goods should be stored for enough time to promptly distribute items to current sales instead of storing items to be sold in the future.
A system for managing order processing determines the selection of products and packing procedures for every newly received order from a customer. On the marketplace online, the order management software may be integrated into the shopping cart of an online store to initiate automatic order processing.
A picker team or automated warehouse robots pick products from the warehouse following the packing slip’s directions. The packing slip includes specific details, like an inventory of the SKUs of items and colors, sizes, the number of units, and their location in the distribution center’s warehouse.
Packing materials are picked by a team of packing experts and automated fulfillment machines to get the lowest dimension weight. Dimension weight can be calculated using the multiplier of the package’s size times width times length. Because space for delivery vehicles is limited, optimizing the package weight (or the DIM weight) is essential to reduce the delivery time while possibly reducing the shipping cost.
Furthermore, packing teams usually provide return shipping supplies and labels if the buyer wants the product to be exchanged or returned for a refund in the future.
The order is then sent via a transportation channel or a shipping node to be delivered to the customer. Shipping companies and carriers — be it shipping companies or freight liners, FedEx, UPS, the U.S. Postal Service (USPS), or other carriers — establish the freight billable cost based on whichever is more significant: the actual weight of the box or its dimension weight.
Even if its weight is not too heavy, like T-shirts, packaging it in the lightest DIM is usually a good idea to avoid the packaging increasing the overall weight of the package. Additionally, many carriers have guidelines for packaging to maximize their profit from the space they have. Failure to comply with these requirements could delay delivery when carriers cannot take the request.
Typically, shipping routes include multiple carriers. For instance, FedEx may pick up packages in the fulfillment center, which USPS will then ship to the customer’s home. There are many motives behind these different methods of shipping. A common reason could be that USPS can deliver even to remote areas, where other commercial carriers don’t. It’s more convenient to use USPS to deliver the final miles of the delivery route in such instances.
Returns processing starts with the inclusion of packaging materials and a return form with the original customer’s purchase. If a customer returns a product in exchange or refund, it should be handled with care to ensure it’s suitable to replenish the item naturally if it malfunctions and cannot be replaced. Also, a product that has been soiled cannot be restocked. Returns processing is based on inspections of quality and sorting returned products according to the criteria. Finally, returned products are replenished, returned to the manufacturer or vendor to receive a refund from the distributor and credit, or delivered to the recycling center.
How to create a Successful Order Fulfillment Strategy?
It can be difficult to create a plan that considers these procedures. However, it is essential to be aware of every aspect of your supply chain and follow these to deliver a better customer experience.
Here are a few suggestions to create an order fulfillment plan to help you deliver goods on time and improve the customer experience.
Keep Regular Track of Inventory
It’s extremely disappointing for customers to discover that their purchased product is not in stock. The customer could either never purchase from your shop ever again, or they will vent their frustration to the internet to express their displeasure. The brand’s image is at risk. These kinds of situations are the reason to simplify your fulfillment process to speedily deliver orders for your clients.
It is the single most crucial aspect of order fulfillment. The entire chain is dependent on it. So, you must keep an eye on your inventory. Set up an effective inventory control system to provide actual-time cycle counts to ensure that you are aware of when a product is either out of stock or unavailable.
Suppose you don’t have real-time inventory management or the ability to organize your warehouse or keep it precise. Incorporate your inventory warehouse with the systems for managing water to keep current with all inbound, outgoing, and orders from sources.
Adopt Product Kitting
Product Kitting is extremely beneficial in reducing processing time and the cost of fulfillment. Kitting for products is the process in which various items related to each other are packed, grouped, and delivered together as one unit.
Kitting offers many benefits. It can increase productivity and decrease costs for labor by storing items separately in kits. It is also possible to reduce stock and improve cash flow.
Learn more about kitting for products here.
Automate Your Warehouse
Technology has revolutionized every aspect of the logistics chain. Your warehouse shouldn’t be left out. It is essential to implement a sophisticated warehouse management system and the use of data-driven technology to organize your warehouse inventory, organization, and logistics.
You may automatize your warehouse by using technology that includes RFID identification Internet of Things, or IoT, for better tracking and barcodes.
When you implement an inventory management system for your warehouse, you can reduce the number of mistakes made by hand and make orders more quickly.
Maintain a Transparent Supply Chain
Supply Chain visibility is the key element of your strategies. With a thorough understanding of supply chain visibility, you will gain valuable insight into your processes and make improvements to areas that aren’t working efficiently once you have started tracking each stage of the supply chain. In addition, you will be able to identify the areas where you aren’t doing well and will be able to address them.
For example, if you monitor the picking processes within the store and realize that manual picking of lower-shelved goods can take longer, it can be moved to an automated procedure.
Thus, it’s essential to monitor the supply chain of your business and gather information.
Order fulfillment costs
There are a variety of elements that make up fulfillment prices. Certain charges are monthly, and others are per order.
If you are an eCommerce company that handles fulfillment in-house, consider the expenses for labor, warehouse rental, and insurance costs, packaging shipping costs, and the processing of returns.
It’s crucial to comprehend the price per order when outsourcing the fulfillment of orders. These are the fees for fulfillment which add up to the costs of fulfilling orders.
Receiving involves bringing inventory into the fulfillment center. The majority (but not every) fulfillment companies charge in-take charges. For instance, Red Stag. Fulfillment charges per pallet of the inbound goods.
The cost of receiving is more than just unloading the shipment. When your goods are delivered to the warehouse, they will be put into inventory and then taken onto the shelves.
The cost of fulfillment for your order will vary depending on the method by which the goods arrive.
Warehousing is the process of storing your goods in the center for fulfillment. The price you pay for storage is dependent on the shelf space your items require. There are many storage facilities that charge the storage area by cubic feet. Storage costs are charged per month.
If you manage your fulfillment on your own, your warehouse will be an expense for fulfillment that is fixed. The cost of your overhead remains constant throughout the year long. But, when you purchase fulfillment services from a 3PL, you only pay for the services you actually use. The savings on storage costs are among the main benefits of using the services of a 3PL.
Pick and pack your order fulfillment.
“Pick and pack” is the method of taking items off shelves and packing them into your customers’ orders. This cost of fulfillment is the cost per order. Most fulfillment firms charge a fixed fee for the first item of every order and an additional fee for every subsequent item. For instance, the first item could cost $2.50 for each additional item, $0.30.
Packing and shipping charges comprise packaging costs used to send every order. If your items can be shipped in the original packaging, you’ll reduce the cost of packing.
ECommerce shipping is the highest fulfillment cost. Shipping costs per order are contingent on a variety of variables:
- Whether you utilize FedEx or UPS, or USPS to ship your items
- Which areas of shipping the package needs to traverse
- Fragile items might require special handling, which could add cost per order.
- Oversized objects can result in charges for dimensional (DIM) charges for weight cost
If you’re a bulk shipper and you’re a volume shipper, you might be capable of negotiating bulk discounts on shipping rates with your carrier. Here at Red Stag Fulfillment, we send a lot of orders to multiple customers. This allows us to obtain low shipping costs as well as DIM percentages.
It would be great if your return percentage was at zero. But, unfortunately, returns are part of eCommerce. Your fulfillment costs will comprise costs to return processing. It could involve receiving and evaluating returned products for damage and replenishing them. Include a portion of the cost for returns when you calculate the fulfillment cost per purchase.
How do you choose the best order fulfillment service
Outsourcing fulfillment comes with clear benefits. However, with the multitude of fulfillment companies to select from, it is difficult to decide which is right for your business.
Factors that influence the service to use for the fulfillment of orders to choose to include:
Experience. “Look for a third-party fulfillment partner that has experience working with ecommerce brands and cares about the packages they are sending out,” says Jessica Postiglione, founder, and CEO of Bonny. “A lot can go wrong in terms of the pack out: the wrong goods can be added to the order, goods shipped to the wrong customer, there isn’t sufficient padding around the items leading to damage, etc.”
Cost. There’s still a need to earn an income from orders you outsource the fulfillment. Add all stock storage packaging, picking and packing, and shipping charges to your price.
Technology. Avoid the hassle further down the line by selecting an order fulfillment service that is able to grow as your sales volume. For example, fulfillment services that employ order-picking robots can pick orders more than a person.
Location. Warehouses are where you can store inventory in the Shopify Fulfillment Network and automatically send new orders to the closest location to the customer.
Speed. In a world where speed of delivery is paramount, you want to make sure that the companies on your shortlist provide an estimated delivery date and the deadline time for delivery the next day.
Customer service. It’s inevitable that something will happen during the process of fulfilling orders. It’s important to ensure that such instances aren’t too frequent and the fulfillment service can fix the issue.
Ethics. About a quarter of all merchants believe that one of their top concerns in the supply chain is making sure that there the manufacturing partners use fair and ethical work practices. Verify that your partner is safe and health-related in place and also pays employees well.