Order fulfillment refers to the process of storing goods, packing orders and shipping products to buyers. For ecommerce businesses, order fulfillment and shipping play key roles to running a successful business. There’s a lot of different business models ecommerce businesses use, such as self-fulfillment, dropshipping, outsourcing the fulfillment process or using all of the above.
No matter what type of fulfillment and shipping model you want to use, we’ll clearly explain all the different options you have to fulfill and ship orders to your customers.
Order Fulfillment Process
The term order fulfillment refers to the complete process of a customer placing an order and that customer receiving it.
Let’s look at the workflow for the order fulfillment process.
- Receive Shipment
- Sorting Stock
- Shelving Inventory
- Pick Ordered Products
- Check And Pack
- Label Shipment
- Ship To Customer
What Fulfillment Process Is Best
While order fulfillment is a simple logistical process, it can get complex. Once your ecommerce business starts to grow or you have a successful marketing campaign, your fulfillment process can get strained quickly. In fact, one great day of sales could break your fulfillment if you’re not prepared for it.
Let’s look at the 4 ways you can handle your order fulfillment.
(1) In-House Order Fulfillment
In this scenario, your company manages the warehousing and shipping with your own facility and your own team. If you’re planning on doing your own fulfillment, you will need the space and team to fulfill orders efficiently. None the less, there’s many benefits to doing your own fulfillment.
Benefits Of In-House Fulfillment
- Cost Effective – For new companies, it’s often more cost effective to keep your fulfillment in-house.
- Learning Experience – Doing your own fulfillment allows you to learn the fulfillment process.
- Control – Keeping your fulfillment in-house gives you full control over the process.
Cons Of In-House Fulfillment
- Time Consuming – If you’re spending all your time doing fulfillment, that leaves you less time to focus on other areas of your business.
- Easy To Outgrow – You’re limited by the amount of space you have for your fulfillment. As your business grows, you will outgrow what you use now.
- Expensive Cost – If you have a warehouse full of products, that comes with a big price tag. If those products don’t sell, you’re stuck with them.
You also have to think about all of your shipping materials. If you’re sending out hundreds of products a day, you’re going to need shipping labels. You may use a source such as Labels Online, which would give you the ability to buy your own shipping labels, thermal labels, label printers, etc. You would likely save money buying and creating your own labels versus paying someone else to do it. You may also prefer custom labels, which is always a bonus for branding and marketing.
With dropshipping, you’ll be able to use drop ship suppliers who ship orders directly to the customers that buy your products. Many merchants prefer the dropshipping business model as they don’t have to be a part of the shipping process.
Benefits Of Dropshipping
- No Inventory Cost – Thanks to the dropshipping business model, you’re not out thousands of dollars buying inventory.
- No Warehouse Or Storage Fees – Since you don’t have to buy inventory up, you also won’t need a place to store it.
- Saves Time And Effort – Since you don’t have to handle inventory and shipping, you can focus your attention on other areas of your business.
Cons Of Dropshipping
- Smaller Profit Margins – While there’s not too many cons of dropshipping, smaller profit margins are one concern.
- Very Little Control – With dropshipping, you don’t have control over how products are boxed and sent to the customer. There’s also a lot of things that are not hands-on, that can be a good thing but also a bad one.
(3) Outsourcing Fulfillment
You can use order fulfillment centers to outsource your fulfillment. You can also use larger third-party-logistics (3PL) companies for warehousing product, picking, packing and shipping. Companies choose to outsource fulfillment for many reasons, such as saving on bulk shipping, getting products to customers quicker and improving customer service.
Benefits Of Outsourcing Fulfillment
- Lower Shipping Cost – Since most fulfillment companies get discounted shipping rates, you can save a lot of money working with them.
- Saves Time And Effort – Outsourcing your order fulfillment can free up a lot of time for you, allowing you to focus your attention on other areas of your business.
- Faster Shipping – Working with 3PL fulfillment companies that have strategically placed warehouses across the country like Thill can help you get your product to customers faster.
Cons Of Outsourcing Fulfillment
- More Cost – Outsourcing fulfillment can be more expensive than doing in-house fulfillment.
(4) Hybrid Fulfillment
It’s not unusual to see growing ecommerce businesses use one or more of the order fulfillment processes listed above. For one, these are usually growing businesses that need to migrate from self-fulfillment to outsourcing fulfillment. Some companies will use what space they have for fulfillment and outsource others. Hybrid fulfillment models are usually in place while companies are scaling growth.
Benefits Of Hybrid Fulfillment
- Strategic Growth – A hybrid fulfillment strategy can be cost-effective and help grow your business.
- Flexible – Using multiple fulfillment strategies gives you the flexibility to change direction if needed.
Cons Of Hybrid Fulfillment
- More To Manage – There’s a lot of working pieces with hybrid fulfillment, so it can be more to manage.
- Inefficiencies – Having multiple order fulfillment strategies can lead to inefficiencies and inaccuracies.
The Bare Basics Of Order Fulfillment
All online sellers need to grasp and understand the order fulfillment process. It doesn’t matter if you’re doing in-house fulfillment or outsourcing all of your fulfillment, knowing how the fulfillment process works is important to being cost-effective and efficient in your order fulfillment workflow.
Order Fulfillment And Shipping Needs
Order fulfillment and shipping operations have the same basic needs from one fulfillment provider to the next.
(1) Receiving, Stocking And Storing Products
Order fulfillment operations need organized product storage to be effective in their workflow. You can use a warehouse, empty rooms, storage units or stockrooms to find the space you need. Make sure you organize your shelves, bins and boxes.
(2) Packing Stations, Preparing And Packing Orders
This area in the warehouse is often referred to as a packing station, but ultimately it’s an area where orders are prepared and packed. These stations usually consist of a room, storage unit, stockroom for retail, warehouse, there’s a lot of different levels of fulfillment depending on where a business is. Now, these areas contain the packing materials, like boxes, tape, wrap, sheeting, etc.
(3) Shipping Supplies
When it comes to shipping, every inch matters. You’ve heard that one before, right? It’s a good rule to follow, we want to use the least amount of materials, the smallest box possible, the smallest envelope needed to ship an order safely. Now, you don’t want to go “cheap” here but you do want to be aware to use the least amount of materials to get the job done right.
Now, there’s a lot of materials we use for shipping products, so we’re going to need shipping materials. These can include but are not limited to bubble wrap, printing paper, foam, air pillows, air bubbles, etc. Don’t forget, you’re going to need to seal boxes and mailers, so you need some strong tape to get that done.
(4) Packing Slips (Invoices)
A packing slip or printed invoice is going to show a list of all the items a specific order has. These are a great way to keep your fulfillment accurate. Which one should you choose? Well, invoices include the pricing, packing slips do not, that’s the biggest difference between the two.
(5) Shipping Labels
The last stage of the order fulfillment process is printing shipping labels. All of the largest shipping carriers allow you to print shipping labels off, such as FedEx, UPS, USPS and others. You can also use websites like Stamp.com to help. You can also leverage shipping rate comparison software to find the best rates on shipping.
What Shippers Need To Know
As it pertains to the basics of order fulfillment, if you’re going to be shipping product, there’s many things you need to get familiar with.
(1) Box Sizes And Weights
The size of the box you ship and the weight will always play a role in the price you pay to ship your products. You need to make the effort to become familiar with how sizes and weights affect shipping cost.
When shipping, you’ll see the term dimensional weight, also called dim weight, on all of your shipping charges.
Dimensional weight is a practice used by all the major carriers to apply rates based on a box’s overall dimension, not just its total weight. For example, if you ship a large box that doesn’t have much weight, you may be surprised at how much it cost to ship.
Ideally, flat rate boxes are better for heavy items, price is determined by the size of the box and not the weight. All of the major carriers have a flat rate box service.
(2) Delivery Zones
While we’ve discussed delivery zones in depth prior, it’s worth bringing it up here.
All of the top carriers use delivery zones to define parts of the country and use these zones to determine shipping rates and package time-in-transit. Zones are based on your location, so you will always be in Zone One. As distances from your location increases, the Zone numbers, shipping rates, and delivery times all increase.
We always recommend using delivery zone maps on your website so customers can see how long it will take to get their orders shipped. This can help you increase your conversions and give customers more confidence to buy.
(3) Shipping Methods
If you provide different shipping methods to customers, you want to make sure they’re aware of the shipping options they have. If you’re offering multiple shipping methods, we generally see more customers buy. This also allows you to offer different delivery speeds to customers too.
If you’re using different shipping carriers, make sure you customers know. A side-by-side comparison of different shipping carrier and the shipping services they provide would be helpful to your customers.
Another thing you’ll have to consider is where you choose to ship to. Will you be providing shipping only in the United States or will you ship internationally? You’ll also have to tally all the different shipping cost and make sure international customers are aware of how long it will take to get their delivery.
Order fulfillment and shipping are the lifeblood of every successful ecommerce business. In order for you to stay ahead of your competition, you have to understand the order fulfillment process and the key role it plays in your business. There’s many ways to get your products to your customers, you need to find the best efficient model that works for you.
If you have questions about order fulfillment or want to learn how we can help your company, don’t hesitate to give us a call. You can reach us at 1-920-967-9201 or use our contact form.