Key Points In This Article
- Order fulfillment is a very important business task for all companies that ship products to customers.
- Your order fulfillment process is key to efficiency and can be optimized to perform at a high level.
- Order fulfillment software can help you increase performance and make data driven decisions in real-time.
When was the last time you ordered a product online and the experience didn’t go well? You placed an order and the product was a week late or perhaps the product was damaged. Now, did you purchase from that retailer again? Likely not, right?
What makes your ecommerce business any different?
Order fulfillment plays a key role in every aspect of your business and it’s up to you to ensure your ecommerce order fulfillment process is dialed in.
You’re not alone, nearly 4 out of 10 people think the same way. If they had a terrible experience with someone, many would never consider buying from that seller again.
When it comes to fulfillment, we want to avoid that scenario at all costs. Period. That is the goal.
If your customers are getting a bad experience, many of them will never return and if you keep that up, you won’t have a business for long.
What Is Order Fulfillment?
Order fulfillment refers to the full process of receiving, packing, and shipping an online order to customers. Third party order fulfillment services allow online merchants to outsource the complete fulfillment process, which allows the company time to focus on growing their company.
What Does Order Fulfillment Mean?
Order fulfillment means you’re fulfilling an order based on what sales order a customer has placed.
Why Is Order Fulfillment Important?
Order fulfillment is the lifeblood of a business. Companies sell products and services too businesses and consumers, this is how a business makes money. It doesn’t matter what type of business you have, the sale is never complete until the custom receives that order. Companies can’t complete a sale without fulfilling orders.
A successful order fulfillment strategy is key for ecommerce businesses to remain competitive, build customer loyalty and brand equity in the modern landscape of e-commerce.
What Order Fulfillment Strategy Should You Choose?
How can you determine which order fulfillment strategy is best for your company? There’s a few factors you need to focus on and questions you should be asking. Let’s have a look.
(1) Sales
Sales are the lifeblood of your business, so knowing exactly what sales channels are producing results is very important. Your fulfillment strategy should support your order fulfillment and visa versa.
Here’s a few questions should be thinking about.
- What ecommerce platform are you using?
- What’s your most profitable sales channel?
- What platforms are driving sales?
- How can order fulfillment optimization support sales?
When you’re selling on many channels, it can be difficult to track. The next piece of your order fulfillment strategy should be technology and analytics. This order fulfillment software can be utilized in a wide array of manners to help you make real-time decisions that are vital to your business.
(2) Tech And Analytics
When you partner with the biggest 3PL solution providers, you can get your hands on state-of-the-art technology and software that gives you a competitive edge against your competition.
While your ecommerce analytics can be useful, the technology we’re referring to is way beyond just that.
In fact, many 3PLs offer data and analytics as a service – giving you real-time data that you can use to grow your business.
(3) Order Volume
Order volume, sales volume, it matters! How is your order volume?
Once again, when we’re focusing on fulfillment and choosing the right strategy, we need to ask the right questions.
- How many SKUs are you selling?
- How many orders do you ship every month?
- How many orders will you ship next month?
- How many orders will you ship this year/next year?
The amount of products you sell each month and your monthly order volume are going to play a big role in finding an order fulfillment solution for your company.
If you’re only receiving a few orders each month, it’s likely best to keep your fulfillment in-house versus outsourcing fulfillment. If you only have a limited amount of products, you likely don’t need a full inventory or warehouse management system to track all of your inventory.
On the other hand, if your business is quickly growing, you could be outgrowing your current fulfillment solution.
(4) The Size Of Your Business
Every business is unique and the order fulfillment solution you need will depend on the size of your business.
If you’re not seeing a lot of orders daily, you’ll likely keep your in-house fulfillment process.
However, as your business grows and you see more sales, your order fulfillment process will need to change.
While some business owners will have the capital to invest in fulfillment infrastructure, others will choose to outsource their fulfillment to a 3PL.
There’s a wide range of benefits outsourcing order fulfillment to a 3PL.
No matter what you ultimately decide, the specific scenario you’re in now will play a role and influence what you decide to do.
Order Fulfillment Challenges
There’s a number of different order fulfillment challenges you’re going to run into at some point, from supply shortages and inventory management issues to failures in demand and logistics planning to the complexity of your supply chain. If it can go wrong, it will – but you’ll have the ability to adjust and make changes as needed.
With that being said, let’s take a look at the most common order fulfillment challenges.
(1) Logistics Planning
Missed deliveries, slow deliveries, broken products, and wet packing are all things that can damage your company’s reputation. Even worse, it can damage your sales and profitability.
(2) Inventory Management
Customer dissatisfaction, missed deadlines, and negative brand reputation are all linked to running out of stock. It’s difficult for businesses to recover from the issue after it’s finished. There are, however, certain cases in which customers are more forgiving. Customers are typically more forgiving if shortages and delays are the result of a broad weather event, a natural calamity, or what is labeled as a “black swan” type of event – think the pandemic of 2020.
(3) Demand Planning
There’s no question about it, having too much inventory on hand drives up storage and transportation costs. In addition, since demand for those products may fall before you sell them, your risk goes up the longer you hold them. Keeping adequate supplies in stock without ever dipping too low or stocking too much of any particular item is crucial not only for your own selling success but also for the health and safety of your employees. It’s critical to carefully estimate and plan for demand levels in order to avoid having insufficient inventory on hand that would result in shortages, or overstocking.
(4) Supply Chain Execution
Having a supply chain strategy entails calculating the cost-versus-benefit tradeoffs associated with operational choices. A firm may, for example, select a single supplier for a certain product in order to obtain price discounts for greater purchasing volume. It’s also a good method to increase vendor loyalty by establishing yourself as the go-to person for information. This might help you get goods on time during periods of high demand, and it’ll help you gain priority status with the supplier, which may make a difference.
The supply chain’s operation (SCE) is the sequence of activities in the supply chain. Every action in the chain is controlled by software applications. Material management, product tracking, data sharing and data feeds monitoring, and financial information administration are just a few examples.
The SCE model is a collection of applications that must be used in tandem to properly manage your supply chain. A typical SCE scenario includes the usage of several apps such as order management, inventory management, warehouse management, transport management, and logistics software.
(5) Communications
Order fulfillment involves a lot of working pieces, if you’re not communicating properly, it’s going to be a problem.The same can be said about your customers, you have to keep them in the loop until their shipment arrives. Communication is key on all fronts.
(6) Oversea Shipments
Shipping overseas is even more complicated. Not only can it take longer, but you also have customs and extra costs to contend with as well. Occasionally, an item may be sent back, meaning you’ll either have to try sending it again, or else refund the purchase.
How To Improve Your Order Fulfillment Process
No question about it, every order fulfillment company needs an order fulfillment process that’s efficient, accurate and consistent. Every fulfillment service has a specific process for their fulfillment. While this process is similar among companies, there’s a lot of ground that can be made or lost in your fulfillment systems.
Successful order fulfillment strategies don’t rely on a single process, every scenario is different and the type of order fulfillment you require may differ from the next.
Order Fulfillment Process: How It Works
The order fulfillment process uses a number of different steps. These fulfillment steps refers to the complete process of placing an order and receiving that order. The steps that are required in fulfillment, start to finish, this is your fulfillment process.
- Customer places order – whether in person, online, phone, email, etc.
- Received order – commonly placed into a back office software
- Notify Customer – their order has been received
- Warehouse receives order – via software, in person, etc.
- Warehouse picks order – stock, shelf
- Prepare order for shipping – order is verified to be accurate
- Order is shipped – confirm destination
- Notify customer – shipment is being sent
- Customer receives their order – the shipment is complete
The Perfect Order Metric
You may be wondering: how do I improve my order fulfillment process with so many steps? Companies use different metrics to determine just how efficient their fulfillment process is. One of these metrics you want to become familiar with is Perfect Order.
A perfect order is one that is:
- On time
- Complete
- Undamaged
- Includes the appropriate paperwork
This is somewhat similar to fill rate. Fill rate is the percent of your orders that are shipping in full, on time and among the first shipment as a percentage of all of your orders.
If you ask any fulfillment center what their priority fulfillment goal is, they would likely tell you creating perfect orders every time. While it’s nearly impossible to have perfect orders every time, striving for that goal is key.
With so many steps,there are a number of different challenges as it pertains to your order fulfillment process. These challenges are faced on a daily basis, such as inventory management, logistics planning, supply chain management, demand planning and other areas of concern.
We like to simplify our order fulfillment process. While there’s a number of different systems and processes in this process, when you break it down to simplify, your goal is as follows;
- What do we have to sell
- Will our customers buy it
- How do we get it to them
That’s fulfillment in its most basic form, so how do we accomplish this? Let’s take a look at the core challenges your fulfillment services will face in your ordering and fulfillment process.
Planning For Demand
Known as demand planning, this refers to your ability to know in advance when a product is going to be in demand. You need to see the trends to be effective. You also want to have the ability to create that demand too. To create demand, this is where we rely on marketing, advertising and promotions.
You need to have a keen eye for seeing demand in the market. While creating demand for a product is a challenge in itself, your ability to see future trends before they happen can set your company apart from your competition. You want to have the ability to do both.
Inventory Management
Proper inventory management is key to ecommerce fulfillment success. Order fulfillment is all about the customer. We want to make sure expectations are met when a customer first places an order, all the way to the moment their package is in their hands. If you have no inventory for a product a customer orders, not only do you miss the sale, you likely ensured that customer will not buy from you in the future too.
Knowing what needs to be ordered, what needs to be stocked, what you need more of and what you need less of is vital to your success. Inventory management is a huge part of the fulfillment process. The last things you want are delays and unhappy customers.
Supply Chain Management
Managing your supply chains is another challenge in fulfillment that you need to master. When products are low or out of stock, how long will it take you to get it back in stock? If you need new product, how long will it take the manufacturer to get the order complete? Once the order is complete, how long will it take to get to your warehouse?
Supply chain management has many different levels you have to account for, hence why it’s a challenge for many. We’d recommend building a resource list for all your supply chain contacts, outlining the timing rates for each product.
Logistics Planning
In fulfillment, logistics matter a lot, so knowing the exact plan to get products to customers is important.
The more delivery options your company has, the better.
Shipping costs is usually one of the biggest expenses companies have.
One big benefit for those of you that ship a lot of products, a 3PL fulfillment company can help save a lot of money as it pertains to shipping expenses. Many 3PLs get bulk shipping rates because they ship a lot of volume with major shipping carriers.
If you’re looking to save money on shipping, that’s a great place to start.
How To Streamline Your Order Fulfillment Process
For those of you looking to streamline your order fulfillment process or to improve your results, we have you covered. Here’s a few different ways for you to make your ecommerce order fulfillment better.
(1) Leveraging Automation
It doesn’t matter if you love technology or not, automating your order fulfillment process is a necessity. There’s a number of different order fulfillment software out there and the opportunity for you to streamline your fulfillment process.
Automating with the right software can make a huge difference in your fulfillment.
(2) Integrating The Right Systems
There’s a lot of working pieces involved in fulfillment and with software, you may find it hard to integrate everything seamlessly.
This is where Thill can help. We find that most companies have pieces here and there, just not a complete solution. When businesses have all the software and tools they need, we find companies have difficulty integrating all the pieces to work as one complete system.
It’s essential to have the right tools for your fulfillment but it’s equally important to ensure you’re getting the most out of your automated systems for maximum efficiency.
(3) Classify Inventory
Another tip to help your order fulfillment process is classifying your inventory. We’ve discussed the importance of inventory management earlier, but this will help give you an action step you can begin implementing right away.
You can group your inventory from fastest to slowest, ensuring that the fastest moving inventory is close to your pickers. Equally important, you want to make sure these are located close to your shipping dock in your warehouse.
Remember, seconds add up quickly when you’re moving a fair amount of product. The more efficient your warehouse is, the better.
(4) Managing Seasonal Demand
Earlier in the article, we discussed the need to be able to forecast demand. You also want to properly forecast seasonal demand, especially as it pertains to the holiday shopping season.
For many industries, peak demand is around the holiday season. If that includes your company, you can use your last year’s numbers as a guide. Keep in mind, seasonal demand is always changing, there’s always a new trend so be prepared for that.
While seasonal demand often refers to the holidays, you could be in an industry where seasonal demand is at different times. For example, look at the lawn care industry, this would be a good example. For the lawn care industry, seasonal demand begins in spring.
Make sure you’re prepared for increases in demand.
(5) Eliminate Picking Mistakes
Picking plays an important role in the fulfillment process. Surprising to some, many companies report a picking error rate of 1 percent or more. Sure, it’s a slim margin but it can quickly add up to be a big problem. This is one reason we highly recommend using SKUs, so make sure you’re using them too.
The more you can cut down on picking errors, the better.
Order Fulfillment FAQ
(1) What is order fulfillment rate?
The order fulfillment rate is an efficiency measurement, it’s calculated by dividing the number of orders already processed by the total number of orders. This is also referred to as order fill rate.
(2) What does it mean when an order is in fulfillment?
This usually means the order is in the fulfillment process at the moment but it has not shipped out.
(3) What does order fulfilled mean?
An order is consider fulfilled when the customer receives the order.
(4) What is an order fulfillment rate?
The fulfillment rate is a metric that indicates how well an organization fulfills orders. It’s also known as the order fill rate.
How Thill Inc. Can Help With Your Order Fulfillment
If you’re looking for a 3PL order fulfillment partner that can help you with your fulfillment, be sure to reach out and talk to our team.
Thill Inc. has over 50+ years of fulfillment experience and our software integrates with dozens of ecommerce platforms, such as Shopify, WooCommerce, Magento, Ebay, Amazon, CrateJoy, and many more.
If you have any questions, don’t hesitate to reach out. Here’s our contact form.
