Order Fulfillment: Why Mastering it is Critical to Your Business

order fulfillment

Order fulfillment is about the steps involved in receiving, processing and shipping orders. Take note: Over half of online shoppers earmark speed of delivery when evaluating orders. Here’s what you need to know about fulfilling orders and why it’s so critical for your small business.

The Importance of Order Fulfillment

Order fulfillment isn’t just a logistical necessity—it’s the heart of customer satisfaction and business growth. This section explores why mastering this process is indispensable for any business, especially in the e-commerce domain.

The Backbone of E-commerce Success

Efficient order fulfillment is foundational to e-commerce success. It ensures that customers receive their products promptly and accurately, which in turn, enhances customer loyalty and trust in your brand. This reliability becomes a significant competitive advantage, encouraging repeat business and positive word-of-mouth.

Speed and Reliability as Key Drivers

In today’s fast-paced market, speed and reliability in delivering orders are paramount. Customers often prioritize these factors when making purchasing decisions. Businesses that can consistently meet or exceed delivery expectations are more likely to win and retain customers in the long run.

If you are new to the order fulfillment process, this video from NetSuite clues you in on what you need to know:

The Order Fulfillment Process

order fulfillment process graphic with all the steps outlined

Choosing the right order fulfillment model is crucial for operational efficiency and scalability. This section delves into the various models available to businesses and their respective advantages and disadvantages.

Self-Fulfillment Versus Third-Party Logistics (3PL)

Businesses can opt for self-fulfillment, managing all aspects of order fulfillment in-house, or outsource these tasks to a Third-Party Logistics provider (3PL). Self-fulfillment offers more control but requires significant resources. In contrast, 3PLs can offer expertise and scalability but at a cost and with less direct oversight.

The Rise of Dropshipping

Dropshipping is a fulfillment model that allows businesses to sell products without holding inventory. The supplier directly ships orders to customers. This model reduces upfront costs and risks associated with inventory management but requires strong supplier relationships and can offer lower profit margins.

To successfully manage the order fulfillment process, it’s important to understand its various components and make informed decisions. Whether you opt for a DIY approach or enlist the services of an outsourcing company, several key factors come into play:

DIY Order Fulfillment:

  • Inventory Management: If you choose to handle order fulfillment in-house, you must establish a robust inventory management system. This tactic involves keeping track of stock levels, reorder points, and item availability.
  • Warehousing: To store your products, you’ll need a dedicated warehouse space. This facility should be organized, secure, and equipped to handle your inventory efficiently.
  • Inventory System: Implementing an effective inventory system is essential. The chosen system could involve the use of inventory management software to track product quantities, monitor restocking needs, and ensure accurate order fulfillment.
  • Order Processing: You’ll need a streamlined process for receiving and processing orders. This process includes order entry, picking the items from inventory, and preparing them for shipment.
  • Packaging: Proper packaging is crucial to protect products during transit. You’ll need appropriate packaging materials and a standardized packaging process to maintain consistency.
  • Shipping: Coordinating with shipping carriers, generating shipping labels, and scheduling pickups or drop-offs at the post office are vital tasks for DIY order fulfillment.

order fulfillment - warehouse manager on cellphone in the warehouse

Outsourced Order Fulfillment:

  • Inventory Management: When outsourcing, the fulfillment company assumes responsibility for managing your inventory. Moreover, these companies have the expertise and systems in place to keep track of your products.
  • Order Processing: The fulfillment partner handles the entire order processing workflow, including order entry, picking, and packing. They have the manpower and infrastructure to expedite this process.
  • Warehousing: Outsourcing companies have dedicated warehouses designed for efficient storage and retrieval of products. They ensure your inventory is well-organized and secure.
  • Shipping: Fulfillment partners have established relationships with shipping carriers and can often negotiate better rates. These partners take care of generating shipping labels and coordinating timely deliveries.
  • Cost Structure: Outsourced order fulfillment typically involves a fixed monthly fee and a percentage of sales. This structure can be cost-effective, especially for small businesses.
  • Customer Experience: Outsourcing can lead to improved customer experiences. Many fulfillment companies have multiple warehouse locations, allowing them to ship from the nearest facility, resulting in faster and more cost-effective deliveries.

order fulfillment - warehouse racks with labels

Technological Advancements in Order Fulfillment

Technology plays a pivotal role in optimizing the order fulfillment process. This section highlights the latest technological advancements that businesses can leverage to streamline operations.

The Role of Automation and Robotics

Automation and robotics are transforming the order fulfillment landscape, from automated picking systems in warehouses to drones for delivery. These technologies can significantly increase efficiency, reduce errors, and lower operational costs.

Software Solutions for Streamlined Operations

Software solutions, including inventory management systems and order processing platforms, are essential for streamlined operations. They offer real-time insights into stock levels, order status, and customer data, enabling businesses to make informed decisions and improve customer service.

Customer Experience and Order Fulfillment

The final mile of order fulfillment directly impacts the customer experience. This section explores how businesses can enhance customer satisfaction through thoughtful fulfillment practices.

Personalization and Packaging

Customized packaging and personal touches can turn a routine delivery into a memorable experience for customers. Personalization fosters a deeper connection with the brand and can encourage repeat purchases and social sharing.

Transparent Communication and Tracking

Transparent communication about order status and tracking information is crucial for customer satisfaction. Providing customers with regular updates and easy access to tracking details ensures a positive experience and can mitigate concerns or issues that may arise during the shipping process.

By understanding and implementing these aspects of order fulfillment, businesses can not only meet but exceed customer expectations, fostering loyalty and driving growth.

Calloway Cook’s Insights

Calloway Cook is the founder of Illuminate Labs.  He outlined the biggest issue for small businesses.

“Processing orders is incredibly time-consuming,” he writes. “I’m the Founder and only employee of my company. If I label and drive to the post office to ship each order, it would take hours. The opportunity cost of that is great for small start-ups. And that time is better spent on operations & marketing work to scale the business.”

He says the solution is outsourcing. The starting cost to outsource order fulfillment is low. There is usually a fixed price each month and a percentage on sales. There’s another advantage, according to Calloway.

“Using a third party for order fulfillment is good for your customers. Our partner company, Shipmonk, has warehouses across the U.S. It ships to a customer based on which location is closest. This means they can get a package to a customer faster and cheaper than I could.”

Advantages of Outsourcing Order Fulfillment

order fulfillment - warehouse worker with a barcode scanner

Outsourcing your order fulfillment frees up time so you can focus on your business. It speeds up your delivery time and also lowers shipping costs.

Staying in-house? There’s definitely an upside to doing so. For instance, you know every aspect of your operation from start to finish. It’s a cheap way to keep your costs low when you’re a start-up. Be warned. You can quickly outgrow in-house operations if your company takes off.

Top Factors to Consider When Choosing a Fulfillment Partner

order fulfillment - potential partners discussing fulfillment

Most small businesses need some help to get goods and services from Point A to Point B. Here’s a good list of the best order fulfillment services for 2019. Additionally, here are some things to consider when picking a partner:

Get Expert Help

You don’t need to spend hours scouring the search engines looking for a good outsourcing company.  There are online portals like FulfillmentCompanies.net . Get a list of services that have been categorized by different industries.

Ask the Right Questions

Don’t just take the first search results you find. A list of questions about the company’s pricing structure, if they ship internationally and who they use is important. Take your time and make up a list of questions important to your business. You might want to make it a team effort by asking employees for input.

Think Turnaround

You also need to consider the promises you make to customers about shipping times. If you promise them one day shipping, you’ll need to find a fulfillment service that does that for you.

In-House Tips

If you’re going to handle order fulfillment yourself, you’ll need to have inventory on hand. That means setting up a warehouse or designating a storage area. Also, putting the slower-moving items on top shelves is good. Your packaging area should be as close as possible to the loading dock.

You’ll need an inventory system, and software is a great tool.  Tracking inventory in real-time is possible. It helps small businesses to be proactive. Ryan Chan from UpKeep Maintenance Management explains:

“Order fulfillment is more than just delivering on sales inquiries,” he writes. “It is about proactively anticipating the needs of customers before they arise. With the digital revolution of businesses, customers can more easily order online.”

He says CMMS (computerized maintenance management software) lets businesses make proactive decisions and fill orders in a fast-paced environment.

“With features like inventory tracking and KPI dashboards, a CMMS makes work orders a more easily categorizable system.”

Key Considerations for Order Fulfillment Partnership Choice

As you can see, when selecting a fulfillment partner, it’s crucial to weigh the factors that align with your business’s objectives and operations. This table highlights essential aspects to contemplate when deciding between outsourcing fulfillment or managing it in-house.

Factor to ConsiderOutsourcing with a Fulfillment PartnerIn-House Order Fulfillment
Expert HelpUtilize online portals like FulfillmentCompanies.net to find categorized services tailored to different industries.Requires conducting extensive research and sourcing vendors independently.
Asking the Right QuestionsPrepare a list of questions about pricing structure, international shipping, and preferred shipping carriers. Seek input from employees to gather diverse perspectives.Requires creating a comprehensive list of questions tailored to your business needs and objectives.
Turnaround TimeChoose a fulfillment service that aligns with your promised shipping times (e.g., one-day shipping).Maintaining control over shipping times but necessitates efficient logistics and warehousing.
In-House SetupN/A (Outsourced)Set up a warehouse or designated storage area with a well-organized inventory system.
Inventory ManagementOutsourcing companies manage inventory on your behalf, utilizing advanced software for real-time tracking.Implement inventory tracking software for proactive decision-making and order fulfillment.
Proactive Order FulfillmentFulfillment partners may leverage technology like CMMS (computerized maintenance management software) for anticipating customer needs and enhancing efficiency.In-house order fulfillment can benefit from CMMS tools to streamline work orders and track key performance indicators (KPIs).

Order Fulfillment Trends

Here are a few of the big trends that you need to keep an eye on this year and into next year.

Big Data Gets Bigger

Even after just a few years, you’ll have more customer data than you know what to do with. That’s why data analytics will become even more important going forward. Meanwhile, being able to see big and small sales trends will help you to shift gears on the fly. Here’s a link to a Google cloud service.

Automated Order Picking

order fulfillment - automated picking system

It doesn’t really matter if you’re going to go in-house or outsource your order fulfillment. Automated picking is going to speed things up so you’ll need to fine-tune your entire process. In fact, it’s at the point now where customers can use an app to order their groceries.

Integration of AI and Machine Learning

The integration of artificial intelligence (AI) and machine learning into order fulfillment processes is becoming increasingly prevalent. These technologies can predict order volumes, optimize inventory management, and even automate customer service interactions.

AI-driven analytics can provide deeper insights into customer behavior, allowing businesses to anticipate demand more accurately and personalize the customer experience.

Eco-Conscious Fulfillment Practices

Sustainability is becoming a significant concern for consumers, influencing their purchasing decisions. Eco-conscious fulfillment practices, such as using recyclable materials, minimizing packaging, and optimizing delivery routes to reduce carbon emissions, are gaining traction.

Businesses are also exploring circular economy models, where products are designed to be reused or recycled, to minimize waste and environmental impact.

Micro-Fulfillment Centers

To meet the demand for same-day or next-day delivery, businesses are adopting micro-fulfillment strategies. Micro-fulfillment centers are small-scale warehouse facilities located closer to customers, reducing delivery times and costs.

This trend is particularly evident in urban areas, where traditional large-scale warehousing may not be feasible. Micro-fulfillment also allows for more agile inventory management and faster response to changing market demands.

Omnichannel Fulfillment

The lines between online and offline retail are blurring, leading to the rise of omnichannel fulfillment strategies. Businesses are leveraging their entire network — including brick-and-mortar stores, online platforms, and warehouses — to fulfill orders more efficiently.

This approach provides customers with a seamless shopping experience, whether they’re buying online, picking up in-store, or opting for curbside pickup.

Blockchain for Transparency and Security

Blockchain technology is beginning to play a role in order fulfillment by offering enhanced transparency and security throughout the supply chain.

By enabling secure, tamper-proof records of transactions and product movements, blockchain can improve inventory tracking, verify the authenticity of products, and ensure ethical sourcing practices. This technology can also facilitate smoother customs clearances for international shipments.

By keeping an eye on these trends, businesses can stay ahead of the curve in order fulfillment, adopting new technologies and practices that align with consumer expectations and environmental responsibilities. Adapting to these changes not only improves operational efficiency but also enhances the overall customer experience, contributing to long-term business success.

Image: Depositphotos.com

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Rob Starr Rob Starr is a staff writer for Small Business Trends and has been a member of the team for 7 years. He is a graduate of Ryerson University in Toronto with a Bachelor of Journalism degree. His print credentials include employment with various Toronto area newspapers and three works of fiction: The Apple Lady (2004), Creekwater (2006) and Sophistry By Degrees (2008) published by Stonegarden Press In California.

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