Ecommerce order fulfillment is the process of preparing, packing and shipping products to customers. It’s the complex system of logistics that sees a managed inventory tapped to package and deliver an order in a timely manner.
It’s an end-to-end shipping service that is vitally important part of the customer experience.
Failure to meet shipping promises can impact the bottom line, too. If an order fails to reach its destination within two days of the estimated delivery date, 69% of shoppers are unlikely to shop with that retailer again. Meeting and managing customer expectations is paramount.
Order Fulfillment Methods
There are multiple options for ecommerce fulfillment, but it’s up to the organization to determine which is the best fit for it.
When dropshipping, businesses don’t maintain products it sells in stock. Rather, the company purchases inventory on an as-needed basis from a third party, like a wholesaler, which then ships products to buyers. The seller serves as a sort of middleman in the process.
Dropshipping is more common with less mature companies, who are looking to sell products without a significant upfront investment. They’re easy to start and offer low overhead, although profit margins are significantly cut.
Fulfill your own orders.
Sometimes it makes the most sense to take on the fulfillment burden yourself. Taking the process in-house gets the most profit margin on each sale and gives you full control over the process.
However, it’s also a significant upfront and on-going cost and is usually reserved for larger organizations.
Logistics company fulfillment.
The third option is a mix of the first two. In this, the company produces products, but outsources the transportation and warehousing of inventory to a third party. The business maintains control of the quality of products, but passes on the cost of all shipping and handling to the outside vendor.
What is a Fulfillment Service?
A fulfillment service is an outside vendor like Amazon FBA, Rakuten Super Logistics, ShipMonk, Red Stag Fulfillment or ShipBob that handles the shipping process, including packing and handling. These are typically used by companies that don’t want to take on the burden of shipping products, or have outgrown existing warehouse space.
What is a fulfillment center?
Fulfillment centers are the brains of shipping operations. Here, products are prepared and routed to their final destination. Think of these as a control center.
What do fulfillment services cost?
This will depend on a variety of factors, such as volume of products shipped and what is being shipped. Fulfillment services typically charge based on the hour or number of products handled. Some charges, like initial set up, may be one-time.
Others, like regular deliveries, may be recurring.
International shipping costs, even if just to Canada or Mexico, should also be considered.
Choosing a Fulfillment Services Provider
Fulfillment providers have seen a great increase in business, with several new providers coming online. Picking the best one for your unique supply chain can be difficult, but considering these factors will help.
Worked with similar industries.
Having a vendor that understands the needs of your products and customers will go a long way. If you’re shipping something with unique requirements, like perishable food or fragile goods, it’s important to have a shipping partner that fully understands how to handle them.
Has similar existing clients.
Sometimes it’s OK to be a follower. If a company has a history of success with companies with fulfillment needs similar to yours, it’s reasonable to expect that they can do the same for you.
Has multiple warehouses.
A robust warehouse management network with multiple geographic locations is ideal for reducing shipping times and costs. A healthy network of fulfillment centers is a sign that an order fulfillment company is prepared to cover inventory storage and make deliveries wherever the customer is.
Storage and fulfillment fees.
Cost will always be a consideration. How much is it to ship and order and how much is warehouse space per pallet? If you need to scale operations or introduce new SKUs, will there be a change in costs?
Don’t just focus on price.
Though price is a factor, it shouldn’t be the overriding issue. It’s not about finding the cheapest provider, it’s about finding the best provider for your needs.
Investigate their tech stack.
How well can your online store or app work with their API? What is onboarding like? Will there be issues with integrations? How will the shopping cart be impacted? Have a full understanding of what technology requirements there will be before committing to a vendor.
Data and analytics.
What kind of data can the provider give you? How do they track packages and how are KPIs measured? Have a full understanding of what kind of metrics the vendor is able to provide.
Advantages to Using a Fulfillment Service
Logistics aren’t easy and standing up an operation is even harder. Fulfillment companies are experts at this and allow companies to start delivering products quickly.
Lets you avoid long-term leases.
Flexible pricing means that shipping costs will ebb and flow as sales do. Companies that rent their own warehouse space are locked into long-term contracts and storage fees regardless of business performance.
You can be more agile.
Shipping is a large burden and can weigh down a company if not done well. This takes time and resources away from other parts of the company that grow sales channels and the business. For startups or young companies, streamlining order fulfillment services and embracing automation is invaluable.
Focus on your bottom line.
Having a predictable cost helps companies fully understand their balance sheet. With fewer surprises or initial investments, the enterprise is better prepared to grow. A third-party logistics company provides cost certainty.
When Should You Use a Fulfillment Service?
There’s no exact answer to this, as every situation is unique and involves very specific factors. However, following these signs will help determine if now is the right time.
When sales aren’t steady.
Many companies have regular or seasonal cycles in which sales fluctuate. An efficient and optimized shipping operation will understand this and increase and reduce warehouse space as needed. A fulfillment company can provide multiple shipping options based on real-time demand forecasts and adjust inventory levels. They should be equally adept at handling high-volume and low-volume sales.
When you’re too busy.
Growing the business and selling more products should be your focus. The run-the-business aspect of fulfillment is important, but it’s not as important as bringing new products to market. Outsourcing to a fulfillment partner opens up resources for more impactful work and is easily scalable.
When you don’t have the infrastructure in place.
Getting a fulfillment operation up and running is hard and takes significant time and resources, especially when multi-channel sales are involved. You may not have that available and using a third-party vendor that provides an off-the-shelf solution is definitely a viable option.
When You Should Avoid Fulfillment Services
Fulfillment services aren’t for everyone, of course. Depending on the nature of your business, you may not be a good fit for an outside provider.
Cash flow is limited.
If you have limited cash on hand, cutting into those limited resources to use a fulfillment service may not be wise. Until greater resources are secured, you may need to handle shipping yourself.
Your business is highly specialized.
If you sell products with very specific shipping requirements, it may be difficult to find a vendor that can do what you need them to do. In that case, taking fulfillment in-house and ensuring that products are properly handled may be the best course of action.
You have low daily order volume.
If you are a low-volume small business or are a sole proprietor that sells on platforms like eBay, you may be able to handle shipping yourself. In this case, avoid the added complexity of an external vendor and do it in-house, despite the constant trips to FedEx or UPS.
What Does the Fulfillment Process Look Like
In-house operations can be highly complex. Outsourced fulfillment solutions often look fairly simple, because you’re paying the vendor to manage the complexity.
How do returns work?
Logistics providers typically handle returns management themselves. They’ll handle order management and intake of the returned item and often even issue refunds.
What about custom packaging?
This can be challenging, but not impossible. Many logistic providers have their own standards, which are in place to reduce their overhead. However, some may be more willing to work with you to include branding and additional packaging inserts. Companies like subscription box services often use unique packaging that require more in-depth partnerships.
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The Final Word
For ecommerce companies, outsourcing the fulfillment process can be a great way to easily and quickly scale the business. Hiring outside experts — instead of taking on the burden yourself — may very well be the best option for providing a great customer experience and reaching new marketplaces without slowing down the company.
The best ecommerce fulfillment service can be difficult to determine, so take a holistic approach that considers all parts of your business.