How to Turn Ecommerce Fulfillment into a Growth Channel
Fulfillment can make or break your business. Done right, a streamlined and optimized fulfillment process can help you scale your business sustainably and improve your customer experience.
However, a poor ecommerce fulfillment setup can lead to delayed orders, damaged goods, high overhead costs, and unhappy customers. So it’s crucial for ecommerce store owners to understand the specifics of order fulfillment, including the various models, options for fulfillment partners, and the best ecommerce fulfillment strategy for growth.
What is fulfillment in ecommerce?
Ecommerce fulfillment is the process of delivering ordered items to a customer safely and efficiently. The ecommerce fulfillment process includes inventory management and warehouse management, picking and packing orders, and shipping orders off to customers. It also includes reverse logistics (i.e., returns).
As your ecommerce brand grows, your fulfillment services will need to evolve in sync. Otherwise, you risk being overwhelmed by demand, failing to deliver orders, or losing track of your inventory.
Ecommerce fulfillment service models
There are four main types of ecommerce fulfillment, each with its own pros and cons. Depending on your business model and the scale of your operations, you might benefit more from one service model over the others.
1. Self-fulfillment
Self-fulfillment, as the name gives away, is an ecommerce fulfillment model where you manage your own order fulfillment. This includes storing and managing your own inventory, and picking, packing, and shipping orders. It also means you’re in charge of returns processing.
Pros of self-fulfillment
Self-fulfillment lets online store owners retain full control over their fulfillment processes. Your own team will be in charge of managing inventory and fulfilling orders, so you have more active control overstocking inventory and preventing delays.
Cons of self-fulfillment
The biggest drawback of self-fulfillment is that it is difficult to scale. As your online store grows and the volume of orders increases, you’ll need to store and manage more inventory. Your fulfillment team will also need to handle more orders, so they might struggle to maintain the same speed and efficiency.
This means you’ll need to eventually hire more fulfillment staff, and increase your warehousing space, which is costly and not always sustainable.
2. Amazon FBA
Amazon FBA stands for Fulfillment by Amazon. This fulfillment model is a type of outsourcing that Amazon offers online retailers. In this model, Amazon will manage your order fulfillment services for you – all you need to do is have your inventory sent to their warehouses.
Afterward, Amazon manages the inventory, pick and pack your orders, and have the orders shipped to customers. They’ll even manage your reverse logistics and customer service.
Pros of FBA
Amazon FBA is a reliable, established ecommerce fulfillment company, so you can trust it to be efficient and provide your customers with stellar support. Additionally, you’ll also get to use Amazon’s prestigious name to give customers confidence in your e-commerce fulfillment service.
Cons of FBA
Amazon FBA has stringent requirements for ecommerce businesses to qualify for the service. Many growing businesses struggle to meet these requirements consistently.
2. Dropshipping
Dropshipping is a fulfillment model where you, an ecommerce merchant, never physically hold or manage inventory. You also are not responsible for fulfilling the orders or processing returns.
These processes are all managed by the manufacturer – dropshipping ecommerce merchants are effectively middle-men. When customers place orders on the online store, the details are forwarded to the manufacturer, who manages the fulfillment service themselves.
Pros of dropshipping
Dropshipping is a low-cost fulfillment option. Since you don’t have to store your own inventory, manage your own warehouses, or hire fulfillment experts to fulfill orders, you can keep your operational costs low.
Cons of dropshipping
Dropshipping involves giving up control over the order fulfillment process entirely. This means you’re solely reliant on the manufacturer, and cannot balance your own inventory levels, prepare for periods of demand surge, etc.
4. Third-party logistics (3PL)
A third-party logistics provider is a fulfillment outsourcing service that manages your supply chain and order fulfillment processes for you. Unlike Amazon FBA, 3PL providers are more like partners – they work closely with your business and your team, and they keep you up to date with their processes.
Pros of 3PLs
3PL providers can help you scale and grow sustainably. A good 3PL fulfillment partner can help you cut costs and increase fulfillment speed thanks to their network of fulfillment centers, team of fulfillment experts, and advanced logistics technology.
Cons of 3PLs
Working with a 3PL means you’re relying on the service to manage your logistics and reverse logistics processes. So, it’s a bit of a risk. If you plan on working with a 3PL, it’s crucial to find the right one – a partner that can help you grow sustainably.
How the order fulfillment process works
1. Receiving
The order fulfillment process starts when your team receives products at the warehouse from your suppliers.
2. Inventory storage
After receiving the deliveries, your fulfillment team will store them in the warehouse strategically based on your layout and management system.
3. Order processing
When the customer places an order on your ecommerce store, your logistics software should process it. After the order is verified and processed, a picking ticket is generated to guide your fulfillment team. Your team will then pick the required products from the warehouse and pack them for shipping.
4. Shipping
The orders are shipped to your customer’s doorstep. Your team may pick from different carriers depending on the type of order and the destination.
5. Returns processing
Sometimes, customers aren’t happy with their orders and they’ll request for returns in accordance with your returns policy. Processing returns is an important part of maintaining customer satisfaction – and your fulfillment team should thus make sure that customers have a hassle-free experience.
How ecommerce brands mess up fulfillment
Successful ecommerce order fulfillment is crucial to growing your brand and scaling. Unfortunately, many online retailers are still making these damaging mistakes.
Choosing fulfillment centers close to you
Choosing fulfillment centers close to you might sound like a good idea at first – but it’s not beneficial for your customers. When you choose fulfillment centers, it’s essential to pick ones that are close to your customers. This will help you ship orders faster and keep delivery costs low.
Picking rural fulfillment centers to save money
Similar to the previous problem, rural fulfillment centers will drive your delivery times and costs up. Offering customers expedited shipping won’t be possible anymore, severely limiting your ability to offer expedited shipping or free delivery options.
Thinking warehouses and fulfillment centers are the same thing
Warehouses are establishments for storing inventory long-term – fulfillment centers hold a portion of your inventory for a shorter period of time until the orders are picked, packed, and shipped to customers.
Fulfillment centers are especially useful for inventory management methods such as just-in-time or lean management. So, you might have a couple of large warehouses, but an entire network of fulfillment centers.
Choosing to self-fulfill while the brand is growing
Self-fulfilling as your brand scales can seriously hinder your growth potential. If your team is overwhelmed with orders, or if you need to hire more fulfillment staff, many problems can arise. For example, if you hire too much help during the holiday season’s demand surge, you’ll be left with too big a work force once the storm resides.
How to create a winning order fulfillment strategy
In addition to avoiding common fulfillment problems, you can also leverage some best practices to create a winning order fulfillment strategy. Here are some vital steps to consider.
The locations of your fulfillment centers matters
The locations of your fulfillment centers can drastically influence your customers’ experiences. If you have a network of strategically placed centers, near to your key customer bases, you can deliver orders faster and at a lower cost. This leaves room for your brand to offer expedited shipping and possibly free delivery options.
Make sure you integrate with multiple platforms & technologies
If your products are listed on multiple marketplaces, it’s important to integrate across each platform and use the right technologies to sync your data. For example, if you’re a gaming company, then you might need to integrate with Shopify, Amazon, Walmart, and other platforms. This way, you can optimize inventory management and accurately perform business functions such as demand forecasting.
Offer 2-day shipping to keep up with Amazon and other brands
Amazon has set the standard for shipping through its Prime program. Now, customers have come to expect 2-day shipping as standard practice, even from small businesses. So if you’re looking to create a winning fulfillment strategy and outdo your competition, it’s crucial to offer 2-day shipping at least.
The challenges with ecommerce fulfillment
Ecommerce fulfillment comes with many challenges that can hinder your growth. Here are some of the most common problems that growing ecommerce brands face.
It’s hard to find in-house fulfillment experts
If you need orders fulfiled quickly, accurately, and securely, you’ll need a team of fulfillment experts. Unfortunately, they’re quite difficult to come by. And if you hire inexperienced fulfillment professionals, you run the risk of delayed orders, damaged shipment, and even stolen inventory. None of these outcomes are good for your business – and they can also tank your customer experience.
Seasonal demand is hard to keep up with
Demand can fluctuate dramatically across seasons. For example, demand tends to surge – especially in retail – during the holiday season. As a growing business, it’s difficult to keep up with these demand spikes. You need to fulfill drastically larger order volumes with the same workforce.
Some businesses try to manage demand better by hiring more workers, but this increases your overhead costs and can hurt your profits in periods of low or moderate demand.
You can’t focus on other areas of your business while fulfilling orders
Order fulfillment is one of the most demanding parts of running a business. You’ll need to allocate significant time and human resources to manage inventory, fulfill orders, and track logistics operations to guarantee a positive customer experience.Thus, many ecommerce companies become overwhelmed with ecommerce fulfillment and cannot focus on other key business areas.
Amazon’s delivery speeds are hard to compete with
Amazon has optimized order fulfillment to the point where the ecommerce giant can easily offer expedited shipping without charging consumers premiums for it. Unfortunately, this means that small online business owners are left struggling to compete.
Your technology & apps are outdated
Many ecommerce fulfillment teams still rely on outdated technology to manage inventory and logistics operations. If your apps are outdated, you’ll struggle with integrations and syncing data across important channels.
How to turn fulfillment into a growth channel
Looking to grow your business with the power of ecommerce fulfillment? Here are some ways to turn order fulfillment into a growth channel.
Offer fast delivery speeds
Offering fast delivery speeds helps you improve your customers’ experience and stand out from your competition. If you can optimize your logistics to offer, say, free two-day shipping, you’ll have a vital brand differentiator under your belt.
Make returns a hassle-free process
Returns are an inevitability in ecommerce – no business is safe from them. But what you can do is provide a seamless, hassle-free returns process to retain customers and strengthen your business. Returns are inevitable, but you don’t have to lose a customer from the experience. Instead, try to give them a great experience that encourages them to keep buying from your business.
Reduce shipping costs with carrier discounts
You might expect some carriers to be superior to others, but in general, there is no clear winner. Some carriers offer better rates for certain shipments, depending on factors such as size, weight, location, and distance. So if you’re looking to get the most out of your ecommerce fulfillment, it’s important to work with multiple carriers and identify the best one for each shipment.
Why we recommend working with a 3PL
A 3PL can help you improve your ecommerce fulfillment operations, cut costs, and focus on growing your business. Here are some reasons why you should consider working with a 3PL partner:
Avoid long-term leases
Leasing a warehouse or fulfillment center is a big, and expensive, commitment. When you work with a 3PL partner, your inventory is stored and managed in their centers and warehouses. So you can skip the long-term leases altogether.
Bring on the experts
Since 3PL providers specialize in order fulfillment, they have teams of highly skilled fulfillment experts. This means that you can trust your orders to be fulfilled quickly and efficiently, and you don’t need to worry about frequent damages.
Use your time to optimize
With a 3PL partner managing your ecomerce fulfillment, you can focus on growing your brand with more strategic initiatives. Like growing your marketing, reaching new customer bases, improving your customer support offering, and finding new supplier partners.
Be more agile
When you work with a 3PL, you can use their physical and human resources on an as-needed basis. This makes it much easier – and more cost-effective – to navigate during times of fluctuating demand. It also means that, once your business starts growing rapidly, you can scale your fulfillment operations up effortlessly.
How to choose a 3PL
Your 3PL partner will manage one of the most important business operations for your ecommerce brand. So, it’s crucial to find a partner that can meet your needs and you can rely on. When you’re vetting 3PLS, here are some factors to keep in mind:
Ensure there are no hidden fees
Get your quote upfront, and explicitly make sure that the 3PL partner does not have any hidden fees. Otherwise, hidden fees can defeat the purpose of partnering with a 3PL – you might end up driving fulfillment costs up inadvertently.
A good 3PL partner will give you a quote or payment structure without any hidden fees. That way, you can clearly discern if they’re a good choice for your brand.
Choose a 3PL that offers fast delivery speeds
Offering fast delivery is crucial to remain competitive in the ecommerce market. So if you’re going to partner with a 3PL provider, it’s important to find one that can help you achieve Amazon-level delivery speeds. Look for a partner that specializes in offering expedited shipping, and make sure they have enough fulfillment experts in managing large order volumes.
Look for multiple warehouses & fulfillment centers
In the interest of staying competitive, offering fast shipping, and reducing costs, you need to find a 3PL partner with multiple warehouses and fulfillment centers. These 3PL providers have the infrastructure in place to help you cut costs and improve your delivery offering.
Choose a 3PL that integrates with your ecommerce platform & sales channels
We live in a digital-first world and technology has helped us streamline many key business functions. You need to find a 3PL provider with the right technology – their systems should integrate with your ecommerce platforms and sales channels to help you holistically optimize business operations.
An integrated system improves inventory management and helps you move data to important channels, driving more informed decision-making.
Ecommerce fulfillment FAQs
Ecommerce fulfillment is an important business function that ecommerce merchants have many questions about. Here are the most frequently asked questions answered.
What is a fulfillment partner?
A fulfillment partner is a services provider that manages your logistics and order fulfillment processes for you. This includes your warehousing, inventory management, order fulfillment, and reverse logistics processes. The fulfillment partner could be a manufacturer that you have a dropshipping agreement with, Amazon FBA, or a third-party logistics provider.
What do fulfillment centers cost?
The cost of fulfillment centers depends on many factors. You might buy land and build your own center, or rent out a warehouse – both of these options come with a long-term contract and significant upfront costs. You’ll also need to hire a team of fulfillment experts and relevant machinery and equipment.
Alternatively, if you work with a 3PL provider, you’ll pay them a relatively lower fee to use their fulfillment centers. The cost will vary based on factors such as the size of the center, special regulation needs, SKUS, etc.
What is direct order fulfillment?
Direct order fulfillment is when an order is delivered directly to the customer.
Make fulfillment easier with ShippingTree
Looking to grow your business without being overwhelmed by the challenges of ecommerce fulfillment? ShippingTree is a leading 3PL partner that can help you grow your brand and streamline your fulfillment operations.
2-day delivery
ShippingTree’s team of fulfillment experts and multiple distributed fulfillment centers help you offer 2-day delivery to customers, so you can compete with Amazon-level speeds.
All-in-one fulfillment
We’re an all-in-one fulfillment provider that helps you streamline supply chain and logistics operations from start to finish. We can be as involved as you need.
Reduced shipping costs
Customers have come to expect faster shipping times at lower costs. ShippingTree can help you deliver.
Conclusion
If you streamline and optimize your ecommerce fulfillment process, your business is supercharged for growth. You’ll be able to scale with confidence and trust that your customers are well looked after. Depending on your business model and the size of your operations, you might benefit from different types of fulfillment models.
However, if you’re a fast-growing ecommerce brand, there’s a point where you might need to work with a fulfillment partner to scale sustainably. And at that point, you should consider working with a trusted 3PL partner – like ShippingTree.
Contact us to learn more.
