Defining eCommerce Fulfillment: The eCommerce Order Fulfillment Process Explained
As digital commerce grows ever more competitive, understanding the various steps involved with eCommerce fulfillment is essential to delivering memorable customer experiences while optimizing your logistics operation for speed and cost. In the blog, we’re going to cover everything eCommerce fulfillment and the various options that businesses have to choose from when choosing the right fulfillment strategy for your brand.
What is eCommerce fulfillment?
eCommerce fulfillment is the end-to-end process of processing, fulfilling, and shipping online orders to customers quickly and efficiently. The eCommerce fulfillment process encompasses multiple steps, starting from when customer orders are received by the warehouse to when the completed order arrives on the customer’s doorstep. eCommerce businesses have the choice of outsourcing eCommerce fulfillment services to a third-party fulfillment provider or completing the entire fulfillment process in-house.
As an eCommerce brand grows, fulfillment services and workflows need to evolve in sync to keep up with order volumes. Otherwise, you risk being overwhelmed by changing demand, failing to deliver orders on time, or losing track of your inventory.
The steps of eCommerce order fulfillment process
eCommerce fulfillment is made up of several fulfillment services that turn an online order into a shipped package:
Inventory receiving
First, a warehouse team needs to receive inventory in a fulfillment center from suppliers. When inventory is received it needs to be unpacked, inspected, and scanned into the inventory management system before it can join other inventory awaiting picking. This process needs to be completed as quickly as possible to avoid delays in fulfillment or bottlenecks in receiving other inventory.
Inventory storage
Once fresh inventory has been processed, a fulfillment team will store them in strategic picking zones based on your fulfillment center layout and the amount of warehouse space available. For example, some SKUs may be placed close to other SKUs that are frequently ordered together to minimize picking times. Inventory levels need to be monitored closely to ensure there are enough units to meet forecast demand and avoid delays to order fulfillment.
Order processing
When the customer places an order on an online store, this needs to be sent to the warehouse so the fulfillment process can begin. If your Warehouse Management System (WMS) has a direct integration with your eCommerce platform, the order will be routed to your facility automatically. Alternatively, fresh orders can be manually downloaded and sent to the fulfillment center at set times throughout the day.
Picking and packing
After the order is verified and processed, a picking ticket is generated to guide a member of the fulfillment team to begin picking the items needed to fulfill the order. Once the required products have been retrieved, they can be packed for shipping to the customer.
Shipping
Once packed, orders are ready to be shipped to your customer’s doorstep. The shipping process requires selecting the appropriate shipping method depending on the destination or size of the package, generating shipping labels, and tracking shipments to ensure they get to the customer within the timeframe guaranteed. This demands are careful balance of shipping costs and times to meet customer expectations while maintaining profit margins.
Returns management
Sometimes, customers will request a return or exchange in accordance with the brand’s return policy. Processing returns can be inconvenient for a business, but it’s an important part of maintaining customer satisfaction in eCommerce. A streamlined return process ensures that return requests are handled promptly and that customers have a hassle-free experience.
Custom fulfillment services
In addition to the fundamental eCommerce fulfillment services, there are other workflows available that are designed to enhance the customer experience and make a positive impression upon delivery. This includes branded packaging, kitting, packaging inserts, gift wrapping, and other services that add value to a brand and provide storytelling opportunities. These do add complexity to a fulfillment operation due to the additional time and resources required, so they can be challenging for eCommerce businesses to coordinate via in-house fulfillment strategies.
Types of eCommerce fulfillment models
There are multiple types of eCommerce fulfillment available to businesses, each with its own set of pros and cons. Depending on the size of your business, your vertical, and business model, you might benefit more from one eCommerce fulfillment model than others.
1. Self-fulfillment
Self-fulfillment, also called in-house fulfillment, is an eCommerce fulfillment model where you manage your own order fulfillment directly. This includes managing and storing inventory, inventory management, and picking, packing, and shipping orders.
Pros of self-fulfillment
Self-fulfillment allows an online store to retain full control over its fulfillment processes. Your team is in charge of managing inventory and fulfilling orders, so you can customize picking and packaging processes exactly as you like. It’s also a more affordable option for small eCommerce businesses, that don’t have the order volumes to make outsourcing fulfillment cost-effective.
Cons of self-fulfillment
The biggest drawback of self-fulfillment is that it’s very difficult to scale. As your online store grows and the order volumes increase, you’ll need to store and manage more inventory independently. Your team will also need to pick, pack, and ship more orders, and they might struggle to maintain the same speed and efficiency. This also means you’ll need to eventually hire more fulfillment staff, and increase the size of your fulfillment center, which is costly and not always sustainable.
2. Amazon FBA
Amazon FBA stands for Fulfillment by Amazon. This fulfillment model allows online retailers who are selling via Amazon to outsource eCommerce fulfillment to the platform itself. Amazon will manage your order fulfillment services on your behalf – all you need to do is have your inventory sent to their warehouses.
Pros of FBA
Amazon FBA offers a reliable and established eCommerce fulfillment service, so you can trust it to be efficient and provide your customers with good support. It’s also very convenient, as the entire process is managed by Amazon’s facilities and allows you to leverage their superior capabilities when it comes to shipping orders quickly and achieving rapid delivery timeframes.
Cons of FBA
Amazon FBA has very stringent requirements for eCommerce businesses to store inventory in their fulfillment centers, including labeling quantity, and turnover. This puts a lot of strain on in-house logistics, and many growing businesses struggle to meet these requirements consistently. Moreover, FBA doesn’t offer any custom fulfillment services, meaning businesses must ship orders using Amazon packaging and losing valuable opportunities to build brand recognition.
3. Dropshipping
Dropshipping is a fulfillment model where the eCommerce merchant doesn’t physically hold or manage the inventory it’s selling, or take responsibility for fulfilling the orders. Instead, all of these processes are managed by the manufacturer or distributor. When a customer places an order on the online store, the details are forwarded to the manufacturer, who manages the fulfillment service independently and ships the order to the customer.
Pros of dropshipping
Dropshipping is a low-cost fulfillment option and very easy for an eCommerce merchant to get set up. Since you don’t have to store your own inventory, manage your own fulfillment centers, or hire fulfillment experts to fulfill orders, you can keep your operational costs low and add new products to your inventory with ease.
Cons of dropshipping
Dropshipping requires eCommerce businesses to give up control over the order fulfillment process entirely. This means you’re solely reliant on the drop shipper, and cannot balance your own inventory levels or prepare for surges in customer demand. Moreover, if the drop shipper makes a mistake, your business is on the hook for providing customer service and setting things right.
4. Third-party logistics (3PL)
A third-party logistics provider is a method of outsourced fulfillment that manages your supply chain and order fulfillment processes for you. Unlike Amazon FBA or a dropshipper, a 3PL provider is a a true fulfillment partner – they work closely with your business to determine the appropriate set-up and find new ways to optimize fulfillment for speed and cost.
Pros of 3PLs
3PL providers enable business growth by helping you to scale and grow sustainably. By providing reliable infrastructure and expertise, a good 3PL fulfillment partner can help you cut costs and increase fulfillment speed via a network of fulfillment centers and advanced logistics technology. Because they take all eCommerce fulfillment services off your hands, your business no longer has to worry about logistics and can get back to focusing on your customers.
Cons of 3PLs
Working with a 3PL means you’re relying on that provider to manage the entire eCommerce fulfillment process on your behalf. So, there’s a lot of trust involved. If you plan on working with a 3PL, it’s crucial to find an eCommerce fulfillment provider who can help your business to growth sustainably and create the right fulfillment strategy for your needs.
The key challenges of eCommerce fulfillment
It might be the backbone of running an eCommerce business, but seamless eCommerce fulfillment isn’t easy or straightforward to achieve for the following reasons:
It’s hard to find in-house fulfillment experts
To fulfill orders in-house quickly and accurately you need a team of fulfillment experts. Unfortunately, they’re quite difficult to come by, especially for smaller businesses. If you hire inexperienced fulfillment professionals or try to manage the process independently, you run the risk of delayed orders, damaged shipments, and high inventory shrinkage. None of these outcomes are good for your business – and they can also tank the customer experience.
Seasonal demand is hard to keep up with
Demand can fluctuate dramatically across seasons. Customer demand tends to surge – especially in eCommerce – during the holiday season. As a growing business, it’s difficult to keep up with these demand spikes without increasing overhead costs. Some businesses try to manage demand by hiring more workers or storage space. However, this can hurt your profits in periods of low or moderate demand.
Fulfilling orders takes time away from other areas of your business
Order fulfillment is one of the most demanding parts of running an eCommerce business. You’ll need to allocate significant time and resources to manage inventory, fulfill orders, and track your operations to ensure customer satisfaction and loyalty. In short, eCommerce fulfillment processes can easily become overwhelming – especially if this isn’t your business’s bread and butter.
Amazon’s delivery speeds are hard to compete with
The eCommerce giant has optimized their eCommerce fulfillment strategy to the point where it can easily offer expedited shipping without needing to charge consumers a premium for it. Unfortunately, this has left small online business owners struggling to compete with this new benchmark. Rapid delivery is either too expensive or impractical to offer, or requires brands to pass on sizeable shipping costs onto customers, which affects the customer experience.
Your technology and apps are outdated
Many eCommerce fulfillment teams still rely on outdated technology to manage inventory and logistics operations, either due to cost or the difficulties of implementation. However, this means you’ll struggle with achieving seamless integrations and syncing data across important channels, which can lead to fulfillment errors or incorrect information being shared with your fulfillment center.
How to choose a 3PL
Overcoming these eCommerce fulfillment process challenges requires a streamlined order fulfillment operation that’s capable of scaling as your business grows – something that’s expensive and time-consuming to achieve without the help of an eCommerce fulfillment provider who can equip you with the right fulfillment center and strategy to meet customer expectations for fast, reliable delivery.
A third-party logistics (3PL) partner manages one of the most important business operations for your eCommerce brand. So, it’s crucial to find a 3PL that can meet your needs and evolve with your business. When you’re vetting eCommerce fulfillment partners, here are some factors to keep in mind:
Ensure there are no hidden fees
Pricing models can vary between 3PLs, depending on how they structure their eCommerce fulfillment services. Some will charge a fixed fee per order they pick, pack and ship on your behalf, while others will charge based on order volume or use totally custom pricing.
It’s really important to get your quote upfront and make sure that the 3PL partner doesn’t have any hidden fees for set-up or maintenance. Hidden fees can defeat the purpose of partnering with a 3PL – you might end up driving up fulfillment cost higher than what you pay currently.
The best eCommerce fulfillment partners will give you a quote or payment structure that itemizes everything that contributes to the final cost. 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 remaining competitive in the eCommerce market. If you’re going to partner with a 3PL, it’s vital to find one that can help you achieve Amazon-level delivery speeds. Look for a partner that specializes in offering expedited shipping and same-day delivery, and make sure they have expertise in managing large or volatile order volumes.
Look for multiple warehouses and fulfillment centers
In the interest of staying competitive and reducing delivery costs, you need to find a 3PL partner with a network of fulfillment centers in strategic locations. This infrastructure helps you cut shipping costs and improve your delivery offerings to boost customer satisfaction and loyalty. Find out more about the pros of multi-node fulfillment here.
Choose a 3PL that integrates with your eCommerce platform and sales channels
We live in a digital-first world, and cloud-based technology has helped us streamline many key business functions. You need to find a 3PL provider who can enable you 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 an eCommerce fulfillment partner?
A fulfillment partner is a services provider that manages your logistics and order fulfillment processes for you. This includes order processing, 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 fulfillment company like ShippingTree.
How do I know that it’s time to outsource fulfillment?
Outsourcing eCommerce fulfillment becomes the right option when your business is struggling to keep pace with rising order volumes, and the fulfillment process is taking time away from maximizing growth opportunities at your business. By bringing in an experienced eCommerce fulfillment company to manage logistics on your behalf, you can focus on enhancing the customer experience and reaching new markets.
What do fulfillment centers cost?
The cost of leasing or running fulfillment centers depends on many factors. You have the option to buy a private facility or rent out an existing warehouse, but 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 to manage your facility and the necessary equipment.
Alternatively, if you work with a 3PL provider, you’ll pay them a lower upfront to use their fulfillment centers, warehouse teams, and storage capabilities. The cost will vary based on factors such as the size of the fulfillment center, SKU count, value-added services, etc.
What fulfillment services does ShippingTree provide?
ShippingTree offers a full spectrum of eCommerce fulfillment services, so you can outsource the entire fulfillment process and get back to what you do best. This includes order management, inventory management, shipping orders, as well as value-added services like kitting and bundling.
How much does ShippingTree charge for fulfillment?
We offer flexible, volume-based pricing plans for businesses at every point in their growth journey, from 500 all the way to 5000+ orders per month with the ability to scale seamlessly.
