E-commerce Order Fulfillment 101 – What you need to know

A solid e-commerce order fulfillment strategy is the center of your business success. After all, getting orders into the hands of consumers quickly, effectively, and with a high customer satisfaction rate is fuel for growth. A company that doesn’t fulfill orders well will fail fast. It is essential to understand what fulfillment is, the elements involved in the process, and what types of fulfillment offer the best benefits for my company. This article will outline what e-commerce order fulfillment involves, the different kinds of fulfillment, and the key indicators it is time to outsource fulfillment.

What is e-commerce order fulfillment?

Fulfillment is the process of getting a product delivered once an order is placed. It involves receiving, inventory storage, order processing, picking, packaging, shipping, and returns management. Order fulfillment consists of every aspect of the product journey, from receiving to final-mile delivery.

Basic Steps of E-commerce Order Fulfillment

Inventory Receiving

Products are received, counted, and checked for quality when they arrive from the vendor or manufacturer. This can occur at any location but typically happens at a warehouse, distribution center, or fulfillment center. Some small e-commerce businesses manage this aspect of fulfillment out of their own homes. However, once orders hit a threshold that overwhelms your living room, basement, and garage, it is probably time to outsource fulfillment. Regardless of the location of receiving, it is crucial to verify the accurate quantities, quality, and type of products before incorporating them into the inventory management system.

Inventory Storage

After receiving and inputting products into the inventory management system, the next step is to prepare them for storage. Stock and shelve items strategically to minimize the time required for order fulfillment. The key is having a well-organized warehouse. Optimize your fulfillment process by implementing inventory management best practices.

Order Processing

Order processing begins when a customer places an order. The order details are sent to the inventory management system that triggers product selection from the warehouse or storage area. Once the product(s) are selected they are then packaged for shipment.

Shipping

The package is loaded onto a shipping carrier transport and begins the journey to the customer’s address. This part of the journey can involve multiple types of transportation and carriers depending on the size, shape, and requirements of the final-mile delivery.

Returns Processing

Order fulfillment extends beyond the customer receiving their package; it concludes when the customer expresses satisfaction with their purchase. This is why returns are the final aspect of e-commerce order fulfillment. When your business grows to a size where returns become a time-soak, it is probably time to outsource fulfillment and returns management to a larger expert team.

What are the different types of e-commerce order fulfillment?

There are generally three main types of order fulfillment. They include; in-house, dropshipping, and 3PL fulfillment. A fourth type, a hybrid, can involve a cross-section of all three types depending on volume and product types.

In-house fulfillment

In-house or in-store fulfillment is when a company fulfills its orders from its facilities, labor, and resources without the assistance of a third-party provider. Most companies begin by fulfilling orders in-house because it is the most cost-effective fulfillment option that allows for the highest level of control.

Dropshipping

Another popular fulfillment option involves fulfilling orders directly from the manufacturer or vendor without going through the typical fulfillment channels, known as dropshipping. Dropshipping is convenient and affordable but offers limited control over the quality and quantity of inventory. Understanding the pros and cons of dropshipping can help you decide if this is the right fit for your e-commerce brand.

3PL Fulfillment

Third Party Fulfillment (3PL) is where the entire order fulfillment process is outsourced to a third party. These teams specialize in every aspect of e-commerce order fulfillment. They have flexible warehousing, labor, and resources to ensure your business can scale quickly. If you want to maintain tight control of every aspect of order fulfillment, a 3PL may not be suitable for you. However, if you have outgrown your warehouse space or your team is overwhelmed with demand, it might be time to outsource fulfillment.

What is the difference between 1PL, 2PL, 3PL, 4PL, and 5PL Fulfillment?

There are slight differences between the different “PL” providers. 1PL fulfillment involves a supplier fulfilling their orders directly, whereas a 2PL consists of a transportation partner like FedEx, UPS, or USPS. A 3PL is a more extensive operation that alleviates more of the order fulfillment journey. 4PL and 5PL companies take on a more significant role as order fulfillment concierges. The following image illustrates the difference between the different logistics providers.

When should you partner with an e-commerce order fulfillment service provider?

• You no longer have the time to focus on your core competencies
• You have outgrown your warehouse space
• Your team is overwhelmed by the demand
• Order errors and returns are increasing
• You know you are paying too much for shipping
• You want to expand into a new market or location (International)