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What is Order Fulfillment? The Complete Guide to Methods and Strategies
This post will look closely at every part of order fulfillment. You will get a thorough guide on how to improve the way you handle orders.
1. What is Order Fulfillment?
Order fulfillment is the act of filling an order from a customer. The cycle starts when the order arrives and stops when it’s sent to the customer. The efficiency of your method has a direct effect on how your customers shop.
Order fulfillment that doesn’t work well can anger customers and cause a loss of sales. Order fulfillment that works well can make customers happier and keep them returning.
Depending on how big your business is, you may be able to handle most of the order fulfillment process on your own. You can do it all under one roof in a well-run building. Many small businesses use a simple method to handle order fulfillment on the inside.
Large businesses need a distribution center plan with more details and more layers. The main goal is to get the customer’s order to them as quickly and cheaply as possible.
2. Why is Order Fulfillment important?
Order fulfillment is essential for several different reasons. Why? Here are five:
1) Customer Happiness.
Customer Happiness. Order fulfillment is the process of ensuring that customers get their goods quickly and in good shape. Customers will be happy with their purchases and come back to buy more.
Statistics show that 43% of customers won’t shop for at least a month after a bad service experience.
2) Increased Sales.
Order fulfillment that is well-planned and works well can help boost sales. Most consumers prefer to make a purchase from a business if they know it can deliver on time.
3) The reputation of the Brand.
If an order isn’t filled correctly, it can lead to bad reviews and complaints. It can hurt the name of a brand. On the other hand, excellent and reliable order fulfillment can help build consumer trust and trustworthiness. It will give the company a good name.
4) Cost saving.
With proper order processing, your business can save money in the long run. The fulfillment process can be made better by using a fulfillment service or technology. It will save you money on people, materials, and other resources.
5) Inventory Management.
Order fulfillment is essential to good inventory management. Keep track of orders and accurate inventories to ensure you don’t overstock or run out of goods.
3. How does Order Fulfillment Work?
Order fulfillment starts when an order is received and stops when the order is shipped. Most of the time, there are five steps to order fulfillment. It is as follows:
- Where things come from. It can be a farm, a supplier, or a factory.
- Receiving(Distribution center).
This part will review the eight steps to fulfilling an order.
Step 1: Bring in the stock.
Businesses must ensure that everything that comes in is handled before shipping. It is the first step in getting an order to the customer. Teams in charge of quality control should count and check the goods. They have to make sure the goods are good enough.
The next step is to give each thing a stock-keeping unit and a barcode. It is meant to make keeping track of and getting supplies more accessible.
Step 2: Put away the inventory.
When goods get to the fulfillment center, they are counted. It is done before the food is given out or stored for a short or long time. Don’t keep things to sell in the future. Instead, keep things that will help with the orderly release of goods for sale.
Step 3: Getting the order ready.
A management system decides how to pick the products for each order that comes in. The packing process is also taken care of by the machine. In the online market, you can use software to handle order handling. It is done by doing the shopping cart work with order control software. Most E-commerce sites can be used with these kinds of programs.
Businesses must have a way for warehouse workers to know when an order has been made. The program will go into great depth about what the customer wants. Most of the time, this is on a packing slip or sales order.
Step 4: Picking.
The picking staff chooses items from the warehouse based on the directions on the packing slip. The packing slip has exact information, like the item’s SKU, color, and size. It should also say how many units there are and where in the building they are.
Many modern organizations have used automation to speed up this step. For example, box-picking robots make it easy to quickly get items from a factory.
Step 5: Packing.
Packing materials are chosen by a team that does packaging or machines that do fulfillment. The goal for businesses should be to get the lowest possible physical weight. It is worked out by measuring the package’s length, width, and height.
Optimizing dimensional weight, called DIM weight, is critical to moving things faster. Because delivery cars don’t have a lot of space, this could lower shipping costs.
When packing fragile things, staff members should use suitable materials. Pack fragile items like glasses well to keep them from breaking during shipping.
Also, packaging teams often include supplies and labels for return shipping. It is essential if the buyer wants to exchange the product or return it for a refund.
Step 6: Shipping.
Once the things have been packed, the shipping staff must send them to a shipping company. Management teams must ensure that the shipping standards are met to avoid delays.
The weight of the package is used to calculate what the cost will be to ship. It could also use the package’s “dimensional weight.” It applies to freight lines, airplanes, FedEx, UPS, and the U.S. Postal Service. Postal Service (USPS) and other shipping companies.
Even if the actual weight is small, like a shirt, it is still worth it to pack it in the smallest DIM. It keeps the importance of the whole product from going up because of the packing.
Also, most carriers follow packing rules to make the most money possible. They do this by making use of the room they have for shipping. Runners can turn down the order if the conditions aren’t met. It could make it take longer to get goods to your customers.
Step 7: Delivery.
Finally, the customer gets the goods they ordered. A shipping proof should be sent to them by email. Always let people know when their delivery is coming.
Usually, there are many carriers on shipping lines. FedEx might pick up a package at the fulfillment center, for example. The order could then be sent to USPS. They will be in charge of getting the box to the customer’s house.
People use these diverse ways to get around for many different reasons. The fact that the USPS receives to rural areas is an excellent example of this. Most other business carriers, on the other hand, do not. In some situations, using USPS for the last mile of delivery makes more sense.
Brands should ask customers what they think about their products’ quality, shipping, and waiting time. It will make it easy to find problems in how orders are filled. Then you can decide if your business can do a better job of taking orders.
Step 8: Handling returns.
Include shipping materials and a note for the customer to use to send it back with the original order. It is the first step in handling the returns. When a customer returns, the process ensures it’s okay to refill the item. It is valid for both a return and a trade.
A lousy product can’t be sold again. A dirty thing can’t either. Quality control checks must be done to process returns, and the goods must be ordered.
Goods that are returned are either put back on the shelves or sent back to the maker or retailer. A distributor is entitled to a return or credit from the company that made or sold the product. Items that are sent back may also be taken to a collection center.
4. The Four Ways to Complete an Order (Strategies)
Over many years, tactics for fulfillment have changed, but the basics are still the same. It is because of some business reasons.
There are four ways to execute orders: in-house, outsourcing, drop shipping, and a combination. Each model meets particular business needs. Let’s look at the four models in more depth.
1) Order Fulfillment In-house.
Order fulfillment In-house is when a company’s staff handles the order fulfillment steps. At every step of the process, employees do their jobs. It includes storing and moving products at a place where the business has control.
It is the best choice for businesses already running and wanting complete operational control. One low-cost option is to do the fulfillment in-house. This plan is suitable for small home-based businesses that don’t get a lot of orders.
As a company grows too big for its original location, it moves to leased or mixed fulfillment.
2) Third-party (Outsourced).
Hiring a third-party logistics (3PL) means outsourcing order fulfillment. These groups handle delivery, inventory, and organizing orders and refunds. It is possible for businesses that need more workers or storage room.
In this instance, every step of the fulfillment process is taken care of by the staff of the 3PL. They get stock from factories and send orders to the final customer. When a business outsources delivery, it doesn’t have to spend money building a warehouse. It is because the product is kept in a warehouse run by a 3PL.
Dropshipping is like outsourcing, even though there is no product to handle. The store doesn’t stock any of the products it sells. Instead, the shop buys the item from someone else before selling it.
The supplier could be the company that makes the product or a business that gets goods from the company and then sells them to drop shippers. The supplier processes all orders and ships the goods to your customers. You only have to pay for what you sell. This option is used by companies that sell online and by new stores.
4) Mixed Fulfillment.
A hybrid fulfillment model company uses a mix of the above. A company might use dropshipping for items not made to order and handle some sales themselves. With the in-house model, you can accept custom orders or items that need to be built before they can be shipped.
Dropshipping is a way to sell expensive items. You can also use the model for things you don’t buy often. If you don’t want to save an item yourself, it makes more sense to use dropshipping. It is excellent for businesses that require more freedom or are increasing.
5. How do you choose a strategy for order fulfillment?
There are many different ways for businesses to fill orders. You might prefer to be happy from the inside or the outside. It all depends on what your business can do and how much money it has.
When you handle fulfillment in-house, you have more control over how it works and how much it costs. Remember that in-house fulfillment will take more time and money. Let’s say your company has a mix of people and tools inside. In that case, you could use a combination method to get the best of both.
If you don’t have many tools or skills in logistics, it’s better to hire someone else to do the job. Your team can focus on making the product and getting the word out about it. It could lead to more money coming in.
A business owner has to choose a way to fill orders that work for their business. Order fulfillment directly affects how well an organization can store, pack, and ship goods.
Customers will be happier, sales will go up, and costs will go down if the fulfillment process is thought out.
1) Things to think about when picking a strategy for order fulfillment.
When choosing an order fulfillment plan, there are a few things to consider, such as:
How big the business is and how many orders it gets?
Before choosing a fulfillment plan, you need to consider how many orders you get every month. Think about how much of your goods you sell as well. These measurements are essential for picking a method that will save money. The goal is to keep your business as competitive as possible.
Using in-house fulfillment could save money for a small business with a small inventory. There isn’t a need to hire a 3PL supplier because there isn’t much material to keep track of.
Also, a small stock would reduce the need for many fulfillment services. It will lead to significant cuts in costs. You can handle fulfillment in-house or hire someone else, depending on how many goods you sell.
Look at how many orders were made through each sales outlet. It will keep you from biting more than you can swallow.
How sales are made and what technology is used?
Where you sell your goods affects how well your order fulfillment plan works. Your strategy must work with the online market if you sell things online. It is easy to use technology in your e-commerce business in the 21st century.
If you use multiple routes, you’ll need more technology to get orders to the right places. The goal should always be to make things simpler. Managing sales through various channels can be challenging without the right technology.
Users can plan and make important choices about fulfillment. You can use methods that connect buying, creating, and selling with what people want. Using inventory management tools can also help set up ways to fulfill orders.
Location is another essential part of figuring out how to deliver orders. The problems of a small-town store differ from those of a multinational business. One serves people from the same country, while the other has customers from all over the world.
A business in a rural place can lose money if it ships goods nationwide. A company like this could even consider moving to a different location to save money on shipping.
Seeing how being close to your clients can save you money is easy. Since goods move less, you won’t have to spend money on expensive long-distance shipping methods.
2) Things to do before you choose your strategy
Spend time getting the facts and ideas you’ll need to make a good choice. If you don’t, your changes could hurt your business and cost you customers.
Look at how your customers act.
How your customers interact with your business will depend greatly on how you handle fulfillment. You should also take into account how much service they expect from you. Before you change how you handle sales, you should know how your customers act.
The best thing you can do is ask yourself these questions:
- How do you place an order?
- When can your clients expect to get their packages?
- When do your clients usually shop?
Analyze your usual order.
It will help if you know your usual order inside and out. And it will ensure that the processes you set up for your business work well. It will help build a picture of high rates, seasonality, and other complicated things. These are the things that your plan for filling orders might need in the future.
It will help you decide what to do and who to ask for advice. These experts might be warehouse design consultants or people who put together systems.
Here are some facts that can help you:
1. Order volume.
2. Average order description.
3. The exact date you chose to pick up the order.
4. Items are counted.
5. When is a customer makes a purchase?
Look at the assets you already have.
When picking a fulfillment plan, you must consider your existing infrastructure. It will be the base for the method you choose.
You should think about the following essential questions about the system.
- How do you fill orders, and how well does it work for you?
- What options do you have for a package delivery person?
- How does your current supply line look?
- How do you plan to grow or spread out?
6. The best practice of using a fulfillment center
1) What is a service that fulfills orders?
A fulfillment service provider is a business that fills orders for other companies.
2) What does a fulfillment center do?
In a fulfillment center, customers place orders for goods, which are then handled and sent to the customers. Most of the time, stores, third-party logistics companies, or e-commerce companies run them. They are in charge of taking care of online orders and keeping stock.
Also, fulfillment centers can mark and package products, help customers, and take back items.
3) How to choose exemplary service for order fulfillment?
You should think about a few things when picking an order fulfillment service:
- How long has the service provider been in business?
Find a third-party delivery partner with experience. A service company should have shown they know how to handle and package things.
Look into and compare a few delivery companies. Study client reviews and looks for any accreditations.
Ask how they package and ship their products to ensure they work for you. The goal is to ensure your people are happy with what you do.
- The total cost.
To make sure you can make money from the orders, you need to think about how much it costs to store the goods. Don’t forget to add up costs when you outsource selection, packing, and shipping. You can do this by including these costs in the price of the goods.
When choosing an order fulfillment service, thinking about technology is essential. It is because it can make you less efficient, less accurate, and less good at what you do.
You might be able to send out orders faster and more accurately than a human labor service. To do this, add robots and other forms of modern technology to your fulfillment process.
Your fulfillment service may be able to give you more detailed and accurate information. It can include order status, inventory amounts, and shipping times. Track your inventory in real-time and use advanced reporting tools to do this.
4) When should I switch to fulfillment by a third party?
Most companies start by filling their orders. But as they grow, some additional services from a third party. It might be hard to figure out when to change. If you start your business with your own money, this could happen.
Companies of all kinds can benefit from warehouse and fulfillment services. A variety of fulfillment service companies options are available to you. Some are experts in tasks that are small or large.
But there are clear signs that were hiring needs to start.
- You don’t have time.
- Seasonal or uneven sales.
- Lack of buildings and roads.
5) Using third-party transportation has a lot of pros.
Here are some excellent reasons to use transportation services from a third party.
- Avoiding deals with extended terms.
Many logistics companies offer flexible rates. They can change prices to meet your needs as your business grows or slows down. Long-term deals tend to be more of a commitment when you rent warehouse space.
- Experts and people who help you.
E-commerce businesses may face several problems. Outsourced fulfillment services, warehouse space, and employees to run the fulfillment center.
As a business grows, you’ll need to hire people to take care of orders and send them out. Staff management takes time.
If your company is going through a change, you might not want to hire someone. You can instead give the job to a transportation company. They will look for and hire suitable people on your behalf.
- You become more agile.
Even though doing it yourself is often free, it could cost you money. If you do it yourself, you might not meet standards and give the customer a bad experience. It is because people want their packages to arrive faster.
You can use their buying power when you hire a 3PL shipping company. It will save you money on shipping and packing costs. Some even give you real-time status updates and stock levels so you can move.
You can try out new ways to organize your inventory and other projects. So, you can grow without worrying about back-end logistics or a lack of people.
6) When shouldn’t I use a 3rd logistic company?
In reality, no one answer works for every business. Sometimes, using an e-commerce fulfillment services company doesn’t make sense. It is true no matter how big your organization is. Here are some possibilities;
- Your company needs more money coming in.
- Your business is one of a kind.
- Your business can only take so many orders each day.
7) Order Fulfillment Challenges
Here are some of the problems that come up with order fulfillment.
- Planning for logistics.
The shipping process is just as necessary as, if not more important than, the sale itself. You have to make sure that people get their things. You should be careful with the goods and ship them correctly.
If packages come late or broken, it could hurt your sales and reputation.
- Taking care of stock.
Running out of stock is a quick way to make people not want to buy from you. Focus on keeping the right amount of reserve. This way, you can rest assured that you won’t lose any clients, because you don’t have enough stock.
- Demand planning.
It’s essential to know how much people want the things you sell. It can stop people from filling up too much. (which can be as costly as understocking). Demand shaping could help in this case. Marketing and advertising are used to create demand through demand shaping.
Order fulfillment includes receiving, handling, and delivering a customer’s order. It is essential to every online store and can make or break the customer experience.
If a fulfillment plan is done right, it could cut costs and speed up delivery times. In the end, it makes the whole customer experience better. Whether the work is done in-house or by a third-party service, this is true. Online shopping works because of how orders are filled. It’s also the step that makes people happy and makes you feel like you did well.