Ecommerce Fulfillment: Definition, Process, How to Optimize
To make your eCommerce business a success, it’s important to understand the order fulfillment process. This process involves getting your orders ready for shipment and making sure they are delivered on time. There are several different fulfillment options available, so it’s important to choose the one that is best suited for your business.
In this article, we discuss the different order fulfillment options available and explain how each one works. We’ll also provide tips for choosing the right fulfillment option for your business. So, if you’re interested in learning more about eCommerce fulfillment, keep reading!
Table of Contents
What is eCommerce fulfillment and why is it important?
eCommerce fulfillment is the process of receiving and processing orders placed by customers online. Typically (at least in the way we do things) eCommerce orders are first received by a warehouse, usually through an online marketplace, where they are then picked, packed, and shipped to the customer. eCommerce order fulfillment is a critical part of the eCommerce supply chain and can have a major impact on customer satisfaction.
Orders that are fulfilled quickly and accurately are more likely to result in happy customers who will come back for more. In contrast, delays in eCommerce fulfillment can lead to frustrated customers who may take their business elsewhere. eCommerce businesses need to carefully manage their fulfillment processes to ensure that orders are fulfilled efficiently and effectively.
Understanding the Order Fulfillment Process
eCommerce businesses have to be systematic and organized when it comes to order fulfillment. After all, fulfilling orders is what keeps the business running and keeps customers happy. There are a few steps that are essential in any eCommerce order fulfillment process.
Receiving Inventory
To fulfill order fulfillment through an Internet store, inventory must be created first. When ordering online you must have inventory on the spot. During outsourcing, your inventory will be refunded and sent directly from a provider that is fulfilling your request.
Receiving Online Orders
The first step is receiving the order from the customer, whether that’s through an online store, over the phone, or in person. Once the order is received, it needs to be processed in the warehouse.
Processing Orders - Pick and Pack
This involves picking the products from the shelves and getting them ready for shipping. The next step is packaging the products securely so that they arrive at the customer’s door safely. Finally, the products are shipped out via the chosen shipping method. This process is called “pick pack and ship“.
Shipping Orders
Return Processing
When customers return a purchase, you should be ready to handle this process. Based on item quality, return reasons, and your refund policies, items may have to be restocked or disposed of.
The Different Types of Fulfillment Services
E-commerce businesses have to take into account a lot of different factors when it comes to fulfilling orders. There’s inventory to consider, for starters, as well as warehousing and shipping. And that’s not even taking into account the returns process! Luckily, there are a variety of fulfillment services out there that can take some of the burdens off of eCommerce businesses.
Traditional Pick Pack and Ship
Probably the most well known type of fulfillment service (and the one we most often engage in at AMS) is known as pick pack and ship. This involves a fulfillment center receiving inventory from a business, and then storing it until an order comes in. When an order is placed, the fulfillment center will then pick the items from storage and pack them up for shipping. This can be a great option for businesses that don’t have their own warehouse space.
B2B Fulfillment
In our experience, this one is wildly less common as a type of eCommerce order fulfillment, but we thought it worth mentioning anyway. B2B stands for “business to business” and involves moving product ordered from one business to another (usually in bulk, but not always.) For more information you can check out our B2B fulfillment services.
Direct Mail Fulfillment
Another type of fulfillment service is direct mail fulfillment. This is where a business sends letters, usually promotional material, to a fulfillment center, and the center takes care of everything from there. They’ll stuff the promotional material and sort them for direct mailing services like USPS. Most of the time, this is an add-on service offered by printing companies.
Accessorial Fulfillment Services
There are even more specialized types of order fulfillment services out there, such as kitting and assembly, subscription box management, and eGift card distribution. No matter what type of e-commerce business you have, there’s sure to be a fulfillment service that’s a perfect fit.
Different Channels for eCommerce Fulfillment (Multi-Channel Fulfillment)
Multi-channel fulfillment for eCommerce describes the process of fulfilling orders through more than one online sales channel. For eCommerce, the sales channels may include a company website, an online marketplace (such as Amazon or eBay), or dropshipping from a retailer’s online store. There’s so much opportunity in the various types of marketplaces now, so we decided that having the tools to incorporate all of these under one roof was critical. That’s why we invested in the software and processes that would enable us to do so.
It’s just too hard to ignore how multi-channel fulfillment can quickly enable businesses to expand their reach and increase sales while limiting the number of locations to keep inventory.
Ecommerce fulfillment process challenges
Getting orders in e-commerce can sometimes be tricky. Unexpected difficulties may cause interruptions in their order fulfillment process. If the interruptions are serious enough, it can cause customers to move to competitors, or even completely shut down the business. Understanding these challenges can help proactively avoid them.
We have heard all kinds of challenges that businesses have faced in the realm of fulfilling online orders. Ultimately, at AMS we try to incorporate solutions that solve these every day problems to highlight the benefits of outsourcing the things that you don’t want to spend your efforts on.
For example, we enable our customers to create blanket POs for items (on a case-by-case basis) which allows us to manage the supply chain and solve difficult seasonal issues or changes in volume. This kind of solution really helps take the burden of figuring this out off our customers and allows us to step in with our forecasting and supply chain expertise.
Preparation for Changes in Volume (Seasonal or Holidays)
Q4 is always “just over the horizon”, so merchants need to prepare for an increase in sales over the holidays. However, maintaining a steady demand is difficult. As order numbers rise, more people labor is required to process orders.
For many companies, especially startups, the changing volume of online orders is challenging. It may be difficult to determine exactly how many employees are required to successfully keep up with order demand. Some startup companies or even well-established e-commerce brands resort to third-party fulfillment services for this reason alone.
No In-house Fulfillment Expertise
Although it may seem relatively simple on the surface, we have seen fulfillment become exceedingly complex without the proper tools, processes, and management in place. This is one of the biggest mistakes that happen with in-house eCommerce order fulfillment. While flying “by the seat of your pants” may work well enough when things are slow, any amount of company growth can throw things into chaos.
Should I outsource eCommerce order fulfillment?
When considering whether or not to make a significant change or move in a particular direction regarding business practices, it’s helpful to list out the advantages and disadvantages of each direction. Below is a list of these to help you decide if you should outsource eCommerce order fulfillment.
Advantages of Outsourcing eCommerce order Fulfillment
Overall, outsourcing your eCommerce fulfillment is a great way to save time and money, while also benefiting from the expertise of professionals in the field. Here are a few other advantages to an outsourced fulfillment strategy:
- Outsourcing fulfillment can save you time and money. When it comes to eCommerce order fulfillment, outsourcing can save you time and money. By working with a third-party fulfillment center, you can avoid the need to invest in expensive equipment and staff, which can be costly and time-consuming.
- It can help you focus on growing your business. As your company grows, you’ll have more important things to worry about than fulfilling orders yourself. Outsourcing this task to a professional fulfillment center will free up your time and resources so you can focus on what’s important – making your business thrive.
- You don’t need to worry about storage space or shipping. If you outsource your eCommerce order fulfillment, you will not need to worry about storing your products. The fulfillment center will take care of that for you. They will also ship the products for you. This saves on operation costs, but also the time and headache required for managing it.
- It’s a great way to scale your business quickly. When your business is growing, it’s important to be able to handle the growing order demand. That’s why you might need to outsource your fulfillment to a company that can do it quickly and easily. An outsourced order fulfillment company can scale more rapidly and with greater flexibility than most other companies.
- You’ll have access to experts in order fulfillment. In addition, an outsourced order fulfillment company can provide you with access to experts in the field. This can be helpful if you’re not familiar with all the intricacies of fulfillment. They can help you make sure your orders are processed smoothly and without any hiccups.
- Fulfillment centers have a broader range of shipping options. Fulfillment centers that offer outsourced fulfillment services generally have contracts with a variety of shipping carriers. This means that they can offer their clients a broad range of shipping options. When you work with a fulfillment center, you are essentially tapping into the resources of that center. This gives you access to multiple shipping carriers, as well as their negotiated rates. may not have access to these same shipping options if you were to handle fulfillment in-house.
Disadvantages of Outsourcing eCommerce order Fulfillment
There are some disadvantages to outsourcing your eCommerce order fulfillment. Understanding these disadvantages can help you decide if you want to perform this work yourself, or hire an eCommerce fulfillment service.
- You may lose some control over the fulfillment process. When you outsource your eCommerce fulfillment, you may not be able to control everything that happens. For example, the people who are fulfilling your orders may not do everything the way you want them to. This is simply because outsourced these services are naturally less customized than an in-house alternative. Putting an SLA (service level agreement) in place helps, but even the best outsourced service will never offer the level of control that you have with an internal process.
- You may not be able to customize your your operation as much as you would like. When you outsource order fulfillment, you can’t always control what happens. Sometimes the people fulfilling orders might not do things the way you want. The extent of this depends entirely upon the flexibility of the third-party company you choose to work with. Some fulfillment centers offer a broader range of service levels than others. But generally speaking, any third-party logistics or eCommerce fulfillment provider is going to have less customization capability than completing the fulfillment process yourself.
Factors to Consider When Choosing a Fulfillment Partner
When choosing a fulfillment company, there are many factors to consider. Selecting one with all of your needs in mind can help ensure their success as an integral part of managing inventory at any scale!
Good, Capable Service
Of course, service is always first! A large fulfillment provider may have the capability of shipping 6,000 boxes a day, but without good customer service, it means nothing. Ask yourself the following questions about the companies you are considering for outsourcing your eCommerce order fulfillment:
It’s hard to over-emphasize that last statement. We’ve seen the major losses that can happen from a lack of good service. It’s just not a risk that we think is smart or prudent to make as a decision maker in a business. That’s why we focus so much of good customer service, even over high level software, dashboards, and other digital assets (which we also have!)
- Are they just pushing me to software? Some outsourced companies have fairly robust proprietary software solutions. This software is often required to implement to work with the company’s fulfillment services. This can cause problems for some customers as there are already a high number of online portals and software systems to use in the process. What’s worse, is the service level is often substituted for the software, with far fewer service managers and employees on staff. When choosing an eCommerce fulfillment service, make sure they aren’t substituting software for service.
- Do they have sufficient service staff? While a company may tout its service, oftentimes it may not have the throughput to back it up. This means when you call with a request, it may take hours, days, or even weeks to receive a response. Then, when your response comes it may not be much help to your particular issue. Make sure the company you choose for your eCommerce fulfillment service can in truth provide the service they claim.
- What is their service record? A great way to determine if the company you are interested in can meet customer expectations is to audit their service record. This may involve speaking to former customers and asking for a record of any data for missed shipments or other failures. While these numbers don’t tell the whole story, they may help illustrate any red flags during your decision process.
- Do I know who my account rep is? If the eCommerce order fulfillment company you are engaged with does not identify your point of contact for your account, this may indicate the company’s service level is poor. An account rep should be assigned to your company early in the process so they can obtain familiarity and build a relationship with your business.
- Do I even have an account rep? An even more alarming red flag is if a company doesn’t even have a rep for your account. This may be the case when a particular business model is to scale as much as possible with the lowest overhead. By doing so, software becomes the substitute for service so less labor is required to grow the number of accounts. The problem with this model is that when a problem arises, the service representative that you speak to knows nothing about your business or your specific services and can only offer generic solutions if any at all.
Multi-Channel Platform Integration
Companies sell their inventory through various sales channels. It is therefore important that fulfillment providers can support transactions through these various sales channels. This is called multi-channel integration. When a company wants to sell via certain channels (ex, Amazon, Shopify, etc.) they need to ensure the appropriate fulfillment service provider can integrate and process orders appropriately.
Other Software Integration
When looking for eCommerce fulfillment companies, look for a partner that is capable of integrating with your specific software requirements. This may include your ERP system such as NetSuite, and your accounting software such as Quickbooks, or other order processing and shipping tools.
Easy Use
Fulfillment is notoriously complex. Pricing structures usually include dozens of lines that each have conditions depending on volume and other things. It’s a lot for many eCommerce brands to take in, especially considering your goal is to just ship your orders. Most often, the partners who decide to make their pricing as simple as possible also want to make every other interaction with you as simple as possible.
Scalability
Before you decide to send all your inventory to a third-party company, you should do your homework on their history and sustainability. Does the company have a lot of debt or are they heavily leveraged? Do they own their facilities or are they renting from a landlord? Situations like this increase the risk for your business should something happen to your fulfillment partner. Look for an eCommerce fulfillment service partner that is financially stable with as little amount of debt or leverage as possible.
Tips for Optimizing an Outsourced eCommerce Fulfillment Process
The following tips will help you optimize your processes for fulfilling eCommerce orders if you decide to outsource the process.
Choose the Right Partner to Work With
The most obvious tip for optimizing outsourced fulfillment is to pick the right company from the beginning. Choosing the right order fulfillment service can make or break an eCommerce business and either improve the customer experience or destroy it.
Establish Clear Expectations With Your Fulfillment Company
- Implement a standard operating procedure. A standard operating procedure (SOP) is a document that specifies the minimum requirements and expectations for how a specific task should be done. It includes step-by-step procedures, as well as checklists, forms, templates, and other tools. An SOP can be used by employees to ensure they are consistently completing tasks across all departments or locations. While the fulfillment provider you choose may not have the capability to adhere completely to your SOP, this is a good starting place when determining how well-matched they are with your needs.
- Implement a service-level agreement. A service-level agreement (SLA) is a contract between a service provider and its customers that specifies the level of service the provider will agree to provide. The SLA usually includes performance metrics, such as response time, uptime, and availability. In addition, the SLA may include financial penalties (or other) for the provider in the event of unacceptable performance. The SLA is an excellent tool to establish clear expectations for the level of service you want your chosen eCommerce fulfillment provider to have.
Communicate Regularly With Your Fulfillment Company
Good communication habits solve a vast number of problems in any business department. This is true not just for an eCommerce business, but for any business. Whether you use a third-party fulfillment provider (3PL provider) or do in-house fulfillment, do your best to establish good communication practices. When you do, your customer experience will improve, costs will decrease, and show-stopping issues will be dramatically less likely to occur.
Make Sure Your Products Are Ready to Ship
Products need to be ready to ship before you send them to a fulfillment company. This means that they are in the right packaging and that all the information needed for shipping is on the package. Otherwise, the eCommerce partner you work with may not be able to fulfill your online orders.
Otherwise, you can find an eCommerce fulfillment provider that offers kitting services. With this service, the 3PL provider can pack your various products according to your requirements to make them ready to ship.
Keep Track of Inventory Levels
Inventory management is a critical component of an effective fulfillment process. Without the right amount of inventory, the right time, for the right SKUs, your company can face stockouts or excess inventory problems. Inventory issues like these cost a lot of time and money and are very often avoidable entirely with proper inventory management.
This is another area where AMS can help a lot. Our inventory management experience is a solution that can allow you to focus on your sales and marketing forecasting while we take care of ensuring your inventory stays in stock at the right levels.
Conclusion: eCommerce Fulfillment Services
Outsourcing your eCommerce fulfillment can be a great decision for your business. It can help you save time and money while freeing up space in your warehouse. There are some things to consider when outsourcing your fulfillment, such as the company you choose and the services they offer.
AMS Fulfillment is a third-party fulfillment company that can help you with all of your eCommerce fulfillment needs, like pick pack and ship services. We offer a variety of services, including order processing, pack and ship, and returns management. Let us handle all of your fulfillment needs so that you can focus on growing your business. Are you ready to take the next step? Contact us today to learn more about our services!
eCommerce Fulfillment FAQ
Ecommerce fulfillment centers receive and store products from merchants, then pick, pack and ship those products to customers when they are ordered. This process eliminates the need for merchants to maintain their physical inventory or warehouses. In addition, fulfillment centers often offer order tracking, customer service, and other features that can benefit online retailers. For these reasons, many merchants choose to outsource their eCommerce needs to a center that specializes in this service.
The cost of using a fulfillment center can vary depending on the size and complexity of your order, as well as the services you require. Generally, you can expect to pay a fee for receiving and storing products, picking and packing orders, shipping products to customers, and providing customer service. You may also need to purchase software or equipment to help manage your eCommerce fulfillment operation. To get an accurate estimate of the costs involved in using a fulfillment center, be sure to consult with one or more centers directly.
If you are selling products online, then you will likely need a fulfillment center to store and ship your items. By outsourcing these tasks to a center that specializes in eCommerce fulfillment, you can focus on running your business and generating sales. In addition, using a fulfillment center can help improve your customer service experience by providing order tracking, return processing, and other features. To determine if a fulfillment center is the best solution for your business, consult with one or more centers to get an accurate estimate of the costs involved.
Yes, you can manage your own eCommerce fulfillment operation, but it will require significant time and effort on your part. In addition, you will need to purchase or lease storage space, acquire the necessary software and equipment, and hire and train employees to handle all of the tasks involved in fulfilling orders. If you are not able to devote the necessary time and resources to running a fulfillment operation, or if you would prefer to outsource these tasks to a center that specializes in this service, then using a fulfillment center may be the best option for you.