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What is order fulfillment?
In supply chain management, what is order fulfillment? Order fulfillment includes all of the steps a company takes between receiving a new order and delivering that order to the customer. The procedure involves receiving, warehousing, picking and packing the product, then delivering it to the consumer; it ends once the consumer receives the goods they ordered. In the case of returns, order fulfillment will handle the return transaction and update the inventory as well.
What are the order fulfillment steps?
Order fulfillment can be a costly and time-consuming procedure. Some eCommerce businesses manage order fulfillment in-house, while others outsource it to a third-party logistics provider, or 3PL.
The following is a summary of the order fulfillment processing steps:
Receiving inventory
Inventory is being received. eCommerce companies can handle inventories in two ways. It can opt to receive and stock the inventory in-house or outsource the stock and all related operations to an eCommerce order fulfillment service provider. If it chooses the first option, the company will be in charge of taking stock, inspecting goods, labeling them, and operating the inventory system. If the organization opts to outsource or dropship, the order fulfillment partner or supplier will undertake these activities on behalf of the company.
Inventory management
If the eCommerce company elects to warehouse the merchandise in house, they will be faced with a new set of chores once the receiving portion is accomplished. The major tasks will be to shelve the inventory and keep track of what products come in and what items go out in order to ship the orders on time.
eCommerce companies that outsource order fulfillment avoid the nitty-gritty of order processing by simply passing on the order request to their partner and letting them handle the rest. For businesses that control their own inventory, this is the stage at which the order is picked up from a shelf, brought to a packing station, examined for any problems, packaged, and moved to the shipping station.
Order delivery
Once the order is ready, it’s sent to the customer. The optimum delivery method is selected based on the order’s size, weight, and special requirements. Typically, a third-party carrier is hired to complete this step of delivery.
Processing of returns
The ability to readily return unsatisfactory purchases is an important element for online shoppers. To ensure that the receiving, replacement, and refunding of returned items is as efficient as possible, a clear returns policy should be put in place to avoid errors.
What are the various types of order fulfillment processing?
Order fulfillment is part of the entire supply chain management process. Order fulfillment can be classified into four types: in-house, outsourced, dropshipping, and hybrid.
In-House
In this model, a company manages fulfillment procedures with its own personnel. Employees handle all aspects of the fulfillment process, including product storage and shipment on-site at a company-controlled facility. In-house fulfillment is perfect for established businesses that require complete control over the entire process. Some home-based businesses, particularly those with modest order volumes, begin by implementing in-house fulfillment as a low-cost option. Many businesses transition to outsourced or mixed fulfillment operations as they outgrow their initial space.
Outsourcing
Outsourced order fulfillment is when a third-party logistics (3PL) or order fulfillment organization handles the shipping, storing, and order/refund processing. Companies that do not have enough storage space or employees may choose this alternative. Employees of the 3PL handle the full fulfilment process in this example, from receiving goods from manufacturers through delivering orders to the end consumer. Companies that use outsourced fulfillment do not need to invest in their own warehouse facilities because inventory is held in a warehouse operated by the 3PL.
Dropshipping
Dropshipping is comparable to outsourcing in that no inventory is required. The retailer does not stock the goods it sells. When a product is sold, the retailer buys it from a third-party source. The supplier could be a manufacturer or a corporation that buys products from manufacturers and sells them to dropshippers. All orders are handled by the provider and shipped to the consumer. This is a popular option for e-commerce and startup retailers.
Hybrid
A hybrid fulfillment model is used by a company that uses a combination of the above order fulfillment options. A company, for example, may process some orders in-house, such as custom items or items that must be assembled before shipping, while using dropshipping services for non-custom items. Dropshipping is used by some businesses for things that are infrequently purchased or that they do not want to store in-house, such as large or valuable commodities. This is appropriate for businesses that require greater flexibility or are experiencing significant growth.
Is it advantageous to outsource order fulfillment?
For many small eCommerce companies and startups, the choice to outsource is motivated by a lack of time and personnel. It takes time not only to prepare and ship customer orders, but also to ensure timely delivery.
Does your company have the resources to produce, pack, and transport all orders quickly enough to keep customers satisfied? Have you experienced an unexpected surge in requests? Is there enough space in your company to stockpile enough products to meet client demand? Is your company able to regularly provide consumers with the same dependable quality of the final product? Or would a fulfillment specialist be more capable of doing so? Think about these questions to see if it makes more sense to outsource the entire process and responsibilities to a fulfillment company.
The option for order fulfillment has a direct impact on a customer’s purchasing behavior. Customers prefer delivery options that are tailored to their specific requirements. Customers can select between fast and moderate shipping options based on their price and time constraints.
There is no single fulfillment procedure that is suitable for all businesses. Whether you want to outsource to a third-party logistics provider or adopt a hybrid warehouse fulfillment model, the essential factor is to discover the proper approach that fulfills your company’s demands as well as the expectations of your customers. The goal is to streamline your fulfillment procedures so that your customers are satisfied.
Interested in learning more?
Let’s talk about the best fulfillment solution for you. SPExpress can help you streamline your e-commerce or brick-and-mortar distribution processes by using our unrivaled industry experience and knowledge. SPExpress can help you monitor inventory levels, fulfill orders, process refunds, and improve customer service. To learn more, please contact us immediately.