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ORDER FULFILLMENT

In the ever-changing world of commerce, firms and businesses have to be innovative to have a cutting edge in the product market. Commerce implies the activity of buying and selling, simply known as trade. The place of trade has been shifted to the internet, hence the term e-commerce.

With the running of an e-commerce business, order fulfillment is a crucial function to any online merchant. Generally, a business that aspires to reach global markets has to take business online. Firms such as Alibaba and other retail powerhouses have communicated how trade is conducted online effectively and order fulfillment is an integral component.

The goal as consumers is to satisfy their desires; instantly, if it avails. The aim of producers and sellers is fulfilling those wants, which is easier said than done.

According to research study:

• 60% of shoppers will abandon their cart; if shipping, taxes, and other fees are too high!

• 50% of shoppers say that speed of delivery is an important factor when it comes to evaluating their online orders.

• 35% of shoppers will never shop with a retailer again if they had a poor delivery experience.

• 25% of shoppers have cancelled an order because of slow delivery speeds.

Therefore, getting ecommerce order fulfillment right is more so important. However, before your online store can master order fulfillment, you will need to understand its dynamics.

In simpler terms, order fulfillment is the process of storing inventory, collecting and packing products, and delivering online orders to customers. This process can be completed in-house by an ecommerce company or outsourced to a third-party logistics provider. Online order fulfillment applies to consumer-to-consumer (C2c), business-to-consumer (B2C) and business-to-business (B2B) orders. For business to consumer orders, the end consumer may place the order on the seller’s website or through an online marketplace. After the customer completes their purchase, the fulfillment process begins.

The Order Fulfillment Process

In order to better comprehend how online order fulfillment works, we have to look at the whole process step by step. The end goal is to deliver customer orders to their doorstep. There are prior steps before shipping from warehouse such as handling of stocks, packaging into least portable weight and choosing the most efficient means of distribution. Hence, the order fulfillment process:

1. Receiving stocks
Before an order can be fulfilled for an online shopper, the seller has to confirm they have the products available. If you are an in-house merchant then you will have to have the inventory with you. However, if you choose a third-party logistics provider then the inventory will need to reach fulfillment provider to deliver on your behalf.

2. Warehouse storage
Depending on the nature of the product, storage has to be uniquely done. Inventory has to be labelled and organized for easy retrieval. Perishable goods such as farm and dairy produce have to be refrigerated to lengthen shelf life.

3. Order handling
Once an order is received, it is immediately processed. The quantities demanded and specifications of the shopper are taken to account. The items are retrieved from warehouse and packaged ready for shipping. Fragile items have to be considered during packaging to ensure they reach their destinations intact.

4. Loading and Shipping
Once an order is ready for shipping and accompanying document processed, it is loaded into the conveyor. There are factors considered in choosing the means of transport depending on distance, delivery speed, nature of commodity, customer preference, cost of shipping and scale of business. The mode of transportation can either be waterways and airways for longer distances, as compared to roads and railways for much shorter distances. Once the goods are on transit, you should receive tracking information that can be shared with customers to update them on the progress of their deliveries.

5. Returned stocks
If customer decides to return an order, then you must be prepared to process it. They may ship it directly back to you or to the fulfillment provider where it is evaluated. Depending on the returned item quality, return reason, and your returns policy, the product can either be restocked as available inventory or disposed of due to malfunction.

Order Fulfillment Approach

Ecommerce order fulfillment requires a reliable approach to it — especially if you plan to grow your business. Sound planning is key to secure the infrastructure, systems, processes, and team necessary for success. There are considerations to be analyzed before scaling up your fulfillment functioning:

1. Location of operations
A physical location remains crucial to an ecommerce business even with an outsourced fulfillment provider. Where you fulfill orders from is one of the most important factors in meeting customer expectations pertaining to delivery costs and speeds. Therefore, optimizing your fulfillment operation based on where your customers reside will help you reach the most people in a most cost-efficient manner. For instance, shipping orders to customers overseas can take significant time unless they are willing to pay more to expedite their delivery. Even locally, if you ship orders from rural areas or from one side of the country to another, you are shipping to higher shipping zones.

Urban fulfillment centers are rapidly emerging as they allow merchants to quickly and affordably ship to customers in big cities with large populations. Another strategic setup in optimizing fulfillment is to distribute inventory to multiple locations that are within close proximity of your customers. The more fulfillment locations near common shipping destinations, the cheaper the costs incurred as compared to air transit and faster than shipping from a greater distance.

2. Technology incorporation
There is a constant need for merchants to keep up with the latest technology such as software that allows automatic syncing with ecommerce platforms and online marketplaces. This does help manage orders across sales channels without requiring any further human efforts, thereby saving on time. This means that as soon as an order is placed online, fulfillment staff are quickly alerted to pick, pack and ship the items to the customer. Tracking information can then be sent back to the online platform or marketplace and shared with the customer. It is also necessary to keep track of inventory quantities on hand across fulfillment locations. This helps online retailers understand when to proactively order more inventory to prevent running out of stocks. There is also need to have efficient connection between upstream activities of purchasing and manufacturing to the downstream activities of sales and product demand to make more accurate purchasing and production decisions.

3. Shipping policy
Depending on your scale of business, fast shipping speeds like a day or two is becoming more prevalent. It is advantageous to keep transit times down and costs low as this appeals to customers. Pricing your shipping can be challenging as there no magic formula. Shipping is certainly not free, hence the merchant has to absorb costs. However, there are certain ecommerce order fulfillment strategies that can work efficiently without hurting profit margins. The cost of shipping could be integrated into the product price or a minimum expenditure threshold for free shipping. Offering free shipping has a major impact on shoppers’ behavior as it helps lessen cart abandonment. For inexpensive products, burdening the cost of shipping will make you lose money, while increasing your product price may turn visitors elsewhere.

Order Fulfillment Framework

In order to make the right choice for how to fulfill orders, a number of factors have to be considered. They include your order volume, your products and what you prefer to manage yourself. There are three common methods of order fulfillment available:

1. In-house order fulfillment
AJust as the name suggests, it is a self-fulfillment model. This is where the merchant completes each step of the fulfillment process internally, without the help of a drop shipper or third-party logistics provider. This model ranges from small order volumes at home to large scale investments in an extensive facility. It is common for merchants that are just starting out to manage inventory and pack orders in their home. At this stage the order fulfillment takes up a lot of valuable time that could have be utilized on acquiring new customers, developing new products and developing marketing strategies. Once merchants grow to a certain point and can no longer manage fulfillment alone, they are faced with either outsourcing fulfillment or building out the fulfillment infrastructure themselves.

This do-it-yourself framework entails:


• Securing warehouse
• Recruitment of staff
• Purchasing necessary equipment
• Licensing and other relevant paperwork
• Acquiring liability insurance.

Advantages


i. It offers full control of inventory and the whole fulfillment process.
ii. It can be low-cost when the business is small because you do all work yourself.
iii. Anyone can do it. No need for contacts as long as you have space to store products, address labels, and packaging resources.
iv. For businesses shipping significant volumes, negotiated shipping rates can become a competitive advantage.

Disadvantages


i. Time-consuming. Packing all of the products yourself will take time. As orders increase, this can take up most of your day.
ii. It is costly as the business grows and can burden a young business as the following is required:

• Warehouse space.
• Warehouse equipment.
• Additional staff.
• Order fulfillment software requirements.

2. Third-party fulfillment
When a merchant hands off ecommerce fulfillment to a third-party often it is as a result of spending too much time packing and shipping orders. It could also be that storage space has run out. A seller may as well need more time for strategic projects, hence has no interest in managing their own distribution infrastructure. When you outsource fulfillment to another company, they handle the entire fulfillment process for you, from receiving your inventory from your manufacturer to restocking returned products. Generally, logistics companies work with many merchants and operate a number of fulfillment centers. They have the logistical expertise and capacity which enables them to negotiate discounted bulk shipping rates from carriers. The logistics company staff will complete all tasks of the order fulfillment process within their fulfillment center such as receiving, picking, packing, labeling, processing returns and quality control. Though each company is unique and has their own specialized services which vary depending on client needs.

Advantages


i. Bulk purchases of inventory in helps to improve profit margins.
ii. Investment in warehouse space or a workforce is not necessary.
iii. It is highly convenient and timesaving.
iv. Much better shipping discounts than if you were to negotiate on your own.

Disadvantages


i. Quality control is beyond reach of merchant.
ii. Due diligence is needful. The ecommerce fulfillment company can make or break your business as they deal directly with your customers.

3. Drop shipping
Drop shipping means that the merchant holds no products they sell in their online store. The products are produced, stored and shipped by the manufacturer. When a customer places an order on the merchant’s online store, the order is forwarded either manually or automatically to the manufacturer who ships the product directly to the end customer. With drop shipping, the shipping process is completely in the hands of the manufacturer, thus your customers might have to wait for a product to be shipped from across the world. Additionally, drop shipping does not allow you full control over inventory management and order fulfillment

 

Advantages


i. Easy to start. Drop shippers provide the products and shipping, so you can focus on sales.
ii. Minimal business development. You get to leverage the network of your drop shipper, instead of personally building the relationships with every supplier. Therefore, every new partner allows you to grow by a significantly large number of new products.
iii. Faster addition of products: Growth in ecommerce begins with adding more products to your website. By integrating a drop shipper’s products with your business, it allows more people to discover you and increases the likelihood by which interested shoppers can encounter your brand.
iv. Affordability. Low overhead costs makes drop shipping a good starting place for online retailers. All you do is pay for inventory once a sale is made, so you avoid operational expenses like warehousing.
v. Test before commitment. Since no overhead cost is incurred, you can test out the viability of new markets for existing products anywhere you establish a drop-shipper service.
vi. Specialization. The convenience of a drop ship product fulfillment experience is that it enables businesses to focus on what they do best, which is especially advantageous to new companies.

Disadvantages


i. Lack of customization. Drop shipping usually means no support for custom products. To achieve this type of support and customization, your drop shipper would have to function as a warehouse. Unfortunately, this is unlikely unless their margins on custom products were worth the time and effort. In such a case, the margins would likely not make sense for you.
ii. Lower quality control. Since the seller is removed from the fulfillment process, your brand’s reputation is entrusted to another party. Buyers usually care about the overall fulfillment experience hence any inconveniences as a result of the drop shipper taints your business image.
iii. Diluted brand power: Your products are produced by others, so it becomes difficult to establish a unique brand.
iv. Competitive disadvantage. Low barriers to entry mean it is hard to establish a competitive advantage over other businesses. Competition based on price can easily become a losing game.
v. Scale of business. Logistics can become challenging as a business scales up, especially when coordinating with multiple drop shippers.

Challenges to Order Fulfillment

The process of ecommerce order fulfillment is not as straightforward as it seems. Unexpected challenges do arise which prevents a business from scaling up and orders from getting out on time. There are several common logistical obstacles faced by ecommerce merchants:

1. No expertise of in-house fulfillment
Becoming a fulfillment expert is not typically the main reason that someone starts an ecommerce business, nor is it the best use of time for a jack-of-all-trades. Few businesses have their distribution network as a core competency or have ready-built supply chain. With the complexities of logistics, many ecommerce teams find it overwhelming to be set up and run operations in a warehouse.

1. No expertise of in-house fulfillment
Becoming a fulfillment expert is not typically the main reason that someone starts an ecommerce business, nor is it the best use of time for a jack-of-all-trades. Few businesses have their distribution network as a core competency or have ready-built supply chain. With the complexities of logistics, many ecommerce teams find it overwhelming to be set up and run operations in a warehouse.

2. Inadequate preparation for changes in volume
With festivities closely approaching, merchants must be ready to scale up operations throughout the holiday season. However, it can be overwhelming to keep up with swelling demand. As more orders are placed, more people are required to help ship them out. From scaling the workforce to managing a greater number of returns, changes in volume are challenging. Additionally, a larger number of staff may quit during peak season or you may need to lay off people during a decline due to seasonality. It may be difficult to plan for and afford future infrastructure needs on your own, especially major expenditures associated with managing logistics in-house.

3. Inability to focus on strategic tasks
When self-fulfilling ecommerce orders, little time is spent on growth-oriented tasks that improve your business. The activity of packing boxes and running to the courier takes you away from growing your customer base, developing new products and marketing to your audience making use of limited time means focusing on the essential tasks that will generate more revenue and grow your business.

4. Stiff competition
Online business owners need to focus on fortifying their brand beyond the product itself, yet very few create a memorable experience through branded packaging. This is because your customer sees the package first before the product that is inside. Not only does this showcase your brand in a cohesive way, but it may also result in customers sharing photos of your unique packages on social media.

5. Struggles in strengthening brand
Becoming a fulfillment expert is not typically the main reason that someone starts an ecommerce business, nor is it the best use of time for a jack-of-all-trades. Few businesses have their distribution network as a core competency or have ready-built supply chain. With the complexities of logistics, many ecommerce teams find it overwhelming to be set up and run operations in a warehouse.

6. Obsolete technology
Many ecommerce businesses are stuck using outdated or manual systems and software with limited technological capabilities that lack insight into modern business. Without up-to-date, connected technologies; you lose speed, automation, and data that drive decisions. As a result you get stuck using guesswork around everything from inventory planning to cart abandonment.

Conclusion
In summary, offering fast and affordable shipping options to your customers helps prevent any surprises at checkout. However, without the proper order fulfillment process in place, ecommerce businesses will be unable to come good on their promise and making your customers wait can be costly. The reality is that if consumers cannot get the shipping speed and price they want from you, they will look elsewhere. To meet customer expectations, you must understand:

• The overall ecommerce order fulfillment process.
• Which fulfillment model makes the most sense for your business
• How to be strategic in your operation.

Thereafter, you will be able to overcome any challenges you face along the way and as your business grows, your ecommerce order fulfillment strategy will exponentially shift over time.

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