Guide to ecommerce order fulfillment – definition, process, problems and best strategies

1. Definition of order fulfillment in ecommerce

The moment an online shopper presses the "Buy" button in an online store or marketplace is precisely the moment when the entire e-commerce order fulfillment process begins. It ends only when a buyer successfully gets hold of a product.
The e-commerce order fulfillment process consists of five main phases:

• Receiving the products from a supplier
• Storage of the inventory in a specific place
• Order picking and packing
• Delivery to a buyer
• Management of returns, refunds and exchanges of unwanted goods

The rightly organized order fulfillment ecommerce process is a vital tool for building successful business.

2. Steps in the process of order fulfillment in e-commerce

Let's now take a look at the four basic steps of e-commerce order fulfillment. Optimizing each of these steps should be a priority, because even the smallest mistakes in e-commerce order fulfillment can leave your customers dissatisfied and lead to lost sales.

2.1. Reception and storage of inventory

The first step in e-commerce fulfillment is picking up the goods from the supplier and placing them in a designated storage location. For someone who has chosen to outsource to 3PL, this could be a fulfillment center. For others who have chosen to do fulfillment themselves, it could be a warehouse. For someone running a smaller business, it might even be a garage. But regardless of what your warehouse looks like, make sure you always put your goods up for sale right away so you can start shipping to customers faster.

To avoid picking errors and locate inventory more quickly, each item should have an identification number and be placed in an assigned location in your warehouse. Fulfillment Box, for example, uses special software for such purposes. It allows you to track each item in real time and reorder it immediately. This way, you can be sure that there are always enough products in stock to satisfy customer demand. This enables very fast order fulfillment in the warehouse, so orders can be processed within a day.

The location of the warehouse is critical to the speed of delivery. Since most customers do not want to wait more than two days for their orders, the warehouse should be located as centrally as possible and close to the main customer base. For example, Fulfillment-Box has an extensive worldwide network of warehouses. Four of them are located throughout Europe. This has the advantage that shipping costs are lower and delivery is faster, as the products are transported from the warehouse closest to the buyer.

2.2. Picking and packing

The second step of the order fulfillment process in the warehouse begins when an order is received. This step involves selecting the right product and packing it in suitable and durable packaging. Then the package is labeled and prepared for shipment. This is the moment when some critical mistakes can happen. For example, if the wrong item is packed. Or choosing the wrong packaging can cause damage to the item. This can have consequences such as return, exchange or refund. In the worst case, you may even lose a customer.

2.3. Shipping

The third step of order processing is transporting the goods to the customer. This process could perhaps be as effortless as a short walk to the local post office. But only for someone who owns a rather small business and sells light goods in small quantities. Those who have a fairly high volume of sales or sell massive and heavy items may need a dedicated carrier to pick up the items from a warehouse. 3PLs typically work with proven carriers on a long-term basis and have favorable rates due to the large volume of shipments. So for larger companies, outsourcing to 3PL can be very profitable.

Another point to consider is international delivery. Different countries have different regulations, duties and taxes. So before you ship all over the world, make sure you know all the terms of sale and choose a good freight forwarder. For example, 3PL Fulfillment Box ships international orders with reliable and well-known DHL service.

Last but not least, notifying the customer about the shipment is important. Integrating such a service into the order processing will surely reduce the number of calls from buyers with questions about the delivery status.

Today's online shoppers are looking for free e-commerce delivery and want to receive a desired item extremely quickly.

According to a recent survey:
• More than 90% of online shoppers expect products to be delivered to them within two or three days.
• 30% anticipate to get their order delivered the same day.
• 66% of shoppers expect free delivery for all online purchases.
• In addition, nearly 70% of shopping carts are abandoned because of shipping charges.

So, efficient and well-organized order fulfillment e-commerce process will not only expand your business, but also to keep your customers satisfied.

2.4. Returns processing

Even though the return process is very inconvenient for both the buyer and the seller, it is unavoidable and completely normal in e-commerce order processing. When done right, even the returns process can be beneficial. Online shoppers feel more secure when they purchase goods from someone who handles returns in a straightforward and organized manner. To mitigate the negative effects of this process, you should provide your customers with prepaid return labels and let them know when they will receive a refund or replacement.

Returns should be processed very quickly so that the customer can receive a replacement or their money back quickly. The faster a product is returned to the warehouse, the faster it can be resold or disposed of. Returned products in perfect condition should be restocked and resold. Slightly damaged merchandise can be sold as second hand. To save space in the warehouse, products that cannot be resold should be disposed of directly. The entire returns management process can also be outsourced to 3PL. Fulfillment Box specifically aims to reduce the negative impact on retailers and customers.

The main reason returns are so common in e-commerce fulfillment is because online shoppers buy products without even seeing them in person. The easiest way to reduce returns in e-commerce fulfillment is to post valid and detailed quotes online and allow customers to ask questions before making a purchase.

3. Order fulfillment strategies

Here are four key e-commerce order fulfillment strategies, along with their respective strengths and weaknesses. In an effort to make the right choice and select the best e-commerce fulfillment strategy for your business, ask yourself the following questions:

• Where is your warehouse located? Where is the location of your customer?
• Are your sales high or rather low?
• What kind of merchandise do you sell? Is it bulky or heavy? Does it spoil quickly? Or maybe is it very fragile?

3.1. In house fulfillment

Another name for this strategy is self-fulfillment, as the seller performs all the steps of the e-commerce fulfillment themselves. This type of e-commerce fulfillment is suitable for someone who is just starting their business and does not have much inventory. For them, product fulfillment in-house is more cost-effective than outsourcing to 3PL.

This strategy is suitable for sellers whose customers are primarily located in one region rather than spread across the globe. In-house e-commerce fulfillment allows full control over inventory, packaging, delivery and returns. In the case of custom, exclusive, special, rare or very fragile items, such control is necessary.

3.2. Outsourcing to 3PL

The strategy of self-fulfillment in ecommerce fulfillment might be quickly exhausted as the company grows and the volume of sales increases. A great way to support increasing business development is to partner with third-party logistics providers. This saves time and effort and gives more opportunities to prioritize other important business tasks. 3PL providers can handle some or even all of the product fulfillment steps. And just in case you don't want to deal with customer issues, some 3PL providers can even handle customer service.

Fulfillment Box, for example, offers warehousing services, handles all steps of picking, packing and shipping, and handles returns. For Amazon sellers, Fulfillment-Box also offers a special service for preparing items for transport to the Amazon warehouse and additionally handles FNSKU labeling.

In attempt to select the most suitable order fulfillment company, consider these factors:

• Location
  Many centrally located warehouse locations have the great advantage of being cheaper to ship because shipping zones are minimized and shipments don't have to be transported far away. So if you want to be closer to your customer base and ship in less time, choose a 3PL with multiple warehouse locations.
• Specialization
  Which e-commerce fulfillment provider is more beneficial to you depends primarily on the 3PL's specialization and the type of goods you trade. If both match, then you've found your 3PL. If a fulfillment provider doesn't specialize in handling goods similar to yours, then working with them will be a total disaster. Also, your 3PL should have experience delivering items safely and quickly. Especially if you deal with large, fragile, or quickly perishable goods.
• Integration with marketplaces
  Ideally, your 3PL ought to possess a special ecommerce fulfillment app that is integrated with all marketplaces which you use to sell your wares. If that's not the case, then consider working with several providers, since your priority is to have whole coverage for your sales instruments. The main purpose of that kid of software is to grant you the ability to track warehouses balances, have record of all orders, shipments and returns. And it gives an overview about the status of any order at any time, making it especially helpful for customer service. It also helps to analyze client purchasing behavior. Fulfillment-Box, in particular, has a software that controls a whole product fulfillment process and is integrated with many marketplaces such as Amazon and eBay.

3.3. Dropshipping

With this e-commerce fulfillment strategy, you don't own the goods you sell, nor do you need storage. The manufacturer not only produces the items, but also stores and transports them to customers instead of you. You simply place goods for sale in your web store and take care of marketing. All order data is transferred to the manufacturer, who picks, packs and transports the goods to the buyer. This product fulfillment strategy allows you to enter e-commerce with less investment, which makes it attractive for newcomers. Another plus is that the seller can focus all his attention on other important business tasks, while the manufacturer physically manages all product fulfillment.
This e-commerce fulfillment plan has some weaknesses:

• The merchant has almost no control over the order fulfillment process.
• The profit must be divided between the dealer and the manufacturer.
• If the manufacturer is located abroad, shipping will take longer and shipping costs will be higher.

3.4. Hybrid

It doesn't have to be just one e-commerce fulfillment strategy. The three systems described above can also be combined. For example, the retailer may handle fulfillment itself on a daily basis and only outsource to 3PL a few times a year during major holidays when sales spike. Or, it may be advantageous to outsource fulfillment of basic products with high sales volumes to a 3PL company or dropshipper, while handling premium products and custom orders from your own base.

4. Order fulfillment problems and how to avoid them

4.1. Incorrect execution of an order

This problem usually occurs during the picking and packing phases. The likelihood of a warehouse worker picking the wrong item is higher when the warehouse is poorly organized. Investing in good inventory software will help employees accurately locate ordered goods.

An incorrect packing process or packaging is likely to result in damage, especially if fragile goods are involved. An incorrect or damaged product can frustrate a customer and likely discourage them from ever buying from you again. Plus, it will cost you money to replace or compensate them. So, to avoid customer dissatisfaction and unnecessary costs, organize your storage place perfectly and use only suitable and durable packaging.

4.2. Long shipment preparations

Long picking phases are another problem of an inefficiently organized storage area. This can also be avoided by using inventory software, which not only makes it possible to find the right item, but also to act quickly. Shipping can also be delayed if the right packaging is not available at the moment. Make sure you always have more than enough packaging materials on hand.

4.3. Stockouts

The easiest way to frustrate a customer and miss a sales opportunity is to run out of stock. Especially if it is a product with high sales. Proper inventory management software is the way to avoid these problems. It should integrate with all your marketplaces and show in real time how many goods are available. It should prevent out-of-stock merchandise from being offered for sale until inventory is replenished. It should also automatically restock items and notify customers of potential delays when needed.

4.4. International delivery

One of the biggest challenges in order fulfillment is international delivery. It takes much more time than a national delivery. Customers know this, but still don't want to wait too long when they have better alternatives. Many are willing to pay extra for premium shipping to get their product faster. So offer multiple shipping options for your international customer base.

4.5. Communication

When conducting e-commerce, clear communication is essential not only with customers, but also with suppliers and employees.

• Communication with clients
  Foremost, establish a competent help line, because this is where customers turn to when something goes wrong with an order. Client concerns ought to be responded to rapidly and productively anytime. Having a competent client service is an effective method to obtain client's trust and loyalty. And if your clients are satisfied with your services, they are more likely to recommend your firm to someone else.
  Another important part of communication is customer notifications. In today's e-commerce processing, giving customers status updates on their orders has become the norm. From the time an order is received to the time it is successfully shipped, customers want to know about every step of the order fulfillment process. You can keep customers updated via email or, ideally, provide them with a tracking code so they can check the status of their order at any time. These notifications take much of the routine off your customer service team, allowing them to focus on other important tasks.
• Communication with suppliers
  If you do not manufacture the items you sell yourself, good communication with suppliers is essential. Work only with reliable and proven distributors who will respond quickly and provide excellent services.
• Communication with employees
  Most steps of your e-commerce processing are performed by your employees. Therefore, even a small miscommunication with them can lead to big mistakes. Good communication with your own staff helps to ensure that all processes run smoothly.

Conclusion: Ecommerce order fulfillment as a way to success

Order fulfillment is a fundamental task for any online retailer, both large and small. No matter how good your marketing is, an efficient and smoothly executed e-commerce fulfillment is what brings loyal customers and positive reviews at the end of the day. And with the help of this little guide, you now have an understanding of e-commerce fulfillment, its basic principles and are able to choose a perfect strategy for your online business.