Best Practices to Improve Your Ecommerce Order Fulfillment Process
What do today’s most successful ecommerce retailers have in common? They have clearly defined accurate and efficient ecommerce order fulfillment processes.
It doesn’t matter if you have the best product and marketing team if you can’t get orders to consumers in a timely, cost-effective manner. Nearly 25% of online shoppers cancel an order because of slow delivery speeds. Not having a trusted order fulfillment process can significantly affect a customer’s purchasing decision, both now and in the future.
But exactly what is ecommerce order fulfillment, and how does it work? How can you make the process run more smoothly for your business to customer expectations?
Keep reading to learn more about the ecommerce order fulfillment process and how technology can streamline the process, ensuring future sales and happier customers.
What Is the Ecommerce Order Fulfillment Process?
Order fulfillment is sometimes called inventory fulfillment or supply chain fulfillment. It is the process that occurs between taking a customer’s order and sending the products to the customer. The order fulfillment operation includes warehousing, processing new orders, item packing, and shipping products. A successful order fulfillment process enables businesses to deliver customers’ orders on time accurately.
First, let’s take a look at the standard steps that make up the ecommerce order fulfillment process. For most businesses, the steps include:
1. Receive a customer’s order online
2. Process the new order in your ecommerce operations platform (such as ERP software)
3. Notify the customer that you have received their order
4. Send a request for fulfillment to your warehouse or supplier
5. Pick the order
6. Pack the order according to the packing slip
7. Ship the order to the customer
8. Notify the customer that their order has shipped
9. The customer receives the order
10. Process product exchanges and returns
The above process applies to both B2C orders (business-to-consumer), where products are sent to a single shopper’s home, and B2B orders (business-to-business), where large quantities of products are shipped to retailers.
Why Is Order Fulfillment Important?
Did you know that 38% of shoppers will never purchase from an online retailer again if they’ve encountered a poor product delivery experience?
You may not think it’s essential to spend much time perfecting your order fulfillment process, but it plays a crucial role in your success, directly impacting your bottom line. When 72% of online shoppers state that on-time delivery directly influences customer loyalty, you can’t afford to address a flawed order fulfillment process.
What Are the Main Steps in the Order Fulfillment Process?
Several moving pieces comprise the order fulfillment process, ranging from managing and routing new inventory to choosing the ideal packaging for the lowest practical dimensional weight.
Let’s take a deeper look at the complete process.
1. Receiving Inventory
When you purchase products from suppliers or manufacturers, you then receive that inventory at your fulfillment center(s). At this stage, you’ll ensure accurate inventory counts, inspect products for damage, create product SKUs, and enter products into your inventory management system.
2. Organizing Inventory
Once you’ve received inventory, you’re responsible for organizing it. Organizing products by category or SKU is a best practice that helps ensure faster order fulfillment.
This step is equally as important in brick-and-mortar stores. Employees and shoppers can quickly locate items that a customer is looking for if things are properly labeled and organized. A customer is more likely to get frustrated and purchase a product elsewhere if you have items unrelated items scattered across locations.
3. Order Picking
After a customer places an order on your website, you must track it across existing inventories for order picking and packing. This is made easier with inventory and warehouse management software that functions as a central database repository for your merchandise.
Whether you, other team members, or warehouse robots are responsible for picking the products, the right software can facilitate fast and accurate inventory availability and order picking.
4. Order Packing
Once the products for an order have been picked, it is time to pack the order appropriately to ensure safe and timely delivery. If you’re responsible for packing your own orders, you’ll need to develop a process for managing adequate supplies and packing materials such as boxes, cartons, bubble wrap, and more.
Always correctly pack fragile items so they don’t suffer damage before reaching your customer (TIP: safe, sustainable packaging is now seen as the gold standard and can lead to higher customer satisfaction rates).
After order picking and packaging, you must ship the order to your customer. Your shipping method may vary depending on whether you use third-party shipping services, merchant shipping, or dropshipping from a supplier.
Depending on your shipping options and relationships, you can list multiple shipping methods on your ecommerce platform. Your customers can pay for the shipping option of their choice. Some standard shipping options include:
- Free shipping: consider setting a minimum amount to make an order eligible for free shipping (this is a proven way to improve ecommerce sales)
- Table rates: calculate shipping rates using a table that considers factors such as destination, weight, cost, and number of items
- Flat rate: a fixed shipping price that is predefined for product delivery
- Buy online, pick up in-store (BOPIS): if you have brick-and-mortar stores, let your customers choose to pick up their order at their closest store
If your ecommerce platform supports it, you may be able to offer your customers a choice of shipping carriers (such as USPS, UPS, or FedEx) that will determine their fulfillment speed.
6. Exchanging or Returning Products
Many people don’t realize that product returns and exchanges are considered part of the order fulfillment process. As an ecommerce business owner, you should view successful order fulfillment beyond doorstep delivery and strive to achieve seamless returns and exchanges.
Once someone requests a return or exchange, the customer order processing should immediately begin. In your order management software, look for the ability to review all order details at once, which gives you the ability to generate product returns and exchanges quickly.
Common Ecommerce Order Fulfillment Challenges
We’ve already established that poor ecommerce fulfillment issues are one of the most common causes of lost business. This is especially true of ecommerce merchants with massive product catalogs. What are some of the most common challenges, and how can you avoid them?
Incorrect or Damaged Inventory
When a customer places an order, the wait begins, and their anticipation builds. When they receive a wrong—or damaged—item, they’re rightfully disappointed. Don’t ever send out a damaged or defective product (such as a scratch on a book cover or a chip out of a corner) and think a customer won’t notice—they always will.
When you send out an incorrect or damaged item, you’ll have to spend money to replace the product or correct your mistake. Once the snafu is finally figured out, the customer may second-guess whether to purchase from you again. You can prevent many of these issues with proper inventory management, ensuring product quality control from the beginning.
Overstocking and Stocking Out
Another sure way to infuriate your customer? Sell them an item that you don’t have.
Without proper inventory management and order fulfillment processes, you risk selling out of items before realizing it, leading to issued refunds and disappointed customers. Adopt inventory management best practices to keep track of every product you own, then sync inventory levels between your online sales channels and fulfillment locations.
If there is a chance a product is out of stock or on backorder, clearly notify your customers in the product listing.
Missed Shipping Notifications
What is the one thing customers look for after receiving an order confirmation? A shipping notification that tells them when to expect their order to arrive. With online shopping at an all-time high, customers are trained to look for these notifications in the shipping process. Many people also check their delivery status multiple times while their order is en route.
If a customer doesn’t receive shipping notification promptly, they start to doubt your business. They may assume that an item hasn’t shipped, leading to multiple calls to your customer service department—wasting time and money.
Customer Service Issues
Not providing effective customer service is another fulfillment mistake you don’t want to make. If your customers experience damaged, incorrect, or missing deliveries, they will expect answers. If your customer service team can’t answer their questions in a timely and satisfactory manner to raise customer satisfaction levels, you might as well light your money on fire.
Even if you must spend more, hiring professional, experienced customer service representatives to manage issues surrounding fulfillment is worth it. Stack your team with highly qualified individuals, and you will have more happy customers than angry ones.
Slow Shipping Speeds
Today’s customers expect to receive their orders quickly, with many ecommerce retailers offering two-day or next-day shipping to compete. If your entire order fulfillment process is complicated and disorganized, you won’t be able to meet customer demands. You also risk losing a future sale—they’ll purchase what they want from your competitors instead.
Ecommerce is a fast business, which means your fulfillment services need to be able to keep up. So, work with a fulfillment partner that can speed up your shipping timelines and satisfy your customers’ high expectations.
Inefficient Ecommerce Returns and Exchanges
In 2020, return delivery costs in the United States were estimated to be 550 billion dollars—and this figure doesn’t include expenses related to restocking or inventory losses! Most of this inventory will return to your distribution centers or warehouses if you don’t have a brick-and-mortar store.
However, if you’re not set up to efficiently accept and restock these products, they’ll lose value by sitting in storage—failing to be reintegrated into incoming inventory. When you can’t immediately resell returned items, you can’t make any revenue on them.
Customers value a return/exchange process that is quick and free. However, don’t promise a return policy that your partners aren’t prepared to carry out. This will negatively affect your customers’ experience and hurt your profit margins. It’s vital to choose an ecommerce fulfillment partner that has the proper procedures, infrastructure, and staffing in place to handle a high volume of returns and exchanges.
What Are the Different Types of Order Fulfillment?
There are several types of online order fulfillment, but the most popular methods include merchant fulfillment, third-party fulfillment, and dropshipping.
Merchant fulfillment is often called in-house order fulfillment and refers to handling order fulfillment “in-house” — without third-party involvement. You may choose to fulfill in-house if:
- Your business is still new, and your order volume is low
- You don’t have the budget to party with a third-party logistics company
- You complete order fulfillment from home
- Your ecommerce platform has built-in inventory management software that helps you achieve efficient order fulfillment on your own
If you outsource your order fulfillment process, you embrace third-party fulfillment methods. Third-party fulfillment partners manage all aspects of the process, from receiving inventory to shipping orders. One typical example of third-party fulfillment is “fulfillment by Amazon” (FBA). FBA encourages ecommerce retailers to partner with Amazon by sending products to Amazon for storage and fulfillment.
You may choose to go with a third-party fulfillment solution if:
- Your typical order fulfillment methods are too expensive
- You’re having issues managing the logistics of fulfillment
- Your business is small-scale
- Your order fulfillment process is slow and is leading to a negative delivery experience
- You want to scale your business quickly
Another popular order fulfillment method is dropshipping. When you receive an order from a customer, you forward the order to your supplier, who then handles the logistics of picking, packing, and shipping. Dropshipping is a favored method because it effectively balances order fulfillment between suppliers and retailers.
You may prefer dropshipping as a fulfillment option if you are new to ecommerce and have a minimal budget for fulfillment services. However, if you’re in a niche where speed of delivery is a priority, dropshipping is not a recommended option. Although it is convenient, it doesn’t provide much control over the supply chain. When you rely on a supplier or manufacturer to fulfill orders, you can’t help your customers track or receive their orders faster. Sometimes suppliers are located far from a customer, which can affect the speed of the order fulfillment cycle.
Choosing the Right Order Fulfillment Strategy for Your Ecommerce Business
The right order fulfillment strategy or method for your business will depend on many factors. While merchant fulfillment may work for one company, third-party fulfillment may be a better choice for another. Before settling on a strategy, you and your team must evaluate several parameters.
Sales Channel/Ecommerce Platform
Your ecommerce platform will be a significant factor in deciding the type of order fulfillment to choose for your business. You may choose to stick to merchant fulfillment if your platform supports inventory management and other tools that support order fulfillment. For example, some ecommerce platforms provide functionality such as tracking inventory across locations, the ability to add company warehouse locations as your business scales, real-time data, and more.
Other platforms allow you to integrate with third-party fulfillment services to help you manage and track orders from a single dashboard. This is when it’s imperative to choose a fulfillment service that integrates with your preferred platform and other business tools. For example, Flxpoint integrates with ShipHero to help retailers achieve seamless order fulfillment.
Sometimes it can take years to scale ecommerce companies, although it’s possible to scale up quickly. In the long run, your customer satisfaction rate and increased order volume decide your ecommerce business’s fate. It’s smart to choose between fulfillment models based on order volume. As your order volume increases, so will the need for a third-party fulfillment provider.
Another major factor in deciding on an order fulfillment method is your business’s geographic location. If most of your customers are local, merchant fulfillment might make the most sense. However, if you’re looking at enabling international shipping, third-party fulfillment or dropshipping may be more suitable.
Your business location also helps determine the type of order fulfillment service you choose. If you are selling locally, you would be good with merchant fulfillment. On the other hand, if you wish to enable offshore shipments, going with third-party fulfillment will be a suitable option.
Do you offer enough delivery options to compete in your market? Next-day and two-day delivery methods dominate the ecommerce landscape, and customer expectations surrounding fast product delivery are high.
Whatever you do, strategize to decrease order delivery cycle time. To do this, you must cover delivery fees on your own (which can quickly get expensive) or ask your customers to pay extra. There are a few options for handling this:
- Offer memberships so that customers pay a monthly fee for dast delivery (i.e., Amazon Prime)
- Add the average shipping cost to the product’s base price
- Set a minimum price for free shipping (which can lead to higher average order totals when customers add more to their shopping carts)
Best Practices for Ecommerce Inventory Management and Order Fulfillment
A trusted order fulfillment process ends with a customer’s order arriving correctly, undamaged, and on time. How can your business achieve this efficient operation and simplify a complex process?
Strive for Seamless Integration
If you’re like most ecommerce retailers, you source products from various suppliers or distributors. The way you choose to fulfill orders doesn’t matter as much as achieving seamless connections between systems. A total retail operations platform can communicate smoothly between partners and systems, eliminating confusion and delays.
Achieve End-to-End Supply Chain Visibility
Another benefit of seamless integration between ecommerce fulfillment software is real-time inventory visibility. With the right software, you can be linked in real-time to your distributors and effectively track products throughout your fulfillment cycle. The best-case scenario is when all parties can access the same product information, inventory counts, and order fulfillment data to see exactly which products are available, in what quantity, and where they are located.
At the same time, your customers should be able to see whether an item is in stock and how many are available. This transparency is known as end-to-end visibility and is an influential aspect of both accurate order fulfillment and customer satisfaction.
Communicate Effectively With Customers
You should constantly communicate with your customers throughout the order fulfillment process. The communication should extend beyond the initial “Thank you for your order” message. Strive to provide real-time communication regarding order status, including when an item ships and is delivered
Smooth Returns and Refunds
Ecommerce returns are common. In fact, one in five online purchases is returned. So, if you’re going to thrive in ecommerce, you may as well learn how to accept returns and issue refunds gracefully.
Customers are more likely to purchase from businesses with a good attitude about returns, refunds, and exchanges. Not only should you stay calm, but you should strive to be efficient. If you use third-party fulfillment or dropshipping, try to only work with suppliers with solid return policies. Shy away from partners who charge restocking fees and work with those who can process refunds and replacements quickly.
Finally, always be upfront and transparent about your return policy. Take care to address customer satisfaction in your fulfillment process, and don’t consider an order fulfilled until your customer is happy with their purchase.
Streamline Your Ecommerce Order Fulfillment Processes With Flxpoint
Streamlining your ecommerce order fulfillment process is one of the best ways to save time, enhance the customer experience, and boost the profitability of a business. Understanding the different functions and how you can use each one to improve the overall order fulfillment strategy is essential.
If you own a smaller business, you may choose to keep these operations in-house, where you can maintain absolute control of your entire online order fulfillment system. Large companies may need to accept limited control of the fulfillment process and take on additional risks if they want to be able to fulfill their orders efficiently. Either way, you can decide which method is suitable for your team through exhaustive research and an intimate understanding of your business’s unique requirements.
Ready to learn more about how Flxpoint can speed up and improve your order fulfillment process? Talk with an expert today.
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