Order Fulfillment — What is it and Why is it Important for eCommerce?

The order fulfillment process is what makes the wheels of eCommerce turn. It’s also a central piece of retail logistics chains and logistics services generally. But for something that plays such a crucial role in retail and eCommerce, the order fulfillment process is largely unknown to those outside the industry. 

Here’s what you should know about order fulfillment, fulfillment providers and how they work. 

What is order fulfillment?

Order fulfillment is a professional service that includes all the steps necessary to deliver customers orders placed online. Every eCommerce platform is dependent on having fast, efficient order fulfillment solutions. 

Getting purchased items to customers may seem like a straightforward matter but in fact there are many moving parts in this process and several business challenges have to be met. 

Let’s look at the major steps in the order fulfillment process. 

What processes are included in order fulfillment?

The order fulfillment process begins with an online purchase. That item has to be located, packed and shipped to the customer. Fulfillment strategies may vary slightly from one organization to another but they all involve these elements:

• Order management. IT solutions typically handle the constant flow of orders and turn them into a list of priorities for the next step in the process. Without an order management tool, any eCommerce operation would quickly get lost in the chaos of tracking so many orders at once. 

• Inventory / warehouse management. You have to know the available quantities of every item you sell at all times. Again, tech solutions are needed here because of the complexity of even small online stores but constant, real-time insights into how many items you have on hand to sell are an essential part of eCommerce fulfillment. 

• Fulfillment center. Also referred to as a distribution center, this is typically the same warehouse where sold goods are kept. Fulfillment centers are where items are packaged and turned over to a transport agency for delivery. 

• Picking & packing. Traditionally a labor-intensive process that is being transformed by robot-based tech, this step in order fulfillment involves the physical removal of items from their assigned storage space and sent to packing stations where items are packaged and multi-item orders are combined into appropriate packaging. 

• Transportation logistics. When the packing is ready to be handed over, a courier service will take over from this point until the parcel is delivered. Every fulfillment service model ends with this step. 

What are the benefits of order fulfillment for eCommerce businesses?

Third-party fulfillment — when a company other than the retailer who sold the product handles everything described so far — is not only the bridge between online stores and their customers, it makes it easier for eCommerce to succeed and grow. 

For most online retailers, setting up, staffing and maintaining a logistics arm to their business is not worth the cost. Outsourcing order fulfillment makes sense from a financial perspective because they can offer customers a high level of service with fast, reliable deliveries at a lower cost than if they did everything themselves. 

This is not only because of efficiencies in the operations of fulfillment services. Thanks to their size and the volume of parcels they handle, logistics operations can negotiate much better shipping rates than you could on your own. That savings is passed along to their customers and so shipping costs can fall significantly when you work with a logistics partner for your eCommerce fulfillment. 

There are other benefits to using third-party logistics services. Most businesses that become successful online do so because of a combination of factors, like a great product, a persuasive sales message, a website optimized for conversions, etc. When they are relatively small, these successful companies can mostly manage on their own when it comes to shipping orders but as they grow, fulfillment challenges will appear. 

Working with an order fulfillment specialist means entrusting them to take care of a very important part of your business that, for most, is outside of your area of expertise. Most eCommerce operations aren’t started and nurtured with the goal of building an logistics infrastructure to serve order fulfillment needs — it’s simply a waste of resources that could be better put to work in other areas of the business. 

Outsourcing order fulfillment to a logistics partner is like outsourcing any other part of a business, it’s done to take advantage of cost and performance advantages by turning over responsibility to a specialist. 

Which order fulfillment strategy is the best for you?

Working with third-party logistics providers is a good fit for most businesses but each case will vary according to specifics involving the size & nature of the operation. 

When you’re operating at a very small scale, you can usually manage with your own logistics needs. When you’re operating at a massive scale, like Amazon, it also makes sense to run your own logistics but for very different financial reasons. 

For most online retailers in between, it’s very likely that some cost and performance advantages can be gained by working with an order fulfillment service run by a dedicated logistics company. 

To find out more about how a logistics partner can help you scale up while keeping your customer satisfaction high and cutting costs, get in touch with our sales team and schedule a chat at your convenience.