Ogoship

Your ultimate guide to e-commerce order fulfillment

How to ship fast and sell global.

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Put simply, order fulfillment is the process that begins once your customers complete a purchase on your website and ends once they receive their goods.

Depending on how you run your e-commerce business, order fulfillment can have several additional phases — with some of them happening before the customer even gets to the checkout.

Here's an oversight of what a complete order fulfillment process may look like.

1) Receiving products from the manufacturer

2) Inventory management and stock checks

3) Warehouse and stock shelf management

4) Picking and packing products

5) Preparing the product for shipping

6) Delivery to the customer

7) Returns process

Your ultimate guide to e-commerce order fulfillment

Why is an effective order fulfillment process a must?

For e-commerce businesses, a great website or a great product is just the start. You can sell lots of products, but if there are problems with the delivery, you will quickly lose the trust of your customers.

Avoid costly mistakes 

Any mistakes in the ordering process cost money. Additionally, late or lost deliveries lead to unhappy customers, which in turn leads to bad reviews. Because online reviews have a significant influence on the shopping habits of modern consumers, this can be dreadful for your business.

Stay competitive

The e-commerce industry has matured and become more competitive and customer expectations have also changed. Today, quick and low-cost deliveries are seen pretty much as standard. But to achieve this, the order fulfillment process must be organized and optimized.

Earn your customers' loyalty 

To wow your customers with a seamless and smooth delivery process you need to have both a well-planned order fulfillment process and the right systems in place. Timely communications on the whereabouts of your shipment, tracking codes, and delivery statuses are just some important things you need to be able to communicate to your customers. All of this on top of fast shipping itself, of course. 

Avoid extra costs

Optimizing usually means optimizing the costs too. E-commerce businesses must pay close attention to shipping costs. If you’re organizing shipping yourself, spare some time for negotiating with various carriers and keep an eye on the best rates to keep the shipping costs low. If you use a professional 3PL partner, the partner does this for you.

Options for e-commerce order fulfillment

1) In-house order fulfillment

In-house order fulfillment is the process where the e-commerce merchant does all the phases of the order fulfillment process themself.

If you are just starting out, it's common that you'll process orders in-house. This, though, requires a significant time commitment at a point when merchants are trying to acquire customers and grow their business. When business expands, merchants are usually faced with two choices:

1) Outsourcing the order fulfillment process

2) Investing in building the order fulfillment process themselves

Investing in the building of order fulfillment infrastructure is a big commitment that includes renting warehouse space, employing logistics staff, and investing in equipment and licensing software.

In-house order fulfillment: 

Pros:

  • Complete control of the process
  • An inexpensive option for low volume businesses
  • In the beginning, space is the only requirement

Cons:

  • Time-consuming if you do it yourself
  • Warehousing and staff are costly investments for a new business
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Calculate your current order fulfillment costs

How much are you spending on order fulfillment right now? Do you have full visibility of all the costs? Download a free order fulfillment cost calculator template.

2) Third-party order fulfillment

Third-party order fulfillment is a popular solution for merchants whose business has started to gain some growth. The merchants may feel they spend too much time picking and packing, are running out of storage space, or just don't want to manage a distribution warehouse themselves.

By outsourcing to a third-party fulfillment service provider or 3PL, e-commerce businesses can access several benefits, including logistics expertise, larger storage capacities, and discounted bulk shipping rates from carriers.

With this method, the tasks related to order fulfillment are all handled by the third party: from receiving, picking and packing, to labelling and returns.

 Pros:

  • Cost-effective
  • Extra storage space allows money-saving bulk orders
  • Choosing an excellent third-party service provider can ensure superior service for your customers
  • 3PL service providers can provide access to fantastic shipping discounts

Cons:

  • Might feel you have less control than with in-house processing
  • You need to make sure the company is reliable to entrust with your reputation.

Dropshipping explained

Dropshipping is a method where the merchant never stores the stock themselves. Instead, all the goods are produced, stored, and shipped by the manufacturer. When the customer places an order in the merchant's shop, the details are forwarded to the manufacturer. From there, the manufacturer sends the delivery directly to the customer. Dropshipping doesn't allow merchants full control over inventory or order fulfillment. Additionally, the manufacturer can be positioned anywhere globally, which typically contributes to extended delivery times. 

 Pros:

  • Dropshippers manage the stock and shipping, making a dropshipping shop easy to set up.
  • Greater access to a more diverse range of products
  • Low overheads and initial investment
  • Allows merchants to focus on increasing sales

Cons:

  • Lack of quality control
  • No support for custom products
  • Little competitive advantage
  • Hard to establish a unique brand as you are selling others product
  • Challenging to manage as your business scales
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How to craft your e-commerce order fulfillment strategy

No business can survive without a solid strategy. A well-functioning order fulfillment process depends on several factors which are unique to your business.

Determine your goals 

To make it in the very competitive e-commerce world, you need a plan. First, you need to decide if e-commerce is a side job or a hobby, or something you want to do seriously.

Figure out where you see your business in a few years. How much money do you need to make to sync with your other life plans? Which niche can you target? Who is your competition?

Once you understand where you want to be in the next few months and years, you should have a good idea of what it will take to achieve your goals.

Do benchmarking

Do research on your competitors. Find out what price, options, and delivery times they are offering. Unless you have exclusive access to products, you'll always be competing with someone.

By having a complete understanding of your competitors — and what they do well — you can start identifying areas where you can beat them. This could, for example, be on service, customer experience, delivery times, delivery costs – or something else.

Make it a priority

Many merchants have access to the same products, one of the best ways to ensure customer loyalty is through excellent service and a delightful customer experience. Items that are delivered on time with no problems are a proven way to establish trust and enhance your reputation. Set the bar high.

So, make e-commerce order fulfillment a top priority in your operations. Additionally, by minimizing order mistakes or errors, you can avoid extra costs that will hurt your profits.

Do the math

Run the numbers on how many shipments you are sending out per month and how much that currently costs.

Does your profit margin allow you to provide the fast and cost-effective shipping that customers demand? Identify any areas that you can improve upon.

Consider outsourcing

Outsourcing with the right company can give you access to excellent service at a reasonable price. Additionally, it will allow you to keep overheads down and access better shipping prices.

For businesses that are scaling up, a third-party fulfillment service or 3PL will provide some considerable benefits that are more cost-effective than going alone.

Be smart

One of the perhaps biggest factors that affect the success of online retailers is their shipping costs and times. Charging too little for shipping can eat into your profits, but charging too much could turn customers off. It's a delicate balance.

A smart e-commerce order fulfillment strategy should be dynamic. For example, offering customers delivery options like same-day delivery or in-store pick-up (where possible) can be very effective.

Additionally, merchants may want to explore the idea of free delivery for purchases over a certain threshold. The cost of these deliveries can be built into the product price but can quickly be recouped by encouraging higher spending.

How to decide what’s right for your online store

Find the right order fulfillment solution for your business and your products
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Ultimately, it’s up to you to find the right order fulfillment solution for your business and your products. However, it's a field where it's possible to gain a lot and lose a lot. 

Remember, our friendly e-commerce experts are always happy to help you to figure out which order fulfillment solution would be most efficient for you – simply get in touch.

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