Improve Your E-Commerce Business’ Performance with the Right Order Fulfillment Strategy

In 2020, we saw more brick-and-mortar stores increasingly pivot their businesses online to keep their employees and customers safe. As the pandemic continues to affect most industries, the e-commerce industry is expected to grow even more in the coming years.

Luckily, technological advancements are readily available to cater to these changes. Now, more customers do most of their shopping online. E-commerce retailers can take this opportunity to bring their businesses to the next level. They can offer customers access to products that they need, provide them with exceptional customer service, and deliver their orders on time.

To be able to do that, you need to optimize your order fulfillment strategy. This way you can maximize your profits, minimize your expenses, and exceed the expectations of your customers.

That’s easier said than done, though. E-commerce businesses do face a lot of challenges when it comes to order fulfillment and meeting customer expectations.

What Obstacles Do E-commerce Companies Face?

Back in the first few years of e-commerce, the opportunity to earn a lot was high mainly because there was very little competition. But as the years went by, the technology required to put up an e-commerce platform became cheaper. These days, even social media has become a profitable platform for e-commerce, leading to the marketplace becoming saturated.

You’ll find e-commerce businesses of every size. Of course, there will be the giants like Amazon and eBay that will always take a huge chunk of the market because they have long-established their names and cultivated customers’ trust. But even when you don’t count those big players, the competition is still tough.

As if that wasn’t enough, e-commerce has to face challenges with order fulfillment, too. Some of the most common problems related to order fulfillment include:

  • Incorrectly filled order
  • Delays in international shipping
  • Errors in tracking codes
  • Inventory mismanagement
  • Miscommunication with suppliers

What Is Involved in Order Fulfilment?

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All successful e-commerce businesses offer outstanding fulfillment services. The strategy you apply to ensure that you are able to fulfill customer orders correctly and on time has a huge role in ensuring customer satisfaction and profit margin.

But before learning the different strategies for order fulfillment, take a look at the different stages in the order fulfillment process:

  1. Receiving your inventory or manufacturing the products would be the first stage in the fulfillment process.
  2. Properly storing inventory is next. This has to be done right because later on, when you need to look for your products to ship to customers, you need to do it as efficiently as possible.
  3. Processing starts when you receive an order and you do what’s necessary to fulfill it.
  4. As soon as they are prepared during the processing, the individual items will be picked up from the storage location.
  5. Packing begins as soon as the items are picked and sorted by order.
  6. Once the complete order is packed, it gets shipped to the customer’s location.
  7. Should there be any problems with the order, the customer may return the item by shipping it back to either you or the storage facility.

What Strategies are Popular for E-commerce Order Fulfillment?

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Because every business is different, what works for one may not necessarily give you the same results. That said, these options here are the most popular strategies when it comes to order fulfillment:

Direct Fulfillment

This is also called in-house fulfillment because as the name suggests, this involves filling orders yourself. This is ideal for small startups that may only be operating from their own homes. Ironically, this is also a great option for huge corporations who have enough funding to operate their own warehouse.

So yes, direct fulfillment could be anything from fulfilling orders from your living room to owning a fulfillment center as a part of your business so you can efficiently ship out hundreds to thousands of orders in a day.

Pros

  • You have complete control of inventory as well as the entire shipping process.
  • For small businesses, this is a low-cost option because you’ll only have to pay for the shipping itself.
  • You may negotiate shipping rates when you do shipping in bulk.

Cons

  • It can be time-consuming because you’ll do all the packing yourself.
  • As the business grows, the cost becomes higher as well, especially when you need warehouse space, additional staff, equipment, and order fulfillment software.

Third-Party Fulfillment

Third-party fulfillment is usually required when you, as a merchant, spend too much of your time packing and shipping out orders or when you run out of space for the inventory. Third-party logistics or 3PLs, as they are also called, involves giving a 3PL provider all the order fulfillment details and relying on them to take care of the storage, sorting, packing, and shipping stages of the order fulfillment process.

Pros

  • You get more time to focus on other aspects of your business.
  • You may get shipping discounts and lower costs for packaging.
  • Your customers can enjoy faster order fulfillment.
  • You won’t have to invest in warehouse space, software, and staff for the order fulfillment.

Cons

  • You have less control over the way your products are packed and shipped.
  • You need to maintain close communication with the third-party provider to make sure everything is right on track.
  • You may have to share warehouse space with other businesses that are clients of your third-party provider.
  • There may be additional fees, depending on the service you choose.

Dropshipping

When you dropship, you never get to hold and store the products you offer on your online store because they are made, stored, packed, and shipped directly to the buyer by the manufacturer or in the case of a drop shipper, they pick up, pack, and ship the order on your behalf. This is a great choice for those who want to run an ecommerce business without owning any inventory.

Pros

  • You don’t have to worry about inventory management.
  • You can offer a wide array of products without the cost of space and overhead.
  • You get to enjoy low operational expenses.
  • You only need to pay for orders that have been shipped to your customers.

Cons

  • You have zero control over the packing and shipping of orders.
  • You are responsible for customer service so you need to keep communicating with both your customers and the dropshipper.
  • You’ll have lower profit margins.
  • You won’t be able to establish your brand because you don’t own and make the products yourself.
  • You’ll have a lot of competition as countless stores sell the same products as you do.

Additional Tips for E-Commerce Fulfillment Strategy Implementation

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Assuming that you have already decided on the order fulfillment strategy you want to use; you now need to make sure to implement it properly. The transition may not be easy but you need to do what you can to make it as efficient as possible to prevent some road bumps. Here are some tips you can follow:

  • Make sure everybody on the team knows the new strategy. They have to fully understand what their roles will be in the new system and what their responsibilities are.
  • Depending on the strategy you choose, you need to prepare your inventory for the transition so that the new receiving process will be faster.
  • Ensure early transfer. When your inventory reaches the desired location early, you are more likely to have a smoother transition. It takes careful planning and choosing the best transportation method that best ensures you won’t get delayed.
  • If you are transitioning into third-party logistics, communicate with them as clearly as possible. Go over your process so they understand how it works from your end and together, you can make the order fulfillment process more efficient.
  • Don’t forget to update your customers. The transition may take longer than usual and if your customers don’t understand this, they can easily get frustrated. Make sure that they understand that you are going through the transition and explain the benefits to them, too.

Conclusion

For an e-commerce business to improve conversion rate and maximize profits, they need to have the right shipping and fulfillment strategy. As important as the quality of the products you offer is the efficiency and accuracy of your deliveries. Customer satisfaction also depends on how fast you are able to fulfill their orders.

Hopefully, what you’ve learned here will get you to assess the current strategy you are using and see if there’s anything you can improve or whether or not you need to transition to a different one.

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