How to Set Up an Order Fulfillment Process

What is an order fulfillment process?

The order fulfillment process is triggered after a customer makes a purchase. Once they've gone through an online checkout and had their order confirmed, the steps to get the order to their door involve:

• Checking inventory

• Picking up and packing the items

• Labeling for shipping or organizing local pickup/delivery

• Shipment dropoff or pickup

• Delivery management, including tracking and any returns

To hit all of the steps of the order fulfillment process smoothly, inventory must be in stock, someone (or something) needs to be there to pick and pack the contents, and you and an effective logistics partner need to get the order out. You'll also need to coordinate with a delivery partner to some degree, whether for local delivery or pick-up or a shipping carrier.

And remember, order fulfillment doesn't always end with a package at the door. Ecommerce sales in the U.S. were over $1 trillion dollars in 2022, and 16.5% of those sales ended in returns. Fulfillment also includes processing and tracking any returns smoothly.

Why does an order fulfillment process matter?

The order fulfillment process matters for a few reasons, with the primary centered on customer service. Placing an online order means your customer is content to wait to get their purchase instead of walking into a store to get it immediately. In many cases, the sort of product they're ordering isn't available in a traditional brick-and-mortar spot, but that doesn't mean their expectations of good, fast service go away.

Nearly two-thirds of customers around the world and across a variety of categories expect their order to arrive within one day.

The bottom line is that a solid order fulfillment process means your customers are getting exactly what they want in the time they expect. Ensuring delivery times are clear and as up-to-date as possible will help keep customers satisfied.

An effective and well-oiled fulfillment process also saves you time. That means you have more time to focus on other business tasks, and as the business grows, the fulfillment process doesn't slow you down.

3 order fulfillment options

Businesses and entrepreneurs looking to build out their online business and order fulfillment process have a few options available to them. Each has their own benefits and challenges. It all comes down to your needs, like the size of your customer base and location or inventory.

1. Self-fulfillment (or in-house fulfillment)

The first fulfillment option is done by the business or entrepreneur. Pretty much everything involved in the order fulfillment process is included here-besides the actual delivery, which is usually handled by a carrier of your choice. Depending on your business, you might also offer in-store pickup or local delivery, especially for fragile items like floral arrangements or food.

Self-fulfillment is great for small teams that can handle the volume of orders themselves. Many direct-to-consumer brands start with this type of fulfillment, boxing up orders late into the night.

The plus side of this option is low fees (not paying a warehouse operator to hold inventory or pack items). This is a very hands-on approach to the order fulfillment process, meaning you can know exactly where and what the inventory is and get it packed up in a timely manner. It's also personal-you can customize boxes and add surprises to orders that customers truly love.

However, self-fulfillment can be time-consuming. If your business is growing beyond this stage, it might be worth looking at other options.

2. Third-party fulfillment

Many ecommerce businesses opt for third-party fulfillment, sometimes called third-party logistics (3PL). A 3PL takes the entire order fulfillment process off the hands of a business, storing, tracking, and packing your inventory and shipping out any orders.

This is the best option for businesses that do a consistent number of online sales and don't have the time to dedicate to self-fulfillment anymore. There are a number of different fulfillment services to choose from, based on pricing and warehouse locations.

The benefits of using a 3PL are that you don't need to consider things like seasonal staffing, like you might if you're doing self-fulfillment. And you get more time and space back by outsourcing packing, shipping, and inventory storage.

The downside of this option is that there is little physical control over what goes on with processing, packing, and shipping the order. 3PLs have their own order fulfillment infrastructure that make it easy for businesses to set and forget, but it's important to do due diligence on any potential logistics partner to ensure your orders make it to your customers quickly and in good condition.

3. Dropshipping

For entrepreneurs new to the ecommerce world, and especially those with limited room for stock or starting funds, dropshipping is another choice.

Dropshipping essentially takes nearly all of the physical part of ecommerce off a business owner's plate. With 3PL, your inventory or products are sent to a warehouse for a company to ship. With dropshipping, inventory is sourced and held by a third-party manufacturer or wholesaler and they handle the order fulfillment.

Dropshipping is a low-budget, low-effort way for anyone interested in ecommerce to get started. The downside of this, however, is you're reliant on the third-party's time, schedule, and availability. If something happens to cause a delay in shipping, it's difficult for you to control it if you're dropshipping. Plus, unless you're ordering custom products, like print on demand merch, you'll be choosing from a catalog and will need to differentiate yourself and your products from similar sellers.

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