From receiving inventory to packing and shipping orders, mastering eCommerce fulfillment is the key to any successful online business
Ecommerce fulfillment refers to everything that happens between the moment a customer purchases something online and the time the order arrives at their doorstep. For online retailers and those planning to set up a new business, understanding how order fulfillment works is essential to your success.
If you’re wondering where to get started or looking to dive deeper into the world of eCommerce fulfillment, here’s a guide that covers everything you need to know!
What is eCommerce fulfillment?
Ecommerce order fulfillment is the backbone of all online retail operations. Between placing an online order and receiving it, eCommerce fulfillment comprises multiple steps. This includes inventory management, picking & packing, and shipping the order to its destination.
Order fulfillment can be done in-house on a smaller scale or with third-party logistics providers (3PL) that allow an online store to grow its operations locally and globally. This process involves a wide network of fulfillment centers/warehouses that store and process orders in addition to local logistics companies that move the product from point A to B.
Understanding the process of eCommerce fulfillment
To better explain how eCommerce fulfillment works, let’s have a look at the key stages most online orders pass through:
- Receiving and warehousing
This step involves receiving the shipment at a storage facility, usually a fulfillment center. The stock is then placed into the inventory software before an order can be fulfilled. At the fulfillment center, the products can be organized in several different ways to ensure utmost efficiency. For example, items with the highest sales volume are often stored near the packing station.
There are additional steps and services a fulfillment center can offer. For instance, Lansil Global’s fulfillment center in Shenzhen, China, has a dedicated quality control team that tests the products and ensures everything is working properly after receiving the shipment from suppliers. In addition, when managing stock across multiple warehouses, a fulfillment company can advise you on the best strategy for distributing inventory.
- Picking
Now that your inventory is stored and ready, the next step is picking. When an order is placed by a customer, your eCommerce platform (such as Shopify) sends it to the fulfillment center. Based on the customer’s order, a picking list is generated, which contains information about that order.
The fulfillment team then uses the picking list to locate the items in the warehouse, identify the correct quantities, and collect them for the next step.
- Packing
Once all the items in the customer’s order are picked, it’s time to pack them. This process is where the items are grouped in a box or envelope. The team ensures that the items are stored carefully so they don’t get jostled or damaged during shipping. If you prefer to have your branding on the package, some fulfillment companies offer custom packaging services as well.
- Shipping
After picking and packing the order, the next step is to ship it to the customer. If you’re planning to ship on your own, you need to purchase shipping labels, attach them to each package, and send them to the customer using one of the carriers available in your country, such as DHL and FedEx.
Working with a 3PL company to handle your shipping needs can help save more on shipping. Unlike individual merchants trying to ship by themselves, a 3PL has a larger scale that helps it ship at lower rates. Another benefit is that most major carriers come and pick up the orders from the 3PL’s fulfillment center, which saves you time and hassle going to a carrier’s office to send the order.
Once the order is shipped, you will receive the tracking number that can be shared with customers automatically or manually.
- Returns handling
Order return processing is an integral part of your fulfillment strategy. When a customer wants to return an item, the process should be as seamless as possible.
Returns handling can be managed in different ways, including:
- Ask the customer to ship the product to your headquarters or your 3PL’s fulfillment center.
- Refund the customer directly without asking them to return the product (in case the return would be too costly).
- The carrier sends a delivery agent to the customer’s doorstep to pick up the item and ship it back to the warehouse or fulfillment center.
Types of eCommerce fulfillment
There are a variety of ways to manage your eCommerce fulfillment operations. Choosing the best fulfillment option depends on your industry, target market, and growth trajectories.
In-house fulfillment
Also called merchant fulfillment or self-fulfillment, this process involves the retailer managing all aspects of order fulfillment internally without the help of a third party. New online stores often choose to start with in-house fulfillment, picking and packing orders from their office or home.
While this process gives you control over your supply chain, it often results in more errors and higher costs.
Third-party fulfillment (outsourced order fulfillment)
Third-party fulfillment is where an expert 3PL company comes in. Outsourcing order fulfillment can include inventory management, picking, packing, and shipping. Most small- and medium-sized brands use third-party fulfillment companies to manage their operations.
Outsourcing fulfillment is an optimal way to grow a business without the need for a significant investment. For example, a 3PL company can help you utilize direct China fulfillment, which comprises storing your inventory in China and fulfilling orders to global customers at minimal costs. Even if you’re expanding locally with your USA fulfillment strategy, a third-party logistics provider like Lansil Global, can help you reach customers across all states with their warehouses covering East and West costs.
Fulfillment by Amazon (FBA)
As the world’s largest eCommerce retailer, Amazon has its own standards when it comes to order fulfillment. Fulfillment by Amazon (FBA) is the process that allows you to store inventory in Amazon fulfillment centers and sell on its online store.
The company has strict standards for picking and packing their packages. That’s why it’s best to work with a 3PL company that offers Amazon FBA prep services to ensure products meet these requirements and are processed efficiently.
Dropshipping
Dropshipping is a new fulfillment model where inventory is produced, stored, and shipped by suppliers or manufacturers directly to the customer. While this approach may seem attractive for brands looking to start their business fast, it often comes with a host of challenges:
- Zero control over your supply chain.
- Longer delivery times as the manufacturers are often located in China.
- The merchandise is owned by the factory, so you cannot easily stand out from the competition.
- Quality issues may arise due to a lack of oversight, potentially leading to inconsistent product standards.
Benefits of outsourcing eCommerce fulfillment
Outsourcing order fulfillment to a 3PL can be a game-changer for your business. Here are some of the benefits:
- Expert team
Ecommerce fulfillment companies have a team of logistics professionals who can advise you on the best fulfillment approach. And it’s not just about advising – 3PL staff has more experience in picking and packing orders efficiently and quickly, which minimizes errors and ensures accuracy.
- A wide network of warehouses
Unless you’re an eCommerce conglomerate, building your own warehouse can break your finances. Order fulfillment companies, on the other hand, have the scale required to set up more warehouses across many areas. When outsourcing your fulfillment, you can benefit from splitting your inventory across multiple warehouses to reach more customers in your target markets.
- Reduced shipping costs
Higher order volume means lower shipping rates. Ecommerce fulfillment providers benefit from their scale serving various businesses to secure lower shipping rates from carriers.
- Faster growth
Looking to expand your business? Doing that on your own can take a long time and drain your resources. With an experienced fulfillment provider, you can unlock faster growth and enter new markets, leveraging the 3PL’s vast network of warehouses and global coverage.
When is the right time to switch to outsourced fulfillment?
As your business keeps growing, you might start wondering if it’s time to make someone else do the heavy lifting (literally). However, your business doesn’t need to reach a certain size before needing to outsource eCommerce fulfillment. If you’re unsure when is the best time to switch, look out for these signs:
- You’re experiencing uneven sales cycles
If the number of orders keeps changing every month, it can mess up your operations and staffing, making it harder to maintain fulfillment in-house. Lower volumes can lead to inefficient resource allocation and higher shipping costs, while sudden spikes in orders may overwhelm your team, resulting in delayed shipments and dissatisfied customers. A fulfillment company is well-equipped to handle cyclical sales patterns without disruptions.
- You don’t have enough time
If you’re too occupied handling your in-house fulfillment operations, you won’t have time to improve your product offering and focus on growth. At that time, you’d be reaching a scale large enough to allow you to work with a 3PL company.
- You want to expand globally
While it’s possible to sell to global customers while fulfilling orders in-house, it’s recommended that you collaborate with a fulfillment company that can help you expand and ensure flawless logistics.
Local fulfillment vs direct China fulfillment: What’s the difference?
Understanding the differences between local fulfillment and China order fulfillment is integral to shaping your fulfillment strategy. Local fulfillment is when your inventory is stored in the same country or region where your customers reside. USA order fulfillment, for instance, involves storing your products in various USA-based warehouses to ship to customers within 2-4 days.
In contrast, China fulfillment involves holding stock in a Chinese warehouse, ideally located near factories and airports. With this model, your orders are picked and packed in China and shipped by plane to Europe, the US, and other regions around the globe. While this option takes 1 – 2 weeks for the product to arrive, it enables global expansion to new markets without the need to hold inventory in warehouses in every country.
How to choose an eCommerce fulfillment provider?
Planning to outsource fulfillment? Here’s what you need to look for when choosing an order fulfillment company:
Industry experience
Search for a fulfillment provider with experience serving clients in similar industries to yours. If you’re selling apparel, electronics, or toys, a 3PL that knows how to handle these products is your best bet.
Local presence
Focus on finding a company that is located in your area and has warehouses close to where your customers live. For example, a US fulfillment company should have at least two warehouses in order to offer coast-to-coast coverage.
Don’t focus only on price
While it’s essential to consider price when choosing an eCommerce fulfillment solution, going for the cheapest option often comes with compromises. Finding a company that is a good fit for your needs can create better value for your business in the long term.
Customer service
Some of the large 3PLs in the market are notorious for their bad customer service. This is just one indication that not every fulfillment provider gets customer service right. Look for reviews on Trustpilot and other platforms to see what other clients have to say about that provider.
Tips to improve your eCommerce fulfillment strategy during Peak Season 2024
The fourth quarter is a time of increased sales and crazy promotions. It’s where online retailers test their eCommerce fulfillment strategy amid high demand, especially between November and December.
Here’s a Peak Season checklist to help you prep for the most important time of year:
- Mark your calendar: keep a note of the most important sales dates, such as Black Friday & Cyber Monday, Free Shipping Day, and Boxing Day.
- Utilize data to predict demand accurately.
- Secure inventory ahead of time.
- Use your dead stock to run heavy promotions.
- Prepare your website for a surge in traffic.
- Choose a reliable eCommerce fulfillment partner.
Fuel your brand’s success with the right eCommerce fulfillment partner
When done right, eCommerce fulfillment can be a powerful growth driver for your business. Customers who receive their orders on time will come back for more and more.
If you’re looking to unlock your next growth chapter without breaking the bank, Lansil Global offers industry-leading eCommerce fulfillment solutions designed to keep your customers happy.
Let’s discuss how we can support your brand by scheduling a free consultancy call.
