For any eCommerce business, success hinges on more than just having a great product and a visually appealing website. One needs to deliver on the promise of a smooth order process and a reliable, efficient system that ensures timely and accurate delivery to customers.
According to McKinsey, there is an increasing number of online shoppers and an equally increasing demand for faster delivery rates. These are only two trends in the evolving eCommerce landscape, but for many merchants, these add to the complexity of providing a positive customer experience as they try to scale their operations.
In this blog post, we’ll go over everything you need to know about eCommerce fulfilment, why it’s critical in helping you scale your brand, and where you can start improving your own order fulfillment processes. Ready to dive in?
What is eCommerce fulfillment?
eCommerce order fulfillment – the process that starts from the moment a customer clicks "buy" to the point where they receive their product – creates a huge difference in making or breaking an eCommerce business. Some even say it’s the backbone of every successful eCommerce operation.
The order fulfillment journey is often multi-tiered, involving several key processes, such as:
- Receiving Inventory: receiving and controlling stock.
- Storage and Warehousing: storing items methodically, ensuring they are easy to find when orders come in.
- Order Processing: picking, packing, and preparing orders for shipping.
- Shipping: sending your products to the customer, often involving various delivery options.
- Returns Processing: handling return of products from customers.
Depending on the size of your business, the complexity of your order fulfillment processes can vary. However, keeping a clear and solid structure for how you manage each process will be critical to helping you scale.
Why is eCommerce Fulfilment Important?
With around 43% of Australian online shoppers willing to switch retailers with a faster delivery time and 76% seriously considering a business’ return policy, streamlining your order fulfillment process is more than keeping your business afloat. It ensures that you can meet the demands of the industry while maintaining – and even exceeding – your customers’ expectations.
If you’re an eCommerce business looking to grow your brand and scale your operations, building a well-structured eCommerce order fulfillment process can further help you avoid operational pitfalls, including:
- Inaccurate inventory management: Without proper fulfillment processes, managing inventory can be chaotic. Fulfillment systems ensure that stock levels are accurate and up-to-date.
- Shipping delays: Customers expect swift delivery. A streamlined order fulfillment process minimises the time between order placement and dispatch.
- Order mistakes: Mistakes in fulfilling orders can lead to returns and dissatisfied customers. The right processes and technologies can substantially reduce these errors.
- Burgeoning operational costs: Optimised order fulfillment can reduce shipping and warehousing costs, which can help you increase your bottom line.
In simpler terms, effective order fulfillment ensures customer satisfaction, leading to repeat purchases and increased sales. Conversely, poor order fulfillment can damage your reputation and raise operational costs due to order errors.
eCommerce Order Fulfillment Models
Finding the right eCommerce fulfillment model for your business will depend on where you are in your eCommerce journey. But keep in mind that you also need to factor in your vision – where exactly do you want to see your business and what type of model would help you get there?
Below, we’ll outline some of the most popular models used by eCommerce companies, along with their pros and cons, so you can weigh which would work best for your business operations.
Self-Fulfillment
As the name implies, this DIY approach involves handling all aspects of fulfillment in-house – from receiving orders, picking and packing items, and shipping them to customers. While it provides greater control over the fulfillment process and allows for customization, it can also be labour-intensive, especially for high order volumes.
This is why this model is suited for businesses with a manageable order volume and a desire for full control over the fulfillment process, such as those who prioritise customisation and personalisation of packaging.
Pros:
- Control over process: Provides full control over the fulfillment process, allowing for quality control and customisation.
- Potential for higher margins: With no third-party involvement, the potential for higher profit margins exists. Even when you're utilising an order fulfillment software, there still may be chances of improving your profit margins with a software while having the control from self-fulfillment.
- Direct customer interaction: Opportunity for direct customer engagement through personalised packaging and service.
Cons
- Time-consuming: This can be labour and time-intensive, especially for businesses with high order volumes.
- Infrastructure costs: Requires investment in warehousing, staff, and packaging materials. Not to mention, some order fulfillment software can come with hidden costs.
- Limited scalability: May struggle to efficiently handle sudden spikes in demand.
Third-Party Fulfillment (3PL)
This model allows businesses to outsource to a 3PL provider to handle the entire logistics and warehouse operations. Primarily, eCommerce businesses who prefer to concentrate on their core business operations, such as product development, marketing, and customer service, can benefit from outsourcing fulfillment to a 3PL.
By delegating the logistics aspect to experts, these businesses can allocate more resources to strategic areas of their operations. Likewise, eCommerce businesses experiencing fluctuating order volumes can benefit from 3PL services as they provide the flexibility to scale warehouse space and labour resources based on demand fluctuations.
Pros
- Scalability: Businesses can easily scale their logistics operations based on demand fluctuations without having to invest in additional infrastructure.
- Expertise: 3PL providers are experts in logistics and can offer specialised knowledge and technology to optimise supply chain operations.
- Focus on core competencies: It allows businesses to focus on their core operations while leaving logistics to the experts.
- Diverse shipping options: 3PLs have a variety of shipping options at their disposal, so eCommerce businesses who need to offer diverse shipping options to their customers, such as expedited shipping, same day or next day delivery, international delivery, or specialised packaging, can benefit from their 3PL partners to provide these services.
Cons
- Cost: Outsourcing logistics to a 3PL provider can be more expensive than managing logistics in-house, especially for small businesses.
- Less control: Businesses may have less control over the logistics process, which can lead to concerns about quality and customer service.
- Dependency: Relying on a 3PL provider means the business is dependent on an external entity for critical operations, which can pose risks in case of disruptions.
Dropshipping
Dropshipping is an eCommerce fulfillment model where the retailer doesn't keep products in stock. Instead, they fulfill orders by purchasing products from a third-party supplier who then directly ships the products to the customer.
This model minimises upfront investment and eliminates the need for inventory management, but can present challenges in quality control and timely delivery.
Pros
- Low upfront investment: Retailers do not need to invest in inventory, reducing initial costs.
- No warehousing needs: Eliminates the need for storage space and inventory management.
- Wider product range: Able to offer a wider range of products without managing inventory.
Cons
- Quality control: Limited control over product quality and shipping times.
- Lower margins: Profit margins can be lower due to the need to pay the third-party supplier.
- Supplier issues: Dependence on third-party suppliers can lead to issues with stock availability and product quality.
Robotic Fulfillment
Lastly, a robotic order fulfillment method features cutting-edge technology – robots working in fulfillment centres and enhancing efficiency through automation. 3PL providers who utilise robotic order fulfillment leverage the power of robotics and automation technology to streamline the process of picking, packing, and shipping orders in an eCommerce fulfillment centre.
This model is well-suited for eCommerce businesses with high order volumes, a diverse inventory, a need for precision, and a focus on long-term scalability and cost efficiency.
Pros
- Efficiency: Robots can work continuously without breaks, leading to faster order processing and reduced fulfillment times.
- Accuracy: Robots are programmed to pick and pack items with precision, minimising errors in order fulfillment.
- Scalability: Robotic systems can often be easily scaled to handle fluctuating order volumes, allowing businesses to adapt to demand changes more effectively.
- Cost Savings: Over time, robotic fulfillment can lead to cost savings through reduced labour expenses and increased operational efficiency.
Cons
- Initial Investment: This model may involve initial setup costs, however, that varies from company to company.
How to Choose the Right Order Fulfillment Model for your eCommerce Business
As your business grows, your eCommerce fulfillment model will be a key element to your success. While other models have more benefits upfront, some may prove to be better for your operations in the long run.
For small eCommerce businesses, a self-fulfillment model may be the more sensible approach as you try to balance your operational costs with your profit. Eventually, as your brand grows and your orders pile up higher, investing in the expertise of third-party fulfillment partners will outweigh the benefits of doing your fulfillment in-house.
When choosing your partner, consider these factors:
- Expertise & Technology: How knowledgeable are they about the industry and what technology do they offer to help you solve your order fulfillment challenges?
- Scalability: Can they easily handle your growing order volumes without sacrificing quality?
- Shipping Options: Do they offer diverse shipping options that cater to multiple customer preferences?
- Costs: Are they transparent with the overall costs included in the services they’re offering?
Remember: your 3PL partner should serve as the silent engines driving your business toward excellence. Choosing the right partner that can grow with you will be critical as you handle your increasing order volumes without sacrificing the quality your brand deserves.
By investing in a reliable fulfillment partner, you can transform your eCommerce journey into an experience where everything clicks into place – effortlessly, efficiently, and cost-effectively.
