Everything an Entrepreneur Needs to Know About Order Fulfillment
Customer satisfaction can make or break a startup, and in the eCommerce space, a happy customer usually demands they get quality products on-time, with no damage or hiccups in shipping. That’s a lot to have on your plate, especially as you do the marketing, sales, HR, and thousand other things with your thousand different hats.
Order fulfillment is a complicated matter that can quickly go from tricky to horrendous when things go wrong. It’s a huge opportunity, either to delight customers or to lose them.
The best way for entrepreneurs to plan their warehousing space, stock, inventory, and delivery options is to learn a little more about the trade, including when to keep order fulfillment and when to outsource it.
So, here is your guide to order fulfillment in the modern eCommerce era, with what you need to know to make the right decision.
What Does Order Fulfillment Include?
Order fulfillment is everything it takes from someone hitting a “buy” button on your website or another channel to getting that order to their home or place of business. The modern world has expanded fulfillment to include everything from confirming an order and delivering it to ensuring the customer is happy at the other end or takes it back if they return the item.
While this isn’t the traditional definition, it makes the most sense for entrepreneurs because you’re handling all of that work with the same department and team. The growth of eCommerce for every type of business, even B2B, makes this an even more significant reality.
The way we shop has changed, so the way we get our orders has responded. Your customers are going to judge you on how products arrive at their door and how painless the returns process is, so you’ve got to prepare.
To give you a little more understanding, we’re going to look at the two main models of order fulfillment for entrepreneurs, as well as the specific steps involved in the process.
When explicitly considering outsourcing, you’ll find that it too has grown in recent years to move well beyond the packing and shipping functions of older third-party logistics providers (3PLs).
In-House Order Fulfillment
The primary method for most small businesses is to do all fulfillment themselves. The company will run a location, ranging from a small garage to a set of small warehouses where every step above is performed.
Owning the entire process and performing it in-house allows your company significant control. It’s especially useful for small companies that can’t afford to outsource or don’t need a lot of additional staff and space to keep up with orders. As companies grow, they tend to consider outsourcing only when fulfillment becomes a burden to running their business.
The primary consideration for your fulfillment is going to be if you have the space and team to do it. Managing it yourself allows you to ensure all boxes look great and meet standards that can change at any moment, plus you can delay shipments or move things around as needed.
If you do not promise orders with immediate delivery dates, then this model also lets you control labor costs a bit better. You can run shifts or perform tasks as needed and move teams around to complete other jobs. Doing it right can mean a significant boost in flexibility but getting it wrong can harm your customer service and credibility.
Most ecommerce platforms now come with some basic warehouse management tools. These might include picking orders and packaging slips with automated inventory counts or could be limited to order lists and just options to print labels after you manually make all the choices needed. Warehouse management systems (WMS) are becoming more popular for small businesses, so you should shop around to see what features you need the most.
The one big downside to running your own warehouse is cost. You’re going to pay for the full team and labor (plus benefits, sick days, breakroom snacks, etc.) as well as land costs associated with storage, taxes, maintenance, and utilities.
Another substantial cost can be the shipping itself. Carriers give standard rates for everyone, but you can get a better deal if you have a high shipment volume. Few early entrepreneurs will qualify. At the same time, shipping can be complicated due to locations and the dimensional weight calculations that carriers use. It’s best to get some software to help you make the most affordable decision for picking carriers on each package.
Outsourced Fulfillment and Providers
Companies need more warehouse space as they grow. There’s often a point they reach where the cost of buying a new warehouse location or expanding physical infrastructure is a burden.
Or maybe you don’t have the time and money to hunt for and hire new talent. That means you’re doing the order fulfillment, and it gets in the way of generating sales.
Whenever you feel like your warehouse or packages are keeping you from running your business, it’s time to ask for help. Typically, this means looking at third-party fulfillment from a 3PL. 3PLs specialize in warehouse and shipping activities, plus they can make it easy for you to keep an eye on inventory levels. They also analyze sales and other data to organize their warehouses more efficiently — this can yield insight for you with recommendations on things like what products to sell together in a kit because they’re usually purchased together.
Software is your big tool linking your business to a 3PL. They’ve got systems that can integrate with your social and eCommerce channels as well as point-of-sale tech. When an order is made and paid for, the 3PL receives all the customer shipping details and immediately goes to work filling it and getting the order out on time.
Generally, they’re faster and more accurate than doing it yourself. Always get a promise for this, however. An order fulfillment service company like Red Stag Fulfillment, for example, guarantee accuracy, speed, and reliability and pay customers when they get something wrong.
One core benefit here is that most 3PLs operate large warehouses and receive discounts from carriers because of their large volume. You’re paying minimal fees associated with storage and shipment, allowing you generally to save money on the cost to store and ship goods while also reducing labor costs.
The risk is that you’re not in control here.
So, it’s always a smart idea to find a partner with a good reputation who specializes in your product type or market. They must understand your business.
Look for honesty before the deal so you can ensure you get it after an agreement is in place.
Image | Pixabay
7 Steps in Order Fulfillment
If you’ve ever seen or smelled a warehouse, you know it’s a living organism. There’s an ebb and flow to the work that comes with anxiety and sweet victory when you get the steps right. To help you understand how to feel the thrill of success, let’s look at the seven most common order fulfillment and warehouse steps.
1. Receiving Goods
The first step in fulfilling an order is having inventory in stock. Track it with your eyes and software to keep counts accurate and use this information to populate what’s “available” on your sales channels. Getting your team to put things on shelves and count accurately makes every other step go smoothly.
2. Receiving Orders
The action starts when you get an order. Your warehouse software will, after the purchase is confirmed, provide an order slip telling you what to put in the order. This is all sent to a designated team member for them to use. At the same time, the system should be deciding on how to ship these products and queue up shipping labels and options at your packing station.
3. Picking an Order
A team member gets the order list and walks around your warehouse picking each product. They should use a list and technology to help them keep things accurate. This is why most warehouses and their software support mobile barcode scanners. It’ll keep you accurate and control inventory losses. This is also when most use equipment like carts, trucks, and forklifts.
Picking techniques can become very complicated based on your products and warehouse, so be sure to read up or ask experts for help with choosing the right pick and pack methods.
4. Packing the Box
Your employee working at a packing station will then verify that they have every item on the packing slip. Once confirmed, they will put all of these products in boxes for shipping. Each piece needs to be carefully wrapped and placed in a box with filler material added around to protect them. Filler material can vary significantly, so look for a combination of what you need to protect products and what’s most affordable.
When starting, many entrepreneurs use a single carrier partner for all packages, so you pay for postage on each box and either schedule a pickup or drive to the nearest drop-off location.
This can be good at the beginning, but you’ll eventually want to branch out to comparison shop based on package weight and size as well as how far it is being shipped. Warehouse systems can do much of this automatically, or you should use a dimensional weight calculator like the one provided earlier.
6. Notifying the Customer and Partners
When a product is picked up or shipped from a carrier store location, the carrier generally gives you a list of tracking information. If you’re paying postage online, these are also automatically generated. Give these to customers as soon as you get them to keep people happy.
If you’re using eCommerce software, look for plugins and features that can automate some of this. There’s a lot of great email integrations where it’ll automatically pull the tracking number for every order and shoot out an email, so you don’t have to waste time trying to remember and typing it all by hand.
Tracking is vital because it allows you to look for slowdowns or delivery problems that impact customer service. Your customers will appreciate you letting them know that the carrier has a delay when that occurs, instead of waiting around for an extra day wondering where their package is.
7. Resupplies and Returns Handling
Step 7 runs you right back into Step 1 because the warehouse is always cyclical and moving.
Sometimes, you’re going to need to handle returns. Your team must have a process that is approved for checking returned items and getting them back on your shelves if the inventory is still good. Your software needs to be updated so that inventory counts are accurate, or you could pay too much in stock or run out unexpectedly.
In the same light, you’ll need to resupply regularly. Moving products into your warehouse and onto shelves while others are picking orders can be challenging. Make sure to set staging areas for restocking or consider doing these at contrasting times during the day. Track and doublecheck inventory levels to stay accurate and be prepared for the next order.
Should You Keep It or Outsource It?
The most prominent question entrepreneurs ask about fulfillment is: when should I stop doing this myself?
Generally speaking, you should look at outsourcing when you feel (or your analytics show) that warehouse activities are getting in the way of making sales. No matter if it’s filling orders, counting inventory, or just spending hours to check your numbers and financials on boxes, filler, and labor, warehouses should help and not hinder an operation.
When things look bleak, or you start losing sleep at that mere mention of expanding next year, it’s time to start talking with 3PLs.
Companies like Red Stag Fulfillment was explicitly created to help growing eCommerce companies handle their warehouse. With a lot of help and industry experts to help entrepreneurs alleviate these pains.
Our big piece of advice for you here is to talk with as many companies as you can. Don’t read just one blog or whitepaper, or have a single call and then jump right into it. Outsourcing is a critical decision, and the impact on your bottom line can vary significantly.
Find someone that knows your business and is willing to get to know you. Warehousing is much more of a partnership than any other kind of outsourcing an entrepreneur can do because the 3PL’s success is entirely dependent on your progress. When the end-customer is happy, both win, but if they’re unhappy, both lose.