If you run an ecommerce store, you know that the order fulfillment process is the heart of your business. Without customer satisfaction, you have no customers. But without an efficient order fulfillment process, your company will have lower profits or perhaps lose money on some orders. Ecommerce fulfillment is an art and a science and there are many ways to refine the process for greater optimization.
Some might think of the ecommerce order fulfillment process as a narrow set of activities, namely picking and packing, and shipping the items to the end customer. But it’s actually much broader, starting with customers placing the ecommerce order, and ending with the carrier invoice reconciliation. So much happens in between those two bookends, and even those actions have microsteps in them where an ecommerce company can gain efficiency. Some of these actions are customer-facing, and some are on the back end, but they all impact the ecommerce business. The fulfillment operation also involves multiple departments, including operations, customer service, finance, IT, and even marketing. When it comes to fulfillment operations for ecommerce businesses, there is lots to learn.
That’s why our logistics consulting experts have put together a complete guide to optimizing your order fulfillment process. Read on to learn more.
Improving the Order Fulfillment Service, Step by Step
The ecommerce fulfillment process can be broken down into three larger categories: order placement/receipt, picking, packing and shipping, and data tracking. Here are the fulfillment steps and ways to optimize each one.
1. Customer order placed
The customer places an online order on the ecommerce platform.
How to optimize
The ecommerce platform can be simple or complex. Increasing the automation, including connections between order management and inventory management systems can determine if the items are in stock, and which warehouse is closest to the customer. Using that information, the systems can determine shipping options and shipping costs before the customer hits “buy.” The customer can determine what shipping cost and delivery timeframe work best for them, or they can choose free shipping if the ecommerce company offers it and the order qualifies. This sounds like a long process, but with automation it should only take a few seconds.
2. Customer order routing
The customer order is routed through company software. The customer is notified that the order was received. The order is sent to the warehouse.
How to optimize
Some companies still deliver orders to the fulfillment center as paper orders. This fulfillment strategy can greatly decrease accuracy and efficiency, and the order should go electronically. If an ecommerce company is using a distributed warehouse strategy, the order would be routed according to the algorithm. The algorithm takes into account available inventory, distance between the warehouse and customer, and shipping methods. Different parts of a customer’s order could be routed to more than one fulfillment warehouse, depending on the order fulfillment strategy.
3. Order fulfillment – Picking
Now that the order is in the fulfillment center, the order is given to a picker. The order could include one or several items and the picker goes through the warehouse space to locate and pick the items.
How to optimize
An order fulfillment company might print out orders for processing, and the picker would walk around the warehouse space grabbing items off the shelf. That manual strategy is the least efficient process an ecommerce fulfillment service could use.
Instead, the fulfillment company, using order fulfillment software, would determine the most efficient order picking route. The picker would be guided by automation, whether reading a tablet or device, or using headphones with order fulfillment locations to move to next. The picker can do this alone, with a cobot (cooperative robot), or it could be completely autonomous. Many robotic systems offer the fulfillment provider options for cooperative picking that can save the pickers’ time, decrease their physical movement, and increase order accuracy. Using automation, algorithms, and robots, it’s possible to fulfill multiple orders at the same time.
4. Order packing
The bin of picked items arrives at the shipping station and the employee determines the right packaging for the order. They might choose a box that is too large, or not add enough bubble wrap or other padding, so the item is damaged during shipping. The associate might use packaging that is not approved by the carrier, or costs extra for delivery. These factors can result in a delay or higher fulfillment costs.
How to optimize
Instead of allowing the associate to choose how to pack the order, the order management system determines the best option for shipping, minimizing packaging and shipping costs, and protecting the item during transit. The software takes DIM weight into account, and uses the carrier’s insurance information to understand what materials might allow the package to qualify for the carrier’s insurance coverage.
5. Shipping orders
The package is ready for shipping and now needs a shipping label. The associate determines the best way to send the package, choosing from FedEx, UPS, DHL, USPS and regional carriers. They weigh the package, print out a label, sorting it to the right location for carrier pick-up. The outsourced fulfillment company contacts the carriers by phone to arrange a pick-up.
How to optimize
Using an automated shipping solution, the software is programmed to balance out delivery time with cost, to choose the right carrier and service level. If the customer selected and paid for a specific shipping service, that would of course be used. The shipping information syncs with the order management system, so the customer receives an alert that the order is on its way. The end customer can track the order status using a tracking number. That is a customer expectation these days, so not offering this information puts the ecommerce store at a disadvantage. The logistics company either has a standing pick-up time based on order volume, or the shipping system triggers a carrier pick-up via API, after printing the label.
6. Account reconciliation
The supply chain for the fulfillment process isn’t complete until the ecommerce company receives the invoice and reconciles the carrier bill for the delivery. If those bills are mailed and a person goes through them individually, that is time-consuming and the company is leaving money on the table.
How to optimize
The ecommerce company can receive billing in an automated fashion, making it easier to reconcile and find errors. Invoice auditing services like Shipware’s can use proprietary software combined with expertise in-house to audit each invoice and find service failures. These failures could range from missed guaranteed delivery time, to applying the wrong accessorial charges, to missing negotiated discounts. The invoice auditing service then requests credit from the carrier, which is automatically applied to the account. Service failures and shipping errors can account for 1% to 9% of invoice costs. Manual auditing is not effective – nor cost-effective. With $2 billion in unclaimed refunds each year, Shipware’s clients are able to claim their share, with no out-of-pocket costs. Shipware only gets paid if the shipper saves money, providing the best shipping optimization.
Supply Chain Factors That Can Improve Ecommerce Order Fulfillment
Evaluating the fulfillment steps in a supply chain is important, but there are other overall considerations affecting a company’s efficiency and ultimately, customer satisfaction.
You might have figured out from the tips that manual processes are slower and less efficient than automated systems. Whether you use outsourced fulfillment or do it yourself, employing multiple automation processes will make a difference in the ultimate fulfillment process. That takes some decisions away from workers, like the item-picking order, what boxes to use for packing, and selecting a shipping service. The software systems should be optimizing decisions for the best results, with ecommerce shipping best practices in mind.
That automation also means you need inventory management, with barcodes or other sensors attached to items when they enter the warehouse, when they’re picked, and again when they’re packed, to ensure quality and tracking. Using an inventory management system allows the supply chain managers to have visibility into stocking levels, giving enough time to reorder so there aren’t stockouts.
Automation software helps with demand planning, to understand what items are selling at which time of the year and in what locations. Management should have formulas in place for when to reorder stock, when to move it between warehouses, and to understand when inventory items are not selling. Demand planning can help decrease the amount of stock sitting on the warehouse shelf, and in anticipating the proper quantities to order for promotions and seasonal sales. That way you will meet consumer expectations.
Partial Order Processing
Sometimes the entire order will not be available at the same time. While it may cost more in shipping, some ecommerce stores will ship items in multiple batches to ensure the end customer receives items more quickly than they would if they waited for a complete order. This is a business decision for the company’s ecommerce order fulfillment strategy, and customers can sometimes make this decision when placing their order. With visibility into the inventory system, the customer can place the order knowing the delivery timing.
One thing not yet discussed is reverse logistics, also known as returns. This returns process can be expensive for the ecommerce business. If the items arrive in good condition and in the promised timeframe, the return rate will decrease. But there will be a return rate even if the right items were ordered. The business should plan for an easy process for the customer. That can include offering preprinted labels and carrier pick-up, and an automated system for tracking the return and receiving credit.
Many ecommerce businesses find it’s more efficient and cost-effective to outsource fulfillment to a third party logistics company. Just like Shipware can help reduce costs with shipping invoices, we can help you optimize your 3PL contracts through our expert negotiating guidance and 3PL consultants. Choosing the right 3PL and negotiating the best contract plays a big role in optimizing order fulfillment. Reach out to us for a free consultation.
For more questions about outsourced fulfillment, check out our blog on what 3PL is. Our resources also breakdown the difference between 3PL vs 4PL, so you can determine the best option for your ecommerce order fulfillment process.