Worldwide e-commerce sales have increased by 10.4% in 2023, accounting for 20.8% of all retail purchases.
This growth is a unique opportunity for online stores to increase profits. Handling e-commerce in a right manner can result in reaching customers all over the world. This market is estimated to reach $6.3 trillion in 2023.
While such demand will be welcomed by online stores, of course, this also creates challenges in terms of order fulfillment and delivering orders in line with your customer's expectations. But what do we mean by order fulfillment and why is it central to your online business model?
Getting Started - What is Order Fullfilment?
In simple terms, ‘order fulfillment’ describes the entire process of shipping goods to individual customers, from handling their original order to distributing products and completing the final delivery.
Typically, the order fulfillment process involves a number of steps. These include order processing, quality control, and ongoing customer support, the latter of which can deal with delivery queries, product faults or requested returns.
Depending on the size of your business or ecommerce store, the fulfillment process may also include several different departments and stakeholders. These may include inventory and supply chain managers, while the initial processing of orders will also involve either sales or customer support staff.
Generally, there are also five individual steps involved with comprehensive order fulfillment processes. These include:
1. Sourcing of Incoming Goods: The goods that you sell may be sourced through various means, from manufacturing and wholesaling to individual farms and providers (in the case of food items). This may also play into your chosen fulfillment model and whether you outsource the delivery of this (we’ll touch more on this later in the piece).
2. The Receipt of Order: When you receive a formal order from a customer, this kick-starts the fulfillment process in earnest. It’s at this point that inventory management is involved in identifying the availability of specific products.
3. Short-term Storage: If goods are identified as being in stock, they may then be set aside for picking. So, such items will require temporary storage, in an accessible place that’s organized and helps warehouse staff to handle orders efficiently.
4. Processing: This involves sold goods and items being picked and packed, before being loaded onto the relevant vehicles and usually as part of much larger orders.
5. Shipping: At this stage, the orders can be shipped and ultimately delivered to the relevant customer’s door. This stage also requires real-time communication with sales and support staff, in order to provide live delivery updates and advise of any delays as quickly as possible.
Understanding the Importance of Order Fulfillment
The key to successful order fulfillment is to deliver products in line with an individual customer’s unique specifications and expectations.
Most crucially, it requires you to focus on delivering goods as quickly as possible or at least ensuring that they arrive at a customer’s front door within the specified timeframe.
This is borne out in evidence too. For example, 38% of online shoppers will abandon their cart if the delivery is expected to take longer than a week, whereas 16% will do if you offer a timeframe of between six and seven days.
A further 8% of customers who have to wait three days or so may also abandon their order, so it’s crucial that you optimize your fulfillment provision and deliver the best possible outcome for customers.
Ultimately, order fulfillment represents the final crucial step in any successful sale, so ensuring that it runs smoothly will have a direct impact on your business’s turnover and bottom-line profitability over time.
The Most Common Order Fulfillment Challenges
Given the potential complexity of order fulfillment and its importance to your online business, it’s important that you recognize and prepare for some of the most common associated challenges. We’ve outlined some of these below.
1. Inventory Management and Demand Planning
Stock and inventory management is key when running an online store, especially as this type of business model is intended to be lean and carry minimal overheads.
This means maintaining an optimal level of stock in real-time, ensuring that you don’t have too little or carry an excess amount that places a strain on your finances.
Certainly, running out of stock may lead to delayed or failed deliveries, upsetting customers and potentially damaging the brand’s long-term reputation. Conversely, maintaining too much stock will create huge challenges in terms of pricing and financial outlay, particularly with regard to increasing storing and carrying costs. This can also increase the risk of loss since the demand for such items may drop before they’re sold.
Because of this, you should take the time to carefully predict and plan for demand levels in real-time, in order to optimize inventory at all times, working closely with key stakeholders to achieve this objective.
2. Logistics Planning
When it comes to logistics, there are myriad issues that can affect your ecommerce store. From slow or missed deliveries to broken items and water-damaged packaging, such instances can undermine your business’s reputation and undermine existing customer relationships.
You can manage this in part through your choice of order fulfillment model, with third-party service providers like Salesupply managing the logistics and delivery of your customers’ orders using their global network of fulfillment centers and logistic partners.
This not only minimizes the risk of items being damaged and potentially negates the issue of delayed or missing parcels, but it also creates accountability within your business and allows you to benefit from genuine industry expertise.
As a result, you can focus on your own core competencies and ensure that your ecommerce store scales strategically over time.
3. Supply Chain Execution
At the heart of every supply chain strategy exists a clear cost vs benefit analysis, as working with delivery providers will incur a cost that must be measured against the advantages of using specific partners.
For example, it’s not unusual for businesses to partner with a sole supplier in order to gain price discounts in exchange for higher purchase volumes. This can reduce costs and optimize performance in the short-term, while potentially affording priority status with your provider.
This may be particularly popular during periods of increased demand (such as Christmas), when delivery windows can be squeezed and non-priority clients may see their own service suffer as a result. However, having a single supplier can also cause issues if anything goes wrong with the vendor, potentially placing your own business at risk.
An alternative to this is known as a multi-carrier strategy, in which you cherry-pick the best offerings on the carriers' menus for your business. Working with several suppliers helps to reduce risks and also might drive prices down, benefiting customers as well.
Logistic service providers and shipping platforms can connect you to numerous carriers, handle the contracts, reduce administration efforts and facilitate quantity discounts because of their bulk purchasing.
Ultimately, striking the right balance and selecting the best order fulfillment model is crucial to effective supply chain execution, which measures the flow of tasks within the wider supply chain.
The Last Word - Choosing the Right Fulfillment Model for You
As we can see, there are different considerations when optimizing your business’s order fulfillment, while this is a challenging and multi-pronged process that requires significant expertise.
So, although you can use in-house order fulfillment as part of your ecommerce business, this may prove to be beyond your existing skill set and force you to compromise on the speed and efficiency of delivery.
Of the two main alternative options available, drop shipping may be viable for those of you who source goods directly from manufacturers in accordance with the demand of your customers. Through this model, you’ll minimize overhead costs by arranging delivery directly from the manufacturer, while realizing the difference between wholesale and retail prices as your profit.
However, this minimizes the control that you have over your deliveries, while it can also lead to unforeseen and extended delays in instances where you liaise with manufacturers that are based overseas.
For most ecommerce stores, a preferable option would be to outsource from an aforementioned fulfillment specialist like Salesupply.
This will ensure that an ecommerce and fulfillment specialist oversees the entire fulfillment process from beginning to end while working closely with you to provide a bespoke service and (in some cases) additional customer support.