Order Fulfillment Meaning, Process and Key Strategies

In today's competitive e-commerce landscape, getting orders to customers quickly and accurately can make or break your business. Order fulfillment—the process of receiving goods from the seller, processing them, and shipping items to the customer—is at the heart of this challenge. It is an integral step in your sales process, and it depends on effective transportation management. In fact, without efficient order fulfillment, you couldn't complete sales at all.

To keep up with customer demands in today's world of extremely high consumer expectations, heavy competition, and next-day delivery standards, your order fulfillment process needs to be efficient and streamlined.

In this blog post, we'll walk you through the order fulfillment process, common challenges you may face, and strategies you can implement to effectively fill customer orders and keep everyone involved happy.

What is Involved in the Order Fulfillment Process?

The order fulfillment process occurs in a distribution center (or across multiple distribution centers, depending on your operation) and generally consists of three steps:

Receiving the goods from the seller

Goods may make it to the distribution center in a variety of forms, depending on the product in question. Regardless of how the product arrives (whether it be a physical or digital product), once it does so, it must be counted and closely inspected to ensure that it was received in good quality and in the proper amount. At this point, there may be a brief “in-between” period where the product must be stored. In an ideal situation, the products are stored for a very short time: just long enough for them to be processed and sent out to the customer. However, in some situations, goods will need to be stored for longer periods and distribution centers should have a process for these situations.

Processing the shipment

Once the shipment has been received and appropriately stored, the next important steps are the “picking” and “packing” of the goods, which make up the processing portion of order fulfillment. Picking consists of the utilization of a warehouse team (or an automated process) who identify appropriate items according to various characteristics such as size, color, quantity or other factors. Then these items are packed in a very specific way to achieve an ideal dimensional weight (DIM). Dimensional weight is vitally important for shipping, as optimizing this value can help expedite transportation and keep costs low.

Shipping the order to the customer

Now that the order has been received and processed, it’s time to get it out to the customer. Carriers are the next piece of the puzzle to navigate, as they will charge fees based on the greater package weight or DIM. There are also specific rules and regulations unique to each carrier that must be considered when the time comes to select one for your shipment. While these extra costs may seem minimal, they can add up significantly in the long run.

What are Some Challenges to Successful Order Fulfillment?

With so many moving pieces and entities involved, the order fulfillment process can run into numerous snags along the way. Three of the common challenges to order fulfillment are:

Supply Issues

As mentioned earlier, consumer demand is higher than ever. When your inventory is low, customers may quickly get frustrated and lose faith in your company. This can be a deadly blow to your brand if you begin to lose your customer base.

Demand Issues

Making accurate demand predictions becomes vitally important when considering warehouse space. If you have far too much of a certain item when customer demand is low, you'll face challenges storing it, leading to increased costs and less space for other goods.

Planning and Logistics Issues

Customer satisfaction hinges on effective logistics planning. What happens when a customer’s package arrives in disrepair? They won't be pleased with you. It’s important to ensure that all factors which can affect the product are accounted for so that the customer experience is the best it can possibly be.

What are the Strategies a Company can Implement to Handle the Order Fulfillment Process?

There are four main order fulfillment strategies you can utilize, based on your needs:

• In-house order fulfillment - Perhaps the simplest of the available options: in-house order fulfillment means that all or most of the fulfillment process is performed by the company itself versus outsourcing the tasks to a third party.
• Order fulfillment via a third-party provider - In contrast to the “in-house” model, third-party order fulfillment consists of outsourcing all or most of the fulfillment process to another provider outside of the company.
• Dropshipping: Your supplier ships products directly to your customers. You don’t need to store or handle those products yourself, though you’ll depend on the supplier for inventory availability and timely shipping.
• Hybrid fulfillment: You combine two or more models to meet your needs. For example, you might manage most orders in-house throughout the year and outsource some fulfillment during the holiday season when order volumes increase.

Final Thoughts

Which fulfillment model is right for your business? Start by looking at your order volumes, inventory needs, available resources, and customer expectations. The best approach may change as your business grows or demand shifts.

Whether you’re building a fulfillment strategy or looking to improve your existing process, Redwood can help you connect the transportation and logistics pieces. Contact Redwood to get the conversation started.