What is Order Fulfillment? Process and Strategy
Order fulfillment is an integral step in the sales process which consists of receiving goods from the seller, processing said goods and shipping these items to the customer. In fact, without efficient order fulfillment, sales could not be completed at all.
In order to keep up with customer demands in the current world of extremely high consumer expectations, heavy competition, and the standard of next-day delivery; the order fulfillment process needs to be efficient and streamlined.
In this article, we will discuss the process of order fulfillment, some common challenges to order fulfillment, and strategies that companies may choose to implement in order to effectively fill customer orders and keep everyone involved in the order fulfillment process happy.
What is Involved in the Order Fulfillment Process?
The process of order fulfillment occurs in a distribution center (or across multiple distribution centers, depending on the operation in question) in a three-step process which generally consists of:
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:
As was mentioned earlier in this article: consumer demand is higher than ever. When inventory is low, customers may quickly get frustrated and lose faith in a company. This can be a deadly blow to brands if they begin to lose their customer base.
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 will face challenges in storing the said item, leading to increased cost and less space for other goods.
Planning and Logistics Issues
Customer satisfaction hinges on effective logistics planning. If a customer’s package arrives in disrepair, they will not 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 that a company may utilize, based on their 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 – Dropshipping effectively cuts out the middle man in the order fulfillment process. With drop shipping, the manufacturer of the product ships the goods themselves.
- Hybrid – As the name implies, the hybrid model combines all or any two of the models described previously. To illustrate: a company might elect to handle everything in-house for most of the year, but during the Christmas season, they may outsource some portions of the order fulfillment process due to a spike in orders.
When it comes to order fulfillment, it’s important to take a close look at your individual company needs, challenges you expect to encounter, and decide on an appropriate model based on this data. Every situation is different and requires careful thought and planning to ensure that all issues are addressed preemptively.