The onset of the COVID-19 pandemic forced many retailers to shut their brick-and-mortar stores and rely heavily on e-commerce sales to sustain their business. In the post-pandemic world, e-commerce still seems to be ruling the roost in terms of sales.
Modern retailers that are still new to e-commerce or are struggling to keep up with the fast pace of online sales and delivery, need to take a long hard look at their order fulfilment process and strategy to compete with UK’s retail giants like TESCO and ASDA.
What is Order fulfilment?
Order fulfilment is a series of steps that an e-commerce retailer needs to take to ensure that the order is delivered to the customer within the promised time. It involves gathering the ordered items from the inventory, packaging, storing, and shipping efficiently so that the order is delivered within the stipulated time frame without any delivery challenges.
In other words, from the time the online sale is made till the time the order reaches the customer, every step taken to facilitate this process comes under order fulfilment.
Apart from order accuracy ie delivering the right items to the customer, order fulfilment time is a crucial metric that can make or break your online business’ reputation. Most e-commerce retailers strive to reduce the fulfilment times but face challenges with regards to same-day delivery, instant local delivery, etc.
6 Steps of the Order Fulfilment Process
1. Receiving Inventory
The first step of the order fulfilment process involves accepting inventory such as goods and products from various manufacturers and wholesale dealers. Whether you run an in-house delivery warehouse or outsource through a 3PL, receiving inventory is critical to kickstart the entire order fulfilment process.
Some of the tasks involved in receiving inventory are:
- Verifying the count of each product received from the manufacturer
- Inspecting for product damages and defects
- Assigning a unique SKU (Stock Keeping Unit) for every product category, and feeding the SKUs to inventory management software. For example, pairs of white socks should have a unique SKU that helps to differentiate them from other sock designs and colours.
- Print and stick SKU or barcode labels to differentiate between products.
- Updating the number of products in stock under each SKU in the inventory system.
2. Inventory storage
The next step is to ensure that the inventory received from the manufacturers is stored in conditions that don’t cause any damage to the products.
Once the inventory is received, it can be transported efficiently to the storage area through the use of roller conveyors. This saves time, and money, and is recommended to move bulkier items with ease.
An efficient system for inventory storage involves creating a designated area to store certain products that are ready to be shipped out for delivery.
The inventory must be organised in such a way that the products are segregated according to their SKUs and are stored in shelves/bins designated to that particular SKU.
Once the online order has been placed, it triggers the next step of the order fulfilment process known as picking.
This step involves picking the right products from the shelves/bins assigned to every SKU.
While picking, the barcode/SKU labels on the products are scanned to check if it matches the products ordered.
To reduce order fulfilment time and human error, many major retailers across the UK are leveraging fulfilment platforms to automate the process of picking, packaging, shipping, and shipment tracking.
Once the products are packed as per the order, they are sent to the packaging team to ensure that the products are not damaged during transit.
Depending upon the product, they are packed in boxes, poly bags, bubble wraps, bubble-lined mailers, etc.
Before sealing the package with tape and adhesives, packing slips are placed inside the packing so that the customer can verify the order after delivery.
The packing material is selected keeping in mind the safety of the product during shipping while also ensuring the least dimensional weight of the package to reduce shipping costs.
If retailers are using the services of third-party shipping providers, they must find the fastest way to deliver a particular order to the customer while also making sure that the shipping process is cost-effective.
The person in charge of shipping will weigh the package and retrieve order details like delivery date, delivery address, etc. before comparing the shipping cost and time across different shopping carriers.
If you have an in-house shipping team to deliver the orders, it is advisable to make use of fulfilment platforms like Tookan for route optimization, logistics automation, and real-time delivery tracking.
6. Returns Processing
Another important aspect of order fulfilment involves returns processing. If an e-commerce retailer offers returns, they need to have a system in place to effectively receive and process returns.
A typical returns process involves:
- Emailing an order returns a label to the customer.
- Receiving the package from the customer.
- Inspecting the product for damages.
- If the product is in good condition, store it along with other products of the same SKU.
- Process refund or reship the new product to the customer.
Factors to consider before finalising your order fulfilment strategy
1. Business size
The scope and size of your business have a major impact on your order fulfilment strategy.
If you are a small business selling only a limited variety of products, you ideally should adopt an in-house fulfilment strategy instead of delegating the fulfilment process to 3PL.
This strategy might not work for large retailers, but this can save money on operations costs for small e-commerce businesses.
Also, if you are selling only a few SKUs of products, you don’t ideally need a warehouse for order fulfilment.
2. Order Volume
Similar to business size, order volume is a crucial parameter that can help you select the right fulfilment strategy.
If your business only receives a few orders every week, it makes sense to go for an in-house fulfilment strategy as outsourcing to 3PL might eat into your profits.
However, one must keep a close eye on the growth of order volume, as processing a higher number of orders might need a change in the order fulfilment strategy.
3. Sales channels
Sales channels are another deciding factor if you are on the fence about the fulfilment strategy.
If you sell your products on e-commerce stores as well as the marketplace, you must have an order fulfilment platform in place to avoid any confusion in the fulfilment process.
Today’s order fulfilment platforms can be easily integrated with your e-commerce website as well as the marketplace.
Irrespective of where the order was made, these fulfilment platforms push the order to the inventory management system, and ensure the last-mile delivery is achieved within the promised time.
Having a robust inventory management system is often the difference between products reaching the customers on time or not.
Location of your warehouse and where the items need to be shipped play a major role in choosing the fulfilment strategy.
If your warehouse is away from the city, it might lead to extra charges while shipping products. Thus, to save on shipping costs, it is advisable to complete the order fulfilment process from warehouses in urban centres.
Also, if you notice that your target customers live in a specific part of the country, then it makes sense to open customer fulfilment centres closer to your customers’ location.
This can help drastically reduce the order fulfilment time, and save a fortune on shipping.
5 Strategies for Order fulfilment
1. In-house fulfilment
A strategy that is popular among new e-commerce businesses, in-house fulfilment involves the retailer managing their own warehouse and undertaking every aspect of the order fulfilment process.
Apart from having total control over the fulfilment process, this strategy allows new e-commerce retailers to learn how to navigate the complexities of order fulfilment. It is also extremely cost-effective as you don’t have to pay a hefty sum to 3PL.
On the downside, a self-fulfilment setup requires a sizable investment at the start. Once you set up the customer fulfilment centre, you are stuck with the warehouse for a while even when your business experiences sudden growth.
2. Outsourced fulfilment
Modern retailers also have the option of outsourcing the order fulfilment process to specialized 3PL providers. A reputed 3PL company has expertise in order handling, inventory handling, and order shipping.
Small e-commerce retailers that don’t have the initial capital to establish self-fulfilment centres, often adopt this strategy. Outsourced fulfilment also saves the time retailers, and helps them focus more on other aspects of their business.
Since these 3PL centres are strategically located across multiple locations in the country, they ensure fast and efficient last-mile delivery. You can also save a lot of shipping as 3PLs offer shipping at a discounted rate for bulk order processing.
However, this strategy takes away the control from the retailer and generally leads to a more expensive order fulfilment process.
A very popular fulfilment strategy, dropshipping involves sending the orders directly to the suppliers and letting them take care of the fulfilment process.
A supplier is responsible for picking, packing, and shipping the products to the customers while billing the e-commerce retailer for order fulfilment.
Dropshipping is an ideal model for e-commerce startups that don’t want to purchase inventory in bulk.
Dropship retailers don’t need to invest in an inventory warehouse or worry about order fulfilment.
Thus, they save time and money that can be used to market the business to reach the target audience.
Just like outsourced fulfilment, this strategy offers very little control to the retailer. Also, since the retailers don’t buy inventory in bulk, they miss out on cheap deals and enjoy only a small profit margin.
4. Leveraging delivery management software
Another smart fulfilment strategy involves re-optimization of your entire order fulfilment process by making use of trusted delivery management software like Tookan.
Whether you have an in-house fulfilment centre or rely on outsourcing to 3PL, Tookan can help you with every aspect of the fulfilment process.
Apart from delivery management software to streamline the picking, packing, and shipping process, Tookan offers route optimization to ensure fast last-mile delivery while saving you money on shipping.
It also offers a customer-centric app where customers can track their shipments in real-time. In short, leveraging an efficient delivery management system can be a game-changing fulfilment strategy.
5. Establishing micro fulfilment centre
While opening an extensive warehouse across multiple locations might be highly expensive, it can be beneficial to invest in micro fulfilment centres.
As the name suggests, micro fulfilment centres are mini warehouses where the order picking process is automated through the use of robots.
Generally, a micro fulfilment centre relies on a sophisticated fulfilment platform that captures the orders online and a small yet effective physical inventory storage that can be accessed by automated machines to process the orders
Also known as dark stores, these micro fulfilment centres can resolve issues related to in-store grocery picking and last-mile delivery.
For example, a grocery retailer can establish a dark store by stocking all the popular items ordered online by customers.
Since the in-store grocery picking is automated here, it saves time and reduces human error.
Also, these micro fulfilment centres are located closer to prime areas from where most customers order.
This ensures the retailer fulfils customer demands of same-day delivery or instant delivery.
In conclusion, order fulfilment is the backbone of the e-commerce retail business as it ensures timely delivery of products to customers.
For a small retailer competing with online retail giants, investing in a proper fulfilment platform, a robust inventory management system combined with a robust delivery management system is a must to help your business grow.
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