1) An Introduction to Ecommerce Fulfillment
eCommerce fulfillment may not be the most exciting aspect of running a business, but it is an essential element for success and growth. Your product may be number one in the industry, and your website could be glitch-free, allowing your customers to easily slide to checkout. But if your eCommerce fulfillment operation is not smooth, your eCommerce business could lose all its sales.
A study done in 2018 shows that 54% of buyers halted their orders due to high order fulfillment prices. An accurate and predictable order fulfillment process helps keep your customers happy as well as saves you time and money while assisting in expanding your business. Your eCommerce fulfillment process should be lined up and running like a well-oiled machine.
But what exactly is eCommerce fulfillment and why is there so much emphasis on it? Worry not, we’re here to explain the entire concept to you so that you can run your business better. With that, let’s get started.
2) What is eCommerce Fulfillment?
Order fulfillment is an essential part of your eCommerce operations because it involves a series of processes that ensure smooth delivery of products to your customers. Usually, these processes include getting the product off the shelves, picking and packing the orders, shipping methods, and other logistics.
As mentioned above, eCommerce fulfillment is an underrated yet essential element for your business. If you are packing and sending out orders from your own premises, you are your own fulfillment provider. However, if your business is expanding, you may have to outsource fulfillment from a third-party logistics provider (3PL).
To get a better understanding of this concept, let’s take a closer look at the processes involved in eCommerce fulfillment.
3) How does a Fulfillment Center work?
Essentially, eCommerce fulfillment is the lynchpin of your operations. Understanding the processes involved in it will help you manage and run your eCommerce business better. Although you need not necessarily outsource your eCommerce fulfillment, doing so will expand your business, make it more agile and save you from unnecessary expenses and risks.
Under the eCommerce fulfillment process there are four main components involved.
3.1. Omnichannel Integration
Your eCommerce business should be seamlessly integrated with your fulfillment center. Either you or your 3PL providers need to integrate with all the platforms that your products are sold on. A custom app/software should be created for sales on platforms that can’t get integrated with the fulfillment center.
3.2. Management of Inventory and Receiving
Receiving is an area where most fulfillment warehouses fall short, for when pallets of your merchandise are sitting on the loading dock, they are not being recorded in inventory. No inventory equals no sales, and this could lead to loss and unnecessary expenses. This is why your fulfillment provider needs to place the stock in inventory within a day or two after receiving it. Additionally, your inventory should be tracked in real-time while maintaining Goldilocks stock levels, i.e, not too much which ties up your capital, or not too little which puts your business at risk of running out before restocking.
An additional inventory challenge is shrinkage, otherwise known as loss, theft, or breakage. Most fulfillment providers provide an allowance for shrinkage; this can range from 2 to 10 percent. The provider is responsible for any damage caused to your inventory while being stored on the shelves, and if there is no account for shrinkage, calculating ideal stock levels can be a challenge.
3.3. Pick, Pack and Ship
The pick, pack, and ship process essentially refers to the cycle in which an order comes in and the warehouse picks out the requested products, after which the floor worker packs the products in the right boxes. The package is then shipped out to the customer.
The fulfillment center must be centrally located so that your eCommerce business can take advantage of short and speedy shipping time. Accuracy of orders is another important aspect fulfillment providers must keep in mind, for mistakes in packing orders can cost you your business and your customers.
3.4. Reverse Logistics and Returns Processing
Returns are inevitable and cannot be avoided, which is why ease of returns is essential for shoppers, and logging in those returns is a crucial function for eCommerce fulfillment. Efficient and quick return processes will provide your customer with a refund faster as well as stock the returned product back on the shelf so that it’s ready to be sold again.
This is an important function that drives the sale of your eCommerce business. Allowing your 3PL to handle this area will give you space and time to focus on increasing your sales.
At this point, though we have thoroughly understood the role of an eCommerce fulfillment center, people are still bound to get confused between a fulfillment center and a warehouse. To avoid such mistakes, let’s take a look at the differences between these two terms.
4) Difference between a Fulfillment Center and a Warehouse
As mentioned above, a fulfillment center is more of a distribution center where orders come in, get picked, packed, and shipped out to your customers. However, a warehouse is a space where inventory is stored. Usually, eCommerce businesses have their own warehouses or rent them out to stock up on their products.
Think of it this way - a warehouse is more like a pantry in the kitchen, where there is space to store and stock up on all your food supplies for later use. A fulfillment center on the other hand is like having someone cook for you in the kitchen using the supplies stored in the pantry. This person is solely responsible for using the supplies in the pantry to cook and serve you food. Thus, the terms warehouse and fulfillment center are two completely different concepts and should not be used interchangeably.
Now that we’ve cleared up the confusion, there’s still a big question hanging in the air - what does your eCommerce business require, a warehouse or a fulfillment center?
5) Does your eCommerce business need a Fulfillment Center or a Warehouse?
If your eCommerce business carries out big operations, and requires you to store a large number of products for a length of time before shipping them out, then getting a warehouse is an efficient and cost-effective option for you.
However, if you’re a business that carries out small to medium-sized operations, and you feel like you’re spending an unnecessary amount of time packing and shipping orders, then outsourcing it to a fulfillment center will relieve you from this problem.
Additionally, if you feel like there is not enough storage space, opting for a warehouse is the right decision. Nevertheless, if your products move out of storage with a relatively higher frequency, then opting for a fulfillment center is a better option, because along with storing your products, it can pack and ship them to your customers hassle-freely.
This brings us to another crucial aspect of fulfillment centers - the benefits you can avail of them. Let’s have a look.
6) What are the benefits of Fulfillment Centers for eCommerce?
3PL providers use experts and top-tier equipment to pack and ship orders. By opting for the services of a fulfillment center, your orders will be packed and shipped by experts, leaving no room for errors and unnecessary expenses.
Fulfillment centers often receive orders from across the globe and have a greater understanding of the rules and regulations about shipping to other countries. If you’re looking at expanding your eCommerce business, you can take advantage of the international network of fulfillment centers.
Fulfillment centers will provide you with a more organized space to store and pack your orders. You can now save space and move out from your attic or garage.
There is 24/7 support provided by fulfillment services via phone or email. Now returns, exchanges and refunds can be managed with ease.
With fulfillment centers doing all of the packing and shipping, it gives you more time to focus on other areas of the business and grow your company.
Fulfillment centers provide room for scalability when there is a massive seasonal influx as well as a scaling down when business is low.
You can now take advantage of discounts provided by fulfillment centers, and their ability to ship to several locations. This option is both time-saving and cost-effective.
Most often, fulfillment centers give you the option to create and customize boxes, coupons and upgrade your packaging to fit your brand. This maintains the freshness of your brands and is exciting for your customers.
With fulfillment centers, several overhead expenses such as quality control, hiring staff, space, packing supplies, and shipping can be eliminated, and you can take complete advantage of the economies of sale.
Fulfillment centers have the latest tracking and inventory management software that you can use to take your eCommerce business to the next level.
You know the benefits you can avail yourself of from outsourcing to a fulfillment center, but is it that important? Let’s find out.
7) Why is it important to have a Fulfillment Center?
Though an eCommerce business does not have a specific requirement for a physical setup, your stock still needs to be stored somewhere. This storing space could be a warehouse, but as mentioned above, that only addresses half the issue. Your products still need to be shipped out to your customer.
This is why instead of renting a warehouse just to store your stock and having to pack and ship the order out yourself, you can opt for a fulfillment center that does all of it for you.
A fulfillment center is a solution to solving all issues on the backend. From short delivery times to expert packaging, the experts at fulfillment centers take care of it all.
8) To Conclude
Inefficient eCommerce fulfillment can slow down your business severely. Shipment errors, badly packed boxes, and other delays can lead to bad reviews from dissatisfied customers. With a solid eCommerce fulfillment process, your eCommerce business has a strong foundation that will improve the growth of your business and help it thrive.
So what are you waiting for? Evaluate the fulfillment needs of your eCommerce business and let’s get started.