Order fulfilment, which is how a company processes a customer’s sales order, is important. Customers have greater power and are more informed than ever. They also have higher expectations. A company’s reputation, profits and ability to retain customers depend on efficient order fulfilment.
There is no business without sales. Without order fulfilment, there is no business.
What is Order Fulfillment?
Order fulfilment is the process of receiving and processing goods to distribute them to customers.
What does order fulfilment mean?
Fulfilment of an order is fulfilling a customer’s sales order according to their specifications. This means delivering the goods promised at the point of sale. This process involves three steps: receiving, processing, and shipping.
Why is order fulfilment important?
Businesses make money selling products, services and goods to customers or businesses. Whether B2B or direct to consumers, the sale does not end until the customer receives the items. Order fulfilment is the core of any business.
Order Fulfilment Process
The order fulfilment process is performed in one or more distribution centres. It typically includes inventory management, supply chain management and order processing. Customer support is also available for those who need it.
The goods may be from a third party, another company department, or a company warehouse.
It must be counted and inspected to ensure that the correct amount of inventory was received and that the quality is acceptable. The SKUs (or bar codes) on the products arriving are used to receive and store the goods and retrieve them from internal storage.
After goods have been received at the fulfilment centre, they are inventoried. They are either immediately disbursed or sent for short-term or long-term storage. It is best to store items for as little time as possible to ensure that goods are distributed orderly for current sales.
Place an Order
An order processing management system determines the product picking, packing and shipping activities for each customer order. Order management software can be integrated into an online shopping cart to automate order processing.
Picking teams or automated warehouse robots pick items from warehouses according to packing slip instructions. The packing slip includes specific information such as the item SKUs, colours, sizes, number and location of units in the warehouse.
A packing team or automated fulfilment robotics select the best packing materials to achieve the lowest possible dimensional weight. This is calculated by multiplying package height by package length. Optimizing dimensional weight (or DIM) reduces shipping costs and speed delivery.
Additionally, many packing teams include return shipping labels and materials if the customer needs to exchange or return an item for a refund.
The order is sent via a shipping channel to be shipped to the customer. The actual package weight and its dimensional weight are the two main factors in determining freight billable costs for shippers and carriers, whether they be freight lines, airlines, FedEx or UPS, or any other carrier.
Shipping routes may include multiple carriers. FedEx might pick up a package from the fulfilment centre and have it delivered to the customer by the USPS. These hybrid shipping options can be used for many reasons. One reason is that the USPS can deliver to remote areas, where other commercial carriers cannot. In these cases, it is more practical to use USPS as the last mile of delivery.
The return process begins by including the shipping materials and a label for the return. To ensure that the product is restocked, a customer must carefully return it for an exchange or refund. It is not possible to restock a product that has been damaged. A soiled product cannot be restocked. Quality control checks are performed on all returned items and they are sorted accordingly. Return products can then be restocked, returned by a manufacturer or vendor for a credit or a distributor refund, or sent to an office that recycles them.
Order Fulfilment Challenges
There are many challenges in order fulfilment. These include inventory management and supply shortages, failures in demand, logistics planning and kinks within the supply chain.
Stock shortages can lead to customer dissatisfaction and a poor customer experience. This can also cause damage to the brand’s reputation. Companies can’t repair the damage done once it is done. There are exceptions. Customers are more flexible if delays or shortages are caused by severe weather, natural disasters, or a Black Swan.
However, too many stock can lead to higher storage and transport costs. You also run the risk of losing your items if there is a drop in demand. You need to be able to predict demand and plan accordingly to ensure adequate stock levels.
Broken or late deliveries, missing or delayed orders, damaged items, and wet packaging can all be detrimental to a company’s reputation, sales, and ultimately, profitability. To ensure that shipping goes smoothly and items don’t get damaged, it is important to manage logistics. Simply put, customer satisfaction is greatly affected by logistics, so keep a close eye on end-to-end–or warehouse to mailbox–performance.
Execution of Supply Chain
A supply chain strategy involves weighing the cost-benefit trade-offs for operational decisions. A company might choose to use a single supplier for a product in order to get price breaks and a higher volume of products. This strategy can also help a company gain priority status with the vendor. It can help in getting goods on-time during high demand periods. But, if the vendor experiences any difficulties (e.g. strikes by employees, natural disasters or supply shortages), using a single supplier model could backfire.
Order Fulfilment Best Practices
Great organisation is key to achieving efficiency and fulfilment. The best practices are to organize, organise and organise.
Start with the basics. You can streamline your receiving procedures so that incoming shipments are processed quickly. Damaged goods can be returned to the manufacturer quickly for replacement. This will help you avoid back-orders and long wait times for customers.
Organize your warehouse to reduce picking time. You should place high-ticket items first and closest to robot or human pickers and packers. Other items should be placed in the warehouse according to their demand. Items that are least in demand should be at the back.
How do you choose an order fulfilment strategy?
You should consider the resources and skills available to you in order to choose an order fulfilment strategy. You may want to outsource order fulfilment if you lack the necessary logistical skills or resources. You can have more control over your operations and cost by outsourcing if you have the resources. You may consider a hybrid model if your company has the resources and talent to do it well.
Order Fulfilment Models
Although order fulfilment models have evolved over the years, the fundamentals remain the same, and this is due to very sound business reasons.
What are the different types of order fulfilment?
There are four options for order fulfilment: outsourcing, drop shipping, hybrid, and in-house. Each model is tailored to meet specific business requirements.
- In-house The in-house model means that all steps of order fulfilment are done internally.
- Third-party This model involves outsourcing all order fulfilment activities to an order fulfilment vendor (or other third-party).
- Drop shipping The manufacturer produces and ships the order. This lowers barriers to entry and reduces overhead costs. This is a key advantage for startups and ecommerce businesses. The buyer can also save money by eliminating the middleman. It can also take control away from merchants in order to manage inventory and fulfill orders. This can cause delays in shipments to customers as many manufacturers are located far away from merchants’ customer base. Shipping may be more expensive and take longer, or items can ship from a distribution centre.
- Hybrid: A hybrid is simply a combination of one or more of the models. A company might choose to fulfil orders for all or a few popular products, but may also outsource fulfillment during peak times, such as holidays. Large, bulky items can be dropped shipped directly from the manufacturer.