A Deep Dive into Fulfillment Planning
eCommerce has been on the rise for years, but recently online shopping positively surged. Over two billion people around the world made an online purchase in 2020, while eCommerce sales in the US jumped by almost a third.
With increased sales came the need for greater order fulfillment capacity. This put a lot of pressure on brands and retailers – many of which struggled to keep up with online order fulfillment. At the time, customers were understanding but brands are now reviewing their fulfillment planning to safeguard against future issues.
What is fulfillment planning and why is it important?
The order fulfillment process covers every step a brand takes from the moment it receives an online order until the customer gets it. This includes processing, locating, packing and shipping the order.
Fulfillment planning ensures each step of the process operates smoothly. This means every customer should receive their correct order on time and at the lowest cost to the company.
Thoughtful fulfillment planning facilitates seamless and efficient order delivery, which can nurture customer satisfaction and trust. When done right, it should also reduce order fulfillment costs for your business through better inventory management and distribution.
What is an order fulfillment process?
The specific details of your fulfillment planning will vary depending on the size of your business, its products, its values and its fulfillment model. But there are generally five steps involved in the order fulfillment process.
1. Ordering stock
Before a product is listed for sale on your website, it has to be available in a warehouse somewhere. So the first stage in the order fulfillment process is receiving stock from your suppliers.
2. Storing stock
Once you receive your inventory, you need to organise and store it in a warehouse. You may need to redistribute it among retail stores and regional fulfillment locations too.
Try to strategically place popular products so that they are easily accessible and close to the packing area. Decisions like this will help increase the efficiency of outgoing orders.
3. Order processing, picking and packing
Once an order is placed through your online store, the relevant products are picked from the shelves either by hand or by an automated machine. Each item will then be packaged as necessary and labelled for shipping.
Usually, couriers pick up packages at the end of the day. But, depending on the shipping service you use, you may need to drop them to a post office or central pickup point.
A tracking code is then created and this can be shared with customers. Some businesses rely on their courier to supply this information to customers, but big brands often build their own order tracking system. Most courier services have APIs for integrating tracking information into your own eCommerce platform.
5. Handling returns, refunds and customer inquiries
Great fulfillment planning will increase order accuracy and reduce returns. But there will always be some people who need to send a purchase back.
Depending on the size of your business and what you sell, you may decide to set up doorstep pickups, drop-off points or require customers to arrange return shipments by themselves. You’ll also need to decide what to do with returned products once they reach you.
Different order fulfillment types
The first step in fulfillment planning is choosing a fulfillment model that’s suited to your business. Here are the three main types and the key facts you need to know about them.
With this model, you organise and control each step of the order fulfillment process in-house. From holding stock to arranging delivery, the details are all up to you.
This option makes sense for brands that already have warehouses and staff in place to manage stock at their brick-and-mortar stores. It is also a good choice for startups and small businesses that have tight budgets and small sales volumes.
Self-fulfillment provides full oversight and control over the fulfillment process. This means there are plenty of opportunities for streamlining and customisation. Shipping is the only part of the process that is outsourced, so it is usually the cheapest option too.
However, self-fulfillment will suck up a lot of resources. You’ll need warehouses, software and a full team of staff – think pickers, packers and customer service agents.
Third-party fulfillment services
If you’re not in a position to run your own order fulfillment, you can hand it over to a third-party. You simply send your stock to their warehouse and then they take care of the rest.
These third-parties specialise in order fulfillment, so you know they are reliable and efficient. This option also allows your business to concentrate on the likes of marketing and product development. However, it is also expensive.
Storage and packing costs can really stack up – especially if you sell large or fragile products. The likes of Fulfillment By Amazon even charge extra for storage during the holiday season. And if your products are on the shelf for more than six months, you’ll be charged extra too.
This option is best for brands that sell fast-moving products. It is also ideal for fast-growing startups that don’t have storage and handling capabilities yet. Third-party warehouses will be able to manage large order increases with little effort.
Dropshipping is another hands-off fulfillment option. But businesses that use this model don’t hold or purchase any stock whatsoever. When they receive an order from a customer, they send it on to the supplier who ships the product directly to the end-user.
This low-cost fulfillment option is great for entrepreneurs who are just launching a brand. Because you don’t hold any stock, there’s a low investment threshold to get started and you aren’t likely to lose much money. You can also switch up your online store’s inventory without getting stuck with unsellable products too.
Dropshipping is great for trialling a business idea, but you’ll have no input into fulfillment planning, delivery times or service quality. You’ll only be able to stock products that are available through dropship suppliers too. So this isn’t a viable option for larger brands.
Building an order fulfillment strategy
If you decide self-fulfillment is the way to go, here are some key things to consider when starting out.
1. Location, location, location
eCommerce businesses can ship to customers anywhere in the world. But to serve your audience effectively, you’ll need to figure out where most of your customers are located and how long delivery should take.
You can then determine the location of your warehouses, as well as your distribution network. If you stock perishable products, this may affect your choice of location too.
The closer you are to your customers, the faster and more cost-effective shipping will be. However, opening warehouses in towns and cities is usually expensive.
Leading brands like Walmart, Amazon, Carrefour and Pepsico are using micro-warehouses as part of their urban product fulfillment plans. This reduces the cost of real estate, last-mile delivery and storage while also facilitating the demand for quick commerce. That’s why micro-fulfillment centres are expected to grow 60% by 2026.
2. Automation and software
Implementing technology and automation as part of your fulfillment planning maximises efficiency and minimise errors. It should also reduce costs in the long term.
Warehouse management software that integrates with your eCommerce platform is a must-have. This way the moment an order is placed, the fulfillment process begins.
RFID tags also provide a foolproof way to find and track inventory. And if you sell products across multiple platforms, digital shelf monitoring tools are invaluable. It is also important to consider if an automated picking system or a team of employees would be better in your warehouses.
3. Delivery options
While you’ll carefully consider shipping when choosing warehouse locations, you’ll also need to take a look at the other delivery methods available.
Speedy shipping often leads to satisfied customers. But providing a selection of shipping options is even more important. Most consumers want sustainable shipping options, while 66% expect brands to offer slow, but free, delivery choices too.
BOPIS (Buy Online Pickup In Store) options are also growing in popularity. If you have brick-and-mortar locations, consider providing in-store and curbside pickup. Otherwise, try taking advantage of third-party pickup services, like Parcel Motel or Doddle.
As a result of advances in technology, as well as the growth of eCommerce, it is imperative that brands review their fulfillment planning now.
Those that want to provide next-level service and meet growing customer expectations are implementing innovative software, agile supply chains and hyper-local fulfillment. These brands can also expect to save money and win over more customers in the future.