What Is eCommerce Fulfillment?

In recent years, the world of eCommerce has expanded exponentially. It has become a fundamental part of our daily lives as consumers – and, likewise, many brick-and-mortar businesses have hopped on the eCommerce bandwagon to meet the growing demand. These days, most companies have an eCommerce component.

Since eCommerce is really just the process of buying and selling goods over the internet, a successful eCommerce venture must have a solid fulfillment system in place in order for things to run smoothly. Fulfillment in the eCommerce space is the behind-the-scenes process of getting a product from a seller’s inventory into the hands of a consumer. It’s not as simple as it may sound, though; it typically encompasses everything from warehousing to order processing, packing and shipping – plus, dealing with returns.

In the early stages of an eCommerce business, the fulfillment process can be challenging to navigate, since there are many moving parts. For one, inventory management can present challenges, as there is ongoing pressure for businesses to always be aware of how much stock they have of a specific product to ensure they are always able to meet consumer demand. Order accuracy is another challenge, since mismatched items and incorrect quantities can quickly lead to consumer dissatisfaction. Dealing with shipping costs, as well as returns and exchanges, is another hurdle for many eCommerce business leaders.

With all of that said, once you’re able to grasp the ins and outs of the eCommerce fulfillment realm, and select a fulfillment strategy that is right for your business, the process can be relatively simple. Read on for detailed insights into eCommerce fulfillment.

The Process of eCommerce Fulfillment

To help you understand the process of eCommerce fulfillment, we’ve created a step-by-step guide for how the system typically works – beginning with receiving goods.

Receiving Goods

Receiving goods is the initial phase of the eCommerce fulfillment process. First, products arrive at a warehouse or storage space. Ensuring products are delivered in a timely manner is essential, as the fulfillment process can’t proceed without the products readily available to ship.

The receiving process is fairly simple. It involves unloading shipments, providing advance shipping notices – which are sent from the supplier or manufacturer to the retailer – and verifying the contents against the notice. Advanced shipping notices (or ASNs) help fulfillment centers achieve operational efficiency by giving them a clear itinerary for what they can expect to arrive. That way, they can anticipate the workload and allocate resources accordingly.

The importance of accuracy at this stage cannot be overstated, as it will directly impact the rest of the fulfillment process. Meticulously verifying the products and cross-referencing with the provided ASN will mitigate issues down the line. It’s important to flag any mismatched quantities, missing items or damaged products from the get-go. Not doing so could snowball into far bigger issues, which could directly hinder customer satisfaction.

Warehousing and Inventory Management

The warehouse is the central hub in which the goods are stored. Beyond being a physical space to hold products, though, the warehousing world often also involves inventory management – which includes tasks like labeling and organizing stock.

Once a warehouse has received the goods, warehouse staff are typically responsible for organizing the products to allow for swift shipping. Products are placed strategically in order to optimize efficiency. They are typically placed in certain areas that correspond with factors such as size, demand frequency and picking patterns.

Modern warehouses typically have smart technologies and systems in place to automate the placement of products, thereby minimizing the time and effort necessary to fulfill orders. These technologies can also assist with labeling – which is another critical component of inventory management. Every product, shelf and storage location must be clearly labeled with important information, including SKU (Stock Keeping Unit) numbers, product descriptions and – depending on the product – expiration dates. Again, labeling is another key way to prevent errors down the line.

Picking, Packing, and Shipping

Picking, packing and shipping are perhaps the most important steps involved in the eCommerce fulfillment process. Having a seamless transition from product selection to shipment preparation is a cornerstone to a successful eCommerce venture.

The first step in the picking, packing and shipping process is – you guessed it – picking. But what exactly does picking mean? Well, in the fulfillment world, picking begins with pick lists – which are guiding notes for warehouse staff, outlining the items that must be “picked” to fulfill specific orders. These pick lists may be generated manually based on order data, or in more advanced systems, they can be composed automatically through software. Once the lists have been composed, warehouse personnel move through the warehouse aisles and select the items needed for each order. In this sense, they are doing the literal “picking.” Like other parts of the fulfillment system, picking requires meticulous attention to detail, as errors at this stage could easily escalate later on.

Once the items have been picked, the next step starts: packing. This involves placing goods into their designated shipping vessels – whether it be an envelope, a shipping container or a box. The products are packed carefully; delicate items should be encased in bubble wrap or other protective material. The central goal of the packing step is to ensure the safe transport of goods, while also maximizing space efficiency and minimizing shipping costs. Prior to sealing a given package, warehouse personnel must examine the item for quality control, and verify that the packaged items are correct.

Before a package can be shipped, it must be labeled. Shipping labels are often generated automatically by the eCommerce platform or shipping software. Accurate labeling is paramount, as shipping labels contain critical information – such as the destination address, tracking number and shipping method.

Once a label has been stuck to the package, it’s ready to be sent to its final destination. If you partner with a fulfillment center to handle your company’s logistics needs, they’ll select a carrier strategically that will offer the best rate and shipping speed. Once the package leaves the warehouse, a shipping confirmation is generated, which allows customers (and businesses) to monitor their package’s movement in real-time.

Handling Returns

Returns are a big part of eCommerce fulfillment, and they can often be the most difficult part of running an online business. If you partner with the right logistics center, though, handling returns is made much simpler.

In most cases, returns are initiated by a consumer, and are driven by a number of factors, ranging from product dissatisfaction to size issues. The consumer is required to ship the product back to the warehouse, at which point warehouse staff will evaluate and inspect the returned item to ensure it meets return policy criteria. Staff will also determine whether the product must be disposed of, or resold.

Items that are deemed fit for resale are returned to their original holding place in the warehouse. Meanwhile, items that are damaged might be donated, recycled or discarded in some fashion.

Overall, returns play a major role in customer satisfaction and brand reputation. A customer-friendly returns process leads to superior consumer retention, as people will be much more inclined to purchase from your company if they know products can be returned with ease. This bolsters brand reputation and loyalty.

Different eCommerce Fulfillment Options

Now that you have a solid understanding of what eCommerce fulfillment is and how it works, we can dive into the many different fulfillment options available to online business owners.

Choosing the right fulfillment strategy to meet your unique business needs is super important if you want your business to thrive.

There are three central eCommerce fulfillment models, including self-fulfillment, dropshipping and third-party fulfillment. We’ve outlined all three so you can get a better understanding of the logistics landscape, and determine the right path forward for your company.

Self-Fulfillment

Self-fulfillment – also known as in-house fulfillment – is the practice of independently managing your eCommerce businesses’ fulfillment processes. It can be a good starting point for small businesses shipping a relatively low number of orders, as it offers business owners a high degree of control over their operations. Particularly in the early phases of a business, it can be helpful for company leaders to have a solid understanding of inventory management, quality assurance and customer interactions. Having this level of control enables businesses to tailor their processes to the needs of their customers.

On the flip side, though, the responsibility associated with self-fulfillment can become taxing, especially as a business grows. Managing every aspect of the supply chain demands a lot of time and resources, and during periods of rapid growth, it’s difficult to give logistics the attention it deserves.

As mentioned above, self-fulfillment can be more costly in the long run, as fulfillment centers typically leverage economies of scale and are able to negotiate more favorable rates with carriers. In short, self-fulfillment can be operationally intensive and expensive – but serves a purpose when a company is just starting out.

Dropshipping

Simply put, dropshipping is a business model in which the seller of the goods takes customer orders without holding any physical inventory. A separate company holds the products, and ships them straight to the consumer. It’s a more streamlined approach to eCommerce, as the business owner doesn’t need to deal with any logistics head-on.

Dropshipping has risen in popularity in recent years – and for good reason. It’s a unique model that allows entrepreneurs to acquire retail partners with their own supplier or manufacturer that deals with storage, picking and packing and shipping of the products.

Perhaps the most salient benefit of dropshipping is that it requires minimal upfront investment, since there’s no need to purchase or stock inventory. This significantly lessens the risks usually inherent in starting an eCommerce business. Additionally, dropshipping also allows for more flexibility, as business owners are able to test a wide range of products without committing to stock. In order to run a dropshipping operation, all that’s needed is an internet connection – meaning entrepreneurs can run their businesses from anywhere.

Despite its many benefits, though, dropshipping does have its drawbacks. For one, it typically has lower profit margins, as business owners will need to pay wholesaler’s fees and shipping costs. Quality control is another obstacle, as business owners can have limited oversight, which can lead to customer dissatisfaction.

Additionally, the dropshipping market has become increasingly saturated, which makes it more difficult for entrepreneurs to stand out.

Third-Party Fulfillment

The final fulfillment model is third-party fulfillment, which refers to the practice of outsourcing logistics processes to a separate fulfillment company. Many of the broad benefits of using third-party fulfillment services – such as Amazon FBA (fulfilled by Amazon) – have been outlined above.

More specifically, though, third-party fulfillment services allow for enhanced scalability, expertise and efficiency, as well as greater customer retention. Unlike small businesses, third-party fulfillment companies often have access to the latest and greatest technological advancements and logistics software, which enables staff to fulfill orders faster and more effectively. In all, outsourcing logistics services will save most companies money (and time, which is also important!) in the long run.

Hybrid fulfillment is an option, too – which simply means you can use a combination of multiple fulfillment methods to meet all your company’s needs.

The Role of Technology in eCommerce Fulfillment

Given that eCommerce is all about online operations, technology is at the forefront of the industry, and it plays an essential role in fulfillment. Advanced technology in eCommerce fulfillment allows for real-time visibility into inventory levels – which prevents stockouts and optimizes order fulfillment.

Technology also helps to reduce manual errors, thereby enhancing overall operational efficiency. Integrated systems improve communication between a company and its customers, as technology can provide consumers with accurate and timely information and updates about their shipments.

Warehouse technology also expedites the efficiency of the picking, packing and shipping process. For example, the global eCommerce giant Amazon uses automation and robots at its fulfillment centers to efficiently pick, pack and ship millions of orders daily.

Incorporating advanced technology into eCommerce fulfillment usually reduces the rate of errors, and improves overall accuracy. It also leads to greater scalability and flexibility, allowing an eCommerce business to easily shift its demands and fulfillment needs.

In sum, integrating technology into the eCommerce fulfillment process – whether through state-of-the-art picking and packing equipment, or stellar organizational software – can work wonders for improving various processes. It can exponentially enhance customer satisfaction and provide the flexibility and agility needed for business growth.

The Advantages of Outsourcing eCommerce Fulfillment

As an eCommerce business owner, the advantages of partnering with a strong fulfillment service provider are multifold. Above all, though, optimizing your company’s logistics will undeniably lead to increased efficiency and growth.

While you’ll need to make an initial investment to hire a fulfillment service, partnering with a logistics company will ultimately save you valuable time and money in the long run. By outsourcing tasks like order processing, packaging and shipping, eCommerce owners can focus on core operations – including marketing and product development. Moreover, using a fulfillment service means you can forgo the costs associated with independently managing logistics – which requires a warehouse or storage space, packaging materials, plus personnel to manage the complex logistics systems and operations.

Not to mention, given that fulfillment centers typically have several clients, they receive better rates with carriers than individual companies. As such, shipping is cheaper – and faster, too. Logistics companies have warehouses that are strategically located, which enables quicker delivery to consumers.

Most fulfillment centers are a one-stop-shop for all things logistics. They come with a wealth of knowledge and logistics expertise. Staff are adept at managing inventory, optimizing shipping routes and handling unforeseen challenges – which can naturally be overwhelming for eCommerce entrepreneurs who aren’t necessarily familiar with the shipping space. Outsourcing fulfillment ensures that the supply chain runs smoothly, gaurenteeing reduced errors and increased customer satisfaction.

In all, using fulfillment services offers an array of benefits to eCommerce owners, including that it saves them time and money, and offers a superior consumer experience.

Selecting the Right eCommerce Fulfillment Partner

Not all fulfillment service providers are created equal – and choosing one can be challenging. It’s important to consider various factors, including industry experience, pricing, location, services offered, customer support, technology, data and analytics capabilities, and scalability. Let’s go over what each of those things means.

Industry experience: The needs of every eCommerce business are different, and when selecting a fulfillment service, it’s crucial to understand whether the logistics provider has experience working in your specific industry. For instance, if you run a makeup company, it would be best to choose a fulfillment service that has experience in the beauty industry – which will allow them to understand the unique challenges your company might face.

Pricing: Of course, evaluating your provider’s pricing model – and comparing it with others – is paramount when choosing the right fulfillment service for your eCommerce company. Before committing to one, make sure you understand the storage fees, order fulfillment costs, as well as any additional charges you should expect to face.

Location: Depending on where the majority of your clients are situated, it’s important to choose a logistics provider with strategically located fulfillment centers. Proximity plays a big role in shipping times and costs, so keep that in mind when making your pick for a logistics provider.

Services offered: Many fulfillment companies offer a suite of services – while others don’t have the same variety. Consider the needs of your eCommerce company (and how those needs could ultimately evolve over time), and make sure your fulfillment service provider offers a comprehensive solution. Some must-have services include: order processing, packaging, shipping and returns management.

Customer support: Given that you’ll be outsourcing your logistics operations, knowing that your fulfillment service provider is accessible is a must. We recommend reading company reviews to ensure the provider has strong customer support and customer service capabilities. If a problem pops up, you want to be able to depend on them to solve it swiftly.

Technology integration: Your fulfillment provider should have top-of-the-line technology that makes it a cut above its competition. This will ensure your eCommerce platforms seamlessly integrates with the logistics side of your business, and your customers have real-time tracking options.

Data and analytics capabilities: Data is a huge decision driver in the world of eCommerce, and understanding the numbers behind your business will help you grow. Choosing a fulfillment service provider with robust data and analytics capabilities will help you understand the needs of your customer base better, thereby informing strategic decisions and optimizations.

Scalability: When selecting the right fulfillment service provider for your eCommerce company, keep the future in mind. If your goal is growth (and it should be!), consider the provider’s ability to scale operations alongside your business. Having a flexible and scalable fulfillment service provider will ensure that any fluctuations in your company’s logistics needs can be accommodated.

How eCommerce Fulfillment Impacts Branding and Customer Loyalty

There are countless reasons why it’s important to have a reliable eCommerce fulfillment system in place, not the least of which is that it unquestionably impacts branding and customer loyalty.

The eCommerce world gets more competitive by the day, and having seamless logistics is one sure-fire way to help your company shine. Remember, consumers have high expectations, and in order to meet the need, your eCommerce company’s fulfillment services must be supreme.

A seamless fulfillment process is also about ensuring smoothness from the moment the order is placed, to the moment it arrives on a customer’s doorstep. Fast order processing, accurate picking and packing, and timely shipping all contribute heavily to the customer experience. Items should arrive in pristine condition, helping to build trust between a consumer and a brand.

Furthermore, a simple returns process and responsive customer support team is another way to foster trust with customers, and encourage them to become repeat customers. Easy returns builds confidence in a brand’s commitment to customer satisfaction.

Communication and transparency are also hugely important factors in the eCommerce fulfillment process. Providing customers with real-time updates on their order status, including tracking information, gives customers a strong sense of control – which improves retention.

In all, a well-executed fulfillment process creates positive associations with a given brand. Naturally, satisfied customers are more likely to become repeat customers and advocates of a business, which leads to long-term loyalty.

Understanding the Costs of eCommerce Fulfillment

As with anything in business, there are significant financial considerations when it comes to warehousing. Leasing warehouse space can be expensive, and it’s important to grasp what the cost entails.

The foremost financial consideration when leasing warehouse space is monthly rent. This cost will vary based on location, size and services provided. In conjunction with rent, there are other utilities and operating expenses that are inevitable. Rate hikes are also always a possibility, so make sure to prepare for that when you’re budgeting.

For those with small businesses that require minimal storage, you could consider self-storage facilities as a cost-effective solution. If you choose to go down that path, you should emember: these facilities are not designed for high-volume eCommerce operations. That being said, if your storage needs are minimal, this could be a good call for you.

We also encourage businesses to consider shared warehousing options, which involves sharing storage facilities with other businesses. This will lead to reduced costs.

Conclusion

If you’ve read this far in the article, you should be a wizard at eCommerce fulfillment. You are likely now well-aware of the numerous advantages of having seamless logistics, and the importance of partnering with reliable fulfillment service providers.

As we’ve outlined above, the path from order placement to delivery is not just a logistical process; it’s a strategic opportunity to build trust, reliability and customer loyalty. The positive associations formed throughout the fulfillment journey are a strong catalyst for repeat business and brand loyalty.

We encourage you to assess your own eCommerce fulfillment strategies, and ask yourself whether there are steps you can take to improve (or overhaul) your current process. Here are some key points to keep in mind:

Communication builds trust: Communicating with your customers is an important mechanism for fostering consumer confidence in your brand.
Accuracy is essential: Getting it right is important when it comes to establishing your brand’s commitment to quality and reliability.
Efficiency is also essential: Efficiency is equally as important as accuracy. Consumers have high expectations – do your best to meet them.
Flexibility leads to greater satisfaction: Offering easy returns and responsive customer support helps retain customers in the long-run, and gain new ones.

In the overly saturated eCommerce landscape, improving your logistics process will undoubtedly enable you to rise above the competition. Reach out to us today to learn more about Stalco’s unbeatable fulfillment center, and the incredible services we have to offer.