When you transact on eCommerce sites, what is more satisfying to you than finding what you want, bagging deals and receiving it on time? In the interest of meeting those needs and providing consistently positive customer experiences online, all businesses on the eCommerce marketplace should streamline their eCommerce order fulfillment processes.
Order fulfillment are the steps that follow after a customer places an order online. It involves warehousing, picking, packing and shipping, all the while sending out updates to the customer until it reaches their hands.
If you’ve ever wondered what sellers are dealing with in ensuring your order reaches you whole and undamaged, you've come to the right place! Let's take a closer look at what eCommerce order fulfillment entails and how it differs from traditional fulfillment.
What is eCommerce Order Fulfillment?
eCommerce order fulfillment is an interaction between a business and customer which involves the business receiving the order, packaging, dispatching and shipping it for delivery to the customer. Returns and refunds also come under order fulfillment when a product is found to be defective or there’s a mismatch between the customer and order.
e-commerce fulfillment services differ from traditional order fulfillment in that customers place an order through the seller's website and fulfillment centers pick items from the warehouse to expedite delivery. eCommerce fulfillment typically works in the following order:
- The seller pays upfront for merchandise being sold online.
- The products get stored in a warehouse.
- A third-party fulfillment service ships the products.
- When customers place an order and seller is in receipt of it, the fulfillment center picks the product from the inventory and takes care of the shipping.
The success metrics for an order to be considered fulfilled include;
The on-time delivery metric lets businesses gauge customer order fulfillment by the assured delivery date.
Formula: Total number of orders/number of deliveries arriving after the promised delivery date).
Total order cycle time
The total order cycle time is the average amount of time between a customer placing their order and when it’s shipped.
Order picking accuracy
Order Picking Accuracy (OPA) refers to the total number of orders that are picked and confirmed for accuracy before shipping. This figure is divided by the total number of orders picked over the same period of time, as a percentage.
Rate of return
The Rate of Return is a KPI that measures the number of shipped items that are returned. The reasons behind return are key to identifying trends and reducing this ratio by proactively preempting them.
Fulfillment accuracy rate
Order accuracy rate refers to the number of total orders that are fulfilled correctly.
Formula: (total orders fulfilled accurately/ total orders fulfilled)*100
Percentage of orders received damage free
This process efficiency metric calculates the percentage of PO’s (purchase orders) that reached the destination without damage.
On-time ready to ship
On-time shipment readiness measures how reliable the company is in preparing orders for shipment. A low value indicates inefficiency in terms of entry operations, understaffed loading docks or inaccurate warehousing.
Formula: (total shipped orders shipped within the designated timeframe/ total number of orders shipped)*100.
Inventory accuracy measures differences between real-life inventory and actual stock. It is calculated by manually counting the number of items in stock and dividing that number by stock count. Multiply this number by 100.
Average warehouse capacity used
Average warehouse capacity measures if the capacity of the warehouse is utilized optimally. The optimal capacity is between 85-90% indicating maximum space consumption.
Orders picked per hour
Orders picked per hour measures order fulfillment and shipping productivity per hour per person.
eCommerce platforms either have their own order fulfillment service or depend on a third-party provider to complete all steps in the cycle. Ecommerce order fulfillment is applicable to both B2B and B2C orders.
Differences between eCommerce and Traditional Order Fulfillment
Why Does Order Fulfillment matter?
Order fulfillment is essential to retain happy customers and win repeat business. Two decades ago, eCommerce technology wasn’t advanced or coordinated enough to provide absolute visibility into an order from the time it was placed to the time the customer received it. When orders got mixed up, delayed or damaged enroute, customers were left feeling cheated because accountability was hard to establish, much less maintain.
Today is a different story. The emergence of inventory management and warehousing has made the logistics of eCommerce easier for sellers and buyers. People are able to access information in real-time, giving them insight into warehouse operations at all times. This has contributed to a rise in eCommerce transactions, with the emarketer estimating sales to reach $6 trillion by 2024. The benefits of order fulfillment include
- Smarter inventory management
- Streamlined supply chain pipeline
- Satisfied and happy customers
- Higher conversion rates leading to increased revenues
- Facilitates faster and simpler collaboration.
The Benefits of Automated Order Fulfillment
The inbound inventory is the starting step to the fulfillment process which ensures accuracy and quality in the remaining stages. The inventory has to be inspected and checked for quality and quantity before propagating forward. As the instant-gratification economy grows, so too does the expectation of real-time updates and prompt deliveries, which requires the seller to be on top of their inventory even as the business picks up and experiences a volume surge. Manual operations can increase the probability of error and cost you more human resources which automation easily takes care of.
Sorting and Storing Inventory
The inventory received needs to be sorted for instant identification and quick retrieval. The parameters for inventory sorting and storage vary from warehouse to warehouse by industry. Seasonal sales is a strong performance indicator of the products that sell the least and most, ensuring that they are in a staging area from where warehouse workers and robotic helpers can access and handle them. Pharmaceuticals and food and beverages sectors similarly set rules to see to it that expiry-sensitive products don't remain long enough in the inventory to present a loss.
Through an eCommerce operating system like EasyEcom, reports on SKU, expiry-tracking and rule-based assignments can be activated to have a bird's eye-view of inventory. This way, sellers are informed if levels are depleting and falling below the threshold. They can then put in replenishment requests to the supplier or manufacturer ahead of time while utilizing the existing space effectively.
There was growing concern among logistics leaders that they were paying their staff for walking rather than picking, increasing picking time by 50%. Automated order processing alleviates this concern by creating a workflow that connects picking, packing and shipping. It increases ship velocity by routing picked products through to the correct packing stations. Since orders are unique and hinge on several factors, including the customer's address, quantity, payment and shipping options, it is essential to automate the process so that deliveries are error -free and arrive undamaged.
Picking and Packing
When you have a large inventory, locating the right items and picking them can be a frustrating and laborious experience without automation. With an AI-driven Warehouse management system, pickers are informed of the exact locations, and the SKUs can be confirmed with handheld barcode scanners. If your warehouse has Robotic Process Automation in place, the robotic helpers can reach places manpower can't and lift and move impossibly heavy objects around, reducing the risk of injury and involvement of people.
Another useful extension of automated order fulfillment is that it auto-recommends packing material to packers to ensure fragile products are delivered damage-free to the consumer.
According to Insider Intelligence, retail returns will cross $620 B in 2023 which is a 2% increase over figures for 2022 and 2021. In an effort to minimize returns, retailers are wisening up by using AI and in some cases, charging for returns despite 58% of customers reportedly seeking a" No Questions Asked" hassle-free returns policy.
High return rates can adversely impact loyalty, reputation and ultimately-sales. You lose the customers you have plus the customers that could have been, making it necessary for eCommerce sellers to have clear returns, refunds and exchange policies in place to deliver value no matter what the circumstance. With automated order fulfillment, you can validate returns and confirm if they are enroute or pending. Once they are back at the warehouse, you can conduct QC-inspections to determine the next course of action- i.e. restoration, discarding or recycling. Confirmed and pending returns reports within an eCommerce enablement solution can help you track packages to check if the returned item qualifies for re-listing on the applicable sales channels. Returns are an occupational hazard, but knowing what to do with them can help you meet customers in the middle, reuse goods and keep the order return rate to the minimum.
How does Order Fulfillment Work in eCommerce Operations?
There are many pieces that make up the entire fulfillment process.
Omnichannel Fulfillment Center Integration
A technology company sits at the heart of every order fulfillment center. It integrates eCommerce stores with the center so that there’s a flow, starting from the receiving inventory to packers and finally, shippers. Ideally, the fulfillment center should have an app to connect incoming orders from any channel, even if those channels are not directly supported
Receiving and Inventory Management
Receiving and organizing inventory
Inventory refers to the complete stock of products based on its availability by region, brand, seller, price and serviceable routes. After you count and inspect incoming inventory, SKUs (stock keeping units) and barcodes are stamped on arriving products for the inventory storage process. This makes it easier to retrieve the correct product later. If your fulfillment is inhouse, you’re expected to do your own inventory. If its outsourced, then you’ll need to send the inventory to the provider who will execute the fulfillment on your behalf.
2. Inventory storage
Warehousing is the physical organization and storage of goods. Goods received at the fulfillment center are sent to the warehouse for further distribution. The products are dispatched based on their category, shelf-life and type of order. For example, customers that have a membership on any eCommerce platform automatically qualify for free or express deliveries, and such items are prioritized for packing over goods that are there for the long haul. Perishables are stored on a similar principle and inventoried with their shelf-life in mind. Inventory storage is an important facet of inventory management because it helps organize the distribution of goods while keeping a backlog for future sales. Being able to locate what you’re searching accelerates your fulfillment operations.
Order Fulfillment: Pick, Pack, and Ship
Workers will go through the warehouse to find the product ordered. It is further categorized by quantity and location to differentiate bulk-orders from repeat and one-off orders. Batch picking is considered to be a reliable order picking method. It groups multiple orders into smaller batches to speed up confirming that what you located is the right item.
Packaging is the one place businesses can really make their mark in. Packers will wrap and seal the product with a tape bearing the fulfillment center’s logo to ensure that its contents are tamper-proof and do not get damaged in any manner when in transit. The packaging will differ depending on the fragility and shelf-life of the product. Label the package with the seller’s and shipping address.
Shipping is the most essential aspect of the order fulfillment process because it determines that you’re getting the order right in terms of quantity, type, where and who it is going to. A packed order is marked for dispatch. You can sign on with any courier service after carrying out a thorough check on their shipping and delivery accuracies. Your customers can select the type of shipping and payment options from the options of Cash on delivery, netbanking or digital wallets. Shipping is further divided into
The option to avail free shipping persuades more buyers to finalize their order. In fact, a Pulse of the Online Shopper report found that 74% of online shoppers cite free shipping as one of the most important factors at checkout, and 94% took actions to qualify for free shipping.
- Flat rate
A flat rate is a fixed price for delivery. You can work the handling fee in here optionally to ensure its safe and secure delivery
- Table rates
This is a tariff list which is calculated based on the dimensions, weight, destination, price and number of items.
Customers can choose where to have their order delivered (i.e. at home, a neighbor’s or a commercial space). This extends to in-store pick ups as well, which saves local brick-and-mortar stores the additional hassle of deliveries. Shipping partners such as FedEx or UPS will determine the speed of order fulfillment based on the serviceability of the location.
Returns Processing: Reverse Logistics
Returns processing refers to those orders that are returned by the customer due to defects or a mismatch in product details. The original order will be marked with a ‘return’ label to distinguish it from the rest of the pallet and deem it fit for restocking. Returns processing also involves rechecking the inventory to make sure that there’s a fault-free replacement item to ship to the customer. The products returned are restocked, sent to the manufacturer for distributor credit or o a vendor or manufacturer for a distributor refund or credit, or sent to a recycling center.
How to Streamline eCommerce Order process fulfillment
Focus on seamless integration
Given that products originate from different sources, it’s essential that you integrate suppliers (vendors or manufacturers) with different distribution channels through an order management system. This simplifies warehousing because you can recognize where the products have come from, retrieve the complete order detail and cross check it against the schedule.
Facilitate end-to-end visibility
Visibility is key to getting the order fulfillment process right. Suppliers should be able to access the same inventory and order fulfillment processes in order to update catalogs as and when supply and demand fluctuates. They can see what items are in stock and confirm quantities by location. From the end user’s side, they should be able to see if products are in stock or close to selling out (those message prompts that appear telling you that there’s only one left, promoting FOMO).
Invite bids for the right shipper
A shipper with a reputation for reliability and delivery accuracy can bolster your brand’s credibility. This is because customers end up venting their frustrations out on you when orders get lost, delayed or damaged. Audit shippers regularly and get into a conversation with them on their recent updates. Find out what testimonials other businesses have left for them and whether there has been a rise in negative feedback, delayed or lost shipments or an increase in order returns. You can consequently end or opt to not renew a contract in favor of a shipping partner with consistently better ratings.
Strategize warehouse locations
The reason for eCommerce’s very existence is that it extends the field of buying options. In other words, products that aren’t locally or instantly available can be bought online. And by strategizing warehouse locations, it’ll be easier for courier partners to fulfill delivery expectations. You can either
Choose warehouses that offer quick pick-and-drop options albeit at pricier rates.
Expand warehouses based on delivery area. Store products in several warehouses throughout the delivery area so that the one closest to the customer’s location is able to confirm that the order can be fulfilled.
Keeping your customers informed from the time the order is received to the estimated date of delivery is helpful to both you and the customer. They can make arrangements to be present around the day the package arrives, or entrust it to someone else. Real-time, on-demand status updates contribute to the shopping experience and make customers far more likely to shop regularly from the same platform.