If you want to skyrocket your online business through E-commerce fulfillment, then read this guide.
It covers everything that will help you achieve all your business goals.
This guide will take you through the basic concepts – from definition, how it works, benefits and maximizing profits through E-commerce fulfillment.
Let’s dive right in.
- What is eCommerce Fulfillment?
- How does eCommerce Fulfillment Work?
- Which Pick Methods can I Employ in eCommerce Fulfillment Order?
- What are the Benefits of Using an eCommerce Fulfillment?
- What are the Disadvantages of eCommerce Fulfillment?
- Are there Any Risks Associated with E-commerce fulfillment?
- What are the Costs Associated with E-commerce Fulfillment?
- How Long Does it take to Receive Goods in E-commerce Fulfillment?
- Which Goods can I order Under E-commerce Fulfillment?
- What entails E-commerce Fulfillment?
- How does the Shipping of Goods Take Place in E-commerce Fulfillment?
- Which Equipment Facilitates eCommerce Fulfillment in a Warehouse?
- Are there Inventory Storage Plans that I Can have for My ECommerce Fulfillment Warehouse?
- How do I select an Ideal Fulfillment Warehouse provider for My Business?
- How do I Start an ECommerce Fulfillment Warehouse?
- Which Best Order Packing Practices for ECommerce Order Fulfillment?
- Is E-commerce Fulfillment the same as E-commerce Shipping?
- What are the Key Activities that must be Managed to Achieve World-class E-commerce Order Fulfillment?
- How do I Find an E-commerce Fulfillment Center?
- What is the Difference Between the Distribution Center and E-commerce Fulfillment?
- What are the Models of E-commerce Fulfillment?
- What Influences the Choice of my eCommerce Order Fulfillment Model?
- What is the Difference Between Third Party eCommerce Fulfillment and Self-eCommerce Fulfillment?
- What is the difference between Third Party eCommerce Fulfillment and Dropshipping?
- Can I Outsource My E-commerce Fulfillment?
- What are the Considerations for My Return and Refund Policy Under eCommerce Order Fulfillment?
- How can I Meet My Clients’ Expectations in eCommerce Order Fulfillment?
- How can I Optimize my E-commerce Order Fulfillment?
What is eCommerce Fulfillment?
An eCommerce fulfillment involves several activities that ensure your goods reach your final customers.
Such activities include taking your products to an eCommerce fulfillment center and packaging it appropriately.
It also involves shipping products to the final consumer and have a return policy in case of any defects on your products.
How does eCommerce Fulfillment Work?
Sample of e-commerce fulfillment process
To understand the working process of an eCommerce fulfillment, you have to understand the steps involved.
These steps are:
1. Ordering from your Manufacture
This step involves placing an order from your manufacturer and agreeing on the due date.
The agreement that you set up between you and your manufacturer determines the shipment method to use.
Some situations may force your e-commerce fulfillment center to pick your goods from the manufacturer to their premises.
You, therefore, have to ensure that your commerce fulfillment center has proper logistic solutions.
2. Product Receiving and Preparing an Inventory
From your manufacturer, the products arrive at your eCommerce fulfillment center.
The staff here pick your products and conduct a proper inventory on them.
Certain issues normally arise at the point of receiving your product and inventory preparation.
For instance, the lack of proper inventory results in no sales leading to financial loss.
There is also an issue with shrinkage.
Shrinkage refers to the occurrence of theft, breakage, and loss of your products.
A reputable e-fulfillment center gives you shrinkage allowance when you are signing a contract with them to minimize shrinkage.
Such a shrinkage allowance normally ranges between 2 and 10 percent of your total warehouse inventory.
It is important to consider certain aspects of your e-fulfillment center before selecting them.
For instance, your center should have a proper inventory record within two days upon receiving your order.
You need to access your inventory record remotely.
This allows you to understand your stock level in real-time and make adjustments where necessary.
Remote access minimizes the chances of your stock running out without replenishing it or having excess inventory.
The shrinkage allowance for your center should be minimal.
This gives your center credibility and assures you that your products remain the same while in a store.
3. Order Fulfillment – Picking, Packing, and Shipping
This is where the actual process takes place.
When you receive an order, your eCommerce fulfillment center picks the products for you, package them properly, and ships them to your customer’s destination.
Accuracy and turnaround period is critical in ensuring the success of this step.
Picking the right product, packing it using the correct packaging material, and shipping it to the right customer ensures accuracy.
Minimizing the turnaround period for your customer to receive their product in time.
This affects customer satisfaction and prevents their change of mind.
Having your eCommerce fulfillment warehouse at a central point to your customer.
This reduces the turnaround period, thus satisfying the customer.
4. Processing Return and Reverse Logistics
There are cases where a customer is not satisfied with the product they order or has some issues.
This necessitates a return of the product and a replacement if possible.
It is important to have a quick turnaround for your returns, facilitating a refund or replacement of the product to your customer.
There are several ways that your eCommerce fulfillment center can facilitate your return processing.
For instance, they need to have a faster turnaround period for your returns.
You can also allow them to handle your returns.
This gives you time to increase your sales while retaining the existing customers.
Which Pick Methods can I Employ in eCommerce Fulfillment Order?
There are different pick and pack methods available for selection in the eCommerce order fulfillment process.
The choice of which method to use depends on your preference and how you want your fulfillment process to operate.
Another consideration to make when selecting the pick method to use is your warehouse’s size and the number of staff you have.
These methods include:
· Piece Picking Method
The process of piece picking involves finishing one order at a time before moving to the next one.
Here you take the order invoice and move around the warehouse searching for that order’s products.
After collecting every item on the invoice, you start packing the products.
This is the best method to use if you have a small business to operate due to the few orders you receive per day.
· Batch Picking
The key consideration for this method is the organization of all the products into batches.
You then arrange each batch in the same location for picking.
The picking process involves checking on the different orders and picking products per the available batches.
When the product in one batch is needed for several orders, you go to that batch and select the required quantity.
This facilitates easy picking and movement around your warehouse.
It is the best method to use than the piece picking method if you are operating a small business.
· Zone Picking
This is the best method to use if you have a large business for your product.
In this method, you classify your warehouse into zones consisting of different products but are likely to pick together.
When an order comes in, you send pickers into the different zones to collect particulars of that order.
Once one picker has products in their zone, they forward it to the next zone pickers until the order picking is complete.
It is a complex process that can work effectively if you have management software to help you operate your business.
· Wave Picking
This method combines both zone and batch picking.
It involves pickers in a particular zone picking products as per the batches present in their zone.
Wave picking helps handle different orders at once since the different batches consist of products that fill different orders.
What are the Benefits of Using an eCommerce Fulfillment?
The key benefits you get when using an eCommerce fulfillment are:
- Low Shipping Cost
Various eCommerce fulfillment providers have a wide pool of shipping couriers to use depending on their cost.
This has the effect of reducing your shipping cost since they select one whose price is favorable.
The fact that they are shipping products for numerous people implies that they get a discount on their shipping cost.
This also favors you when you use their services.
· Lower Operating Cost
You get to eliminate various operating costs by using an eCommerce fulfillment.
For instance, your fulfillment center charges you a flat rate for storing your goods.
This is cheaper compared to renting your warehouse.
You also get to remove picking, packaging, and shipping costs from your side.
Most eCommerce fulfillment providers usually offer a flat rate charge for these services, which is minimal compared to handling them.
· Increases your Reach
The advantage of an eCommerce fulfillment is it allows you to have a huge client base.
You can use your provider’s services from anywhere in the world, provided they are in that location.
Therefore, it is important to consider the outreach level of your eCommerce fulfillment provider before selecting their services.
· Enhances your Customer Services
You can enhance your customer services by selecting the right eCommerce fulfillment providers.
Such a provider should have a lower turnaround time, package your product properly, and ensure correct address delivery.
You are likely to increase your customer by ensuring your eCommerce service provider has excellent customer care services.
· Relieves you of Certain Duties
You don’t have to package your product and ship it by yourself. Those are duties your provider handles on your behalf.
Therefore, you are in a position to focus solely on increasing your sales, which translates to an increase in profits.
What are the Disadvantages of eCommerce Fulfillment?
You are likely to experience the following limitations when using an eCommerce fulfillment.
· Delivery Mistakes
There is a possibility of your eCommerce fulfillment delivering your products to the wrong address.
An incorrect delivery delays the product from reaching the intended customers.
Such a delay may lead your customer to change their mind in certain cases resulting in a loss on your side.
· Lack of Personalization
Remember, you are not handling the picking and packaging process directly.
Instead, your provider is the one responsible for these activities.
This is because your products lack the personalization effect that you may want on your packaging.
For example, it may not be possible to brand your package uniquely before delivering it to your final customer.
Certain providers offer contracts that bind you to the activities that they handle; hence you cannot change such policies.
ECommerce fulfillment can be costly to you.
This is true in situations where you don’t have immediate customers for your products, resulting in overstaying in the warehouse.
This increases the warehousing charges hence becomes a liability if you fail to find customers.
You can minimize this by conducting a proper analysis of the market and understanding its dynamics.
Are there Any Risks Associated with E-commerce fulfillment?
Yes. There are risks that you are likely to get when using eCommerce fulfillment. Such risks include:
Shrinkage is a risk that results from damage, loss, or theft of your products.
The effects of shrinkage are that you end up having fewer sales, which decreases your profit margin.
Most eCommerce fulfillment centers have a shrinkage allowance for their customers to cushion them on its effect.
However, it would be best if you minimized this risk to maximize your profitability.
You can achieve this by checking with a center that has the lowest shrinkage allowance possible.
Such a center handles your products safely, and you have a guarantee of maximizing your profit.
· Poor Customer Service
How you communicate with your customers says a lot if they are going to purchase your product.
In commerce fulfillment, part of this customer care service is not within your control but your eCommerce fulfillment provider.
If your provider has poor customer care services, then it runs a risk of affecting your customers.
It is therefore critical that you check how a particular provider handles their customers before engaging their services.
· Complicated Software
An eCommerce fulfillment works through the use of the software.
This reduces the need for your physical presence within the center.
However, if you don’t understand how the E-commerce fulfilment software operates, it becomes a challenge for you to enjoy the services.
You might have to hire another party to operate the software, which reduces your know-how on your stock.
The best option is to have software to fully understand or have a trusted person to handle it on your behalf.
What are the Costs Associated with E-commerce Fulfillment?
We can breakdown the cost associated with an eCommerce fulfillment as follows:
· Initial Setup Fees
This is a one-time fee that you pay to your fulfillment.
The amount you pay depends on your business’s complexity and how you want to customize your business.
Other factors that determine the initial set up cost include your type of stock, getting it from your supplier, and delivering to your customer.
· Receiving and Intake Cost
There is a need to have a process of receiving your product and stock-taking it.
Such processes attract a fee that varies depending on your eCommerce fulfillment provider.
This fee consists of all the services that your provider takes to manage your inventory.
This is from the time your inventory arrives at their warehouse to the time it gets to your final consumer.
Factors that affect this cost include the type of stock you have and your fulfillment center.
· Storage Fees
There is a need to store your stock once it reaches your eCommerce fulfillment center.
This storage attracts a fee from your fulfillment provider.
This fee depends on your product’s space and the type of provider that you engage for your services.
· Order Fulfillment Fee
This is a fee that your provider charges in the process of picking and packing your customer’s order.
The fee covers the activity of picking and packing your client’s order and the packaging material.
The order fulfillment fee can either be a flat rate or a base rate plus an extra cost.
A flat rate fee is constant regardless of the packing product.
A base rate fee is a constant fee plus an additional cost, which is a percentage depending on your product’s packing.
· Shipping Cost
The shipping cost is the cost of transporting your client’s order from the fulfillment center to your client’s destination.
Most eCommerce fulfillment centers provide logistics support for the goods to reach the clients’ destination.
You, therefore, have to pay for this cost before or after the shipment process.
It also varies depending on the fulfillment provider handling your cargo.
· Return Fees
The return fee is the cost of returning your client’s order from their premises to the warehouse of your fulfillment provider.
This depends on the type of order fulfillment center you are using, the return policy, and the kind of defect on your product.
· Account Management Charge
This is a flat rate charge that your provider offers for handling your accounts.
This charge covers all the customer-related services that your provider handles on your behalf.
It may be a flat rate charge or have a varying percentage depending on your provider’s preference.
How Long Does it take to Receive Goods in E-commerce Fulfillment?
E commerce fulfillment center
How long it takes to receive your goods in an eCommerce fulfillment depends on your eCommerce fulfillment provider.
However, an effective provider should ship your product as soon as possible.
To achieve this, your provider should be in a strategic location close to its customers.
In most cases, an eCommerce fulfillment should deliver your products within three days.
Which Goods can I order Under E-commerce Fulfillment?
You can order virtually any product in an eCommerce fulfillment.
However, you need to ensure the product is legal within your jurisdiction.
You can order common products from an eCommerce fulfillment include cosmetics, apparel, electronics, and supplements.
Other products are pet accessories, toys, and accessories.
What entails E-commerce Fulfillment?
Ecommerce fulfillment entails several activities.
These activities include shipping your goods from your supplier to your eCommerce fulfillment provider’s warehouse.
It also involves storing the goods and pick and pack the goods for shipment to the final consumer.
These activities end when your customer either gets satisfied or returns the goods.
How does the Shipping of Goods Take Place in E-commerce Fulfillment?
There are different means that you can use to ship your products in an eCommerce fulfillment. Such means include road transport, rail transport,air freight and ocean freight.
Ocean and air shipment are ideal shipping methods of getting your products from your manufacturer.
Road transport is the common method of shipping your product from your order fulfillment provider to your customer.
Which Equipment Facilitates eCommerce Fulfillment in a Warehouse?
We can categories the equipment that you should have in your eCommerce fulfillment warehouse into the following categories:
· Storage Equipment
Fulfillment center storage facilities
Storage equipment is what holds your product while it is in your warehouse.
You can have different storage equipment depending on the type of product you are handling.
Common storage ranges from the shelves that you place your goods, sacks, and other specialized equipment.
You have to consider your warehouse space before selecting the storage equipment to use.
· Material Handling and Transportation Equipment
Material handling equipment is used to move the cargo from one point to another within the warehouse.
It also includes the transportation machines for your goods from the supplier to the warehouse and within the warehouse.
Common material handling equipment here include lift trucks, cranes, and forklifts.
You can also have conveyor belts and walkie stackers to handle your goods.
The function of this equipment is to hold your product in position when undergoing processing or manipulation.
Examples of such include hoists and clamps, and work tables.
· Packing Equipment
You have to package your product properly before shipping it to your customer.
For you to achieve this, you need appropriate tools and equipment.
Standard packing equipment include boxes, bags, packing tables, sealers, scales, and label printers.
This is a piece of essential equipment that facilitates the stocktaking of your products within the warehouse.
They help in knowing the volume of stock left in your warehouse.
Standard barcoding equipment that you should have include printers, barcode readers, and the applicable software.
You have to consider several aspects of your warehouse before deciding the right equipment to use.
For instance, you have to consider the warehouse layout and size.
The equipment you select should move within your warehouse with ease without interfering with its arrangement.
The management software for your warehouse should also be secure and easy to operate.
One should not be able to interfere with the software, and it should also enhance the performance of your warehouse.
Are there Inventory Storage Plans that I Can have for My ECommerce Fulfillment Warehouse?
Yes. There are different inventory storage plans that you can employ in your eCommerce fulfillment warehouse.
Proper inventory storage helps in minimizing product theft, breakage, and ensures the quality of your product.
Common methods available for selections include:
· Like with like Inventory Storage Method
This method involves planning your products depending on the color, size, and category.
That is, you can arrange products of the same colors or size in the same place.
This is a simple yet poor way of arranging your inventory.
This is because you can have different products of the same color or sizes together even if the products are other.
For instance, you can arrange machinery and toys together since they are of the same color or size.
This method can lead to loss or damage to your products.
It also slows down the picking and packing process for your goods, leading to delays in delivery.
· Chaotic Inventory Management
This method involves storing your products without particular order.
This arrangement leads to storing different products together.
You can have cosmetic products with consumer products together.
Operating this inventory storage method works best if you include software management, which can help you find each product’s location.
However, it is a method that can lead to slowing down the delivery of your customer’s product.
This is not what you should aim to achieve.
· Volume Inventory Storage
Volume inventory storage involves arranging the products as per their volume.
As such, you can place products that have a higher turnover close to where you are packing them.
If you have slow-moving products, you can place them further from the packing location.
The essence of this method is to reduce the packing time and movement of pickers within your warehouse.
It is the best method to use if you have a large business since it reduces the picking time for your product.
· Class Inventory Storage
Using this method entails having products of a particular class together.
The same class products have a common trait, like similar products or those that sell together.
You can also have a class with the same turnover rate or items you can pack in the same procedure.
The essence of this is to facilitate the picking and packing and packing process of your product.
· Mobile Shelf-based Storage
This is an inventory storage method that involves robots’ use to collect products from different shelves.
It helps in reducing the labor force in your warehouse and also to increase efficiency.
How do I select an Ideal Fulfillment Warehouse provider for My Business?
When selecting the best fulfillment warehouse provider for your business, you have to consider the following factors
· Economic Sense
The warehouse provider for your business should make economic sense when you engage them.
This should be in terms of the total cost they charge and the services they offer.
You also have to consider the shrinkage allowance that a particular warehouse provider gives you.
This should be as minimal as possible.
· Customer Expectation
You have to consider what your customers want and if your warehouse provider can safely handle them.
Your provider should also have the capabilities of packing the products properly and ship them to your customers.
Your return policy should be compatible with that of your warehouse provider.
This includes them having a schedule for shipping your clients; returns and space for packing these returns
How do I Start an ECommerce Fulfillment Warehouse?
Starting a functioning eCommerce fulfillment warehouse for your eCommerce order fulfillment involves the following:
Ecommerce fulfillment warehouse
· Understand your Warehouse Space
You have to understand the space that you need to establish your warehouse effectively.
Such a space should be sufficient for storing the goods that you will be receiving.
You also have to consider the other activities that will take place within your warehouse.
Such activities include space for receiving your goods, room to accommodate dead stock and returns, and packaging space.
If you have expectations of increasing the goods you are receiving in the future, you should have a space allowance for that too.
· Understand the needed Equipment
Equipment facilitates the effective handling of goods you receive into your warehouse.
There are four key equipment types that you need to consider for your warehouse.
They include storage equipment, material handling and packing equipment, transport, and positioning equipment.
The equipment you purchase should be relevant to your warehouse and facilitate its effective working.
· Automation of Repeating Processes
Some functions within your warehouse require minimal human interaction.
It would help if you automated such activities.
Also, you can check for activities that are repetitive and either automate or eliminate one function.
For instance, you can have a barcoding system to eliminate the need to repeat the counting process.
· Pick Path Optimization
You have to consider the pick path method you are to have for your warehouse.
Common pick path methods available are wave picking, zone picking, and batch picking.
You also have to consider having a linear warehouse where your staff can pick run to the closest shipping point.
While picking your orders, it is important to fulfill one order before moving to the next.
When storing goods in your warehouse, you should consider having goods that customers purchase together in the same storage area.
This ensures there is a seamless picking of your order.
· Warehouse Rules and Regulations
Rules and regulations establish a [proper working environment for your staff and show your organization’s level of organization.
When coming up with these regulations, you have to consider your workers’ safety and the workflow procedure.
You also have to establish the quality control standards that facilitate the operation of your warehouse.
Such measures can include how to report damaged and poor-quality products and how to store them.
Training impacts useful knowledge to your staff and helps in the smooth operation of your warehouse.
There are different levels of training that you can have for your workers.
For instance, you can train machine and equipment operators on how they are going to handle them.
You can also train customer service workers on how they are to communicate and treat clients.
Effective training minimizes warehouse accidents and maximizes the functionality of your warehouse.
· Having the Right Warehouse Management Software
It is an easy way of understanding what comes in and out of your warehouse.
You can also understand the volume of stock that are on different levels of your warehousing.
When searching for an effective warehouse management software, you have to consider certain elements.
They include key alerts, scalability, ease of integration, pick and pack, and workflow management protocols.
Which Best Order Packing Practices for ECommerce Order Fulfillment?
You can employ different order packing practices on your eCommerce order fulfillment, including:
· Rescanning Different Order Products
Tre is a need to rescan the order products before packing them.
This ensures your clients receive quality products when they order from you.
It also reduces returns if the products are of poor quality or are not what the client ordered.
· Correct Packaging Material
Always ensure you have the right packaging material for packaging your products.
That is, in terms of the material and size of the packaging.
Right packaging material facilitates the packaging process, which translates into reducing the time your clients receive their orders.
When selecting the right packing material, you have to include the infill instructions and relevant material. this enhances the packing process.
Is E-commerce Fulfillment the same as E-commerce Shipping?
No. eCommerce fulfillment is not the same as eCommerce shipping.
Ecommerce fulfillment entails several activities.
They include receiving your goods from your supplier, shipping them to the warehouse, picking and packing your customer order, and shipping them to them.
Ecommerce shipping entails all the activities necessary to transport goods from the warehouse to the customer’s location.
Ecommerce shipping is part of eCommerce fulfillment.
What are the Key Activities that must be Managed to Achieve World-class E-commerce Order Fulfillment?
If you want to achieve a world-class e-commerce order fulfillment, you have to manage the following activities keenly:
· Inventory Control
There is a lot about your inventory that you need to perfect for your eCommerce fulfillment to succeed.
Among the activities you have to bote here include having the right product and the right quantity.
This is to ensure you don’t run out of stock.
You can always arrange with your supplier to replenish your inventory when it is about to finish.
Inventory control also involves ensuring your stock is in good condition, and there is minimal interference with it.
That is, there is no theft or damage to your product.
It is important to have a proper record for your inventory, including knowing what leaves and what comes.
Logistics forms the backbone of a successful eCommerce order fulfillment.
It is important to have a working logistic system for smooth operations.
Logistics includes having an adequate transport system and a working warehousing system.
An effective transport system is useful in transporting your cargo from your supplier or manufacturer’s warehouse.
This way, you always have an assurance that your product won’t delay along the way to the warehouse.
A transport system ensures you can safely and timely deliver your customers’ orders from your warehouse to their premises.
A warehousing facility is vital for your cargo’s safe storage as you wait for your customer to order.
A proper warehousing system should have the necessary equipment to handle your cargo safely.
In some cases, you may need specialized equipment to store your cargo.
This is to ensure that the cargo does not spoil while still under storage.
· Customer Care
How you handle your customers before and after ordering from your eCommerce order fulfillment determines if you retain them.
Having excellent customer care services is key tomaintaining and increasing your customer base.
Customer care services include effectively communicating with your customer about the progress of their order.
You also have to listen to their concerns and address them properly.
You have to effectively reach out to potential customers about the products you are selling and how they can get them.
Effective marketing skills attract potential buyers increasing your profit margin.
It is a proper way of positioning your eCommerce order fulfillment
How do I Find an E-commerce Fulfillment Center?
When looking for an eCommerce fulfillment center, you have to consider the following:
· Terms and Condition of Service
The eCommerce fulfillment center that you select should clearly state the terms and conditions for operation.
This helps you understand how you will function with the particular center and solve any dispute arising.
You can consider asking for the volume of your cargo they can handle and the type of services they offer.
· Flexible Infrastructure
Check for the infrastructure options that a particular eCommerce fulfillment center has.
An ideal infrastructure should handle your goods properly and ship to your customer within the shortest time possible.
The methods of shipment of your goods should take into account the location of your supplier and customer.
They need to have different means of shipping your goods.
An eCommerce fulfillment center with various infrastructure is the best option.
· Verified Business Address and Preference
While there are numerous eCommerce fulfillment centers for your selection, there are also cons in the industry.
You, therefore, have to ask a given provider to show their certification before you engage them.
You also need to identify their physical location, which helps you know how to access them and your product’s storing location.
· Distribution Network
Understanding the distribution network of a particular center is critical in determining the shipment procedure for your goods.
An effective fulfillment center should allow for your goods’ speedy delivery to the warehouse and your customer.
· Space for Growth
The fulfillment center you select should allow you to grow your business.
That is in terms of the volume and variety of your cargo they can handle.
You can consider the warehousing space and specialized equipment that a particular center has before selecting it.
What is the Difference Between the Distribution Center and E-commerce Fulfillment?
An eCommerce fulfillment is a process that depends on a third-party logistic provider to complete a client’s order on an eCommerce retailer’s behalf.
A distribution center’s function is to facilitate the receiving, temporary storing, and distributing of goods depending on the orders.
A distribution center bridges the gap between customers and suppliers.
Ecommerce fulfillment works effectively if you have a strategic location.
A distribution center does not depend on the site for it to operate.
A distribution center gives you control of your products, whereas your products’ control under eCommerce is limited.
A distribution center is costly due to the various services that they perform on your products.
However, the delivery process of a distribution center is longer compared to that of an eCommerce fulfillment.
You can store your products within an eCommerce fulfillment center for a longer period thankeeping them in a distribution center.
What are the Models of E-commerce Fulfillment?
Ecommerce fulfillment is available in three models.
The type of model you select for your use depends on which products you want to sell, your orders’ volume, and inventory management.
· In-house eCommerce Order Fulfillment
This model features a seller who does all the fulfillment process by themselves, thus excluding a third party’s need.
It is an ideal model if you are a small-scale seller and do not have high order volume since it is time-consuming.
An increase in the order volume necessitates the need to change to a different fulfillment model.
The advantage of in house order fulfillment model is the low capital requirement that it has.
This means you can start and manage this model easily.
In house order fulfillment
However, there is a need to have space for your inventory, which can be costly.
Space can either be your warehouse or a rented one.
· Third-party E-commerce Order Fulfillment
This is the best model to use if your processes are complex, making it difficult for you to handle.
Such a situation is when your order volume increases, meaning you cannot satisfy all your clients without delay.
In this model, you have to hire a third party to handle your business’s major processes.
These processes include picking and packing, shipping to your customers, and collecting goods from your supplier.
This lets you handle other functions of your business, which aims at increasing your profit.
For instance, you can specialize in marketing, receiving orders, and your business’s customer relationship aspect.
This model has several advantages.
For instance, it streamlines all the processes involved ensuring smooth operation.
It frees your time, thereby allowing you to focus on other aspects, which increases the profit margin.
The third-party model is cost-effective since you don’t handle the burden of certain expenses like warehousing.
However, the use of this model offers several limitations.
For instance, it reduces control of your products, which creates an avenue for shrinkage.
A high shrinkage rate can significantly reduce your profit margin.
Allowing your third party to handle the customer service aspect is risky.
In such cases, if your third party does not professionally handle your clients, it might destroy your reputation and make you lose your clients.
Third party order fulfillment
This is an eCommerce model, whereas you don’t store or own the product as a seller.
The product remains with the manufacturer until you find a seller.
Once you find a seller, you forward the order to your manufacturer.
It is then the responsibility of your manufacturer to ship the product to the client’s address directly.
Dropshipping places the entire fulfillment process to your manufacturer.
You, therefore, don’t have to worry about the logistics or warehousing aspect of the business.
However, dropshipping reduces your profit margin compared to the other models.
What Influences the Choice of my eCommerce Order Fulfillment Model?
Before selecting a particular model for your use, you need to consider the following factors:
· Volume of Operation
Considering the volume of operation helps in determining if you are serving your customers effectively.
A low volume operation implies that you can satisfy your clients; hence you may opt for an in-house eCommerce order fulfillment.
However, if you have a high-volume operation, you might have to consider selecting a third-party e-commerce fulfillment model.
· Order Processing System
You need to consider the inflow of your orders. If you have many orders within a single day, you have to check how to handle them.
One way of handling this is by installing an enterprise resource system to manage your orders.
If that is not enough, you have to consider hiring a third party to handle your eCommerce fulfillment orders.
Whichever choice you decide, satisfying the needs of your customers should be your priority.
· Procedure for Packing and Shipping
Effective packing and shipping of your product facilitate customer reception of your product.
If you aim to personalize your customer’s package, you need to consider in-house eCommerce fulfillment.
Third-party or drop shipping models are ideal if you are shipping products that do not require personalized packaging.
You have to consider the warehousing aspect of your business.
Small volume order business means you can carry out your business within a modest space.
However, if you have a large volume, you have to consider a warehouse.
You can own a warehouse for your storing your products or hire a third-party warehousing service.
Hiring a third party is cheap since you have to pay for the space that your cargo occupies. Another option is dropshipping.
This is where you don’t handle your business’s warehousing aspect, but instead, your manufacturer handles it for you.
· Inventory Management
You can easily manage an inventory of a small order fulfillment business since the stock is not that huge.
However, if you increase your store, then you have to consider other options.
For instance, you can opt to purchase an inventory management system or hire a third party to manage the inventory for you.
If you evaluate your business and don’t want the inventory aspect, you can opt for dropshipping.
Dropshipping does not require you to have any inventory, but instead, your manufacturer handles it on your behalf.
What is the Difference Between Third Party eCommerce Fulfillment and Self-eCommerce Fulfillment?
Third-party fulfillment is where you engage the services of a third party to handle your fulfillment needs.
These services include receiving your goods, picking and packing your customers’ order, and delivering them to them.
Self- eCommerce fulfillment is where an organization handles all the fulfillment processes by itself.
Here, they ship, warehouse, package, and undertake customer relations.
Self-eCommerce fulfillment gives you control of the entire process.
That is, you get to control your stock levels, carry out an inventory, and personalize your packaging.
However, it is a time-consuming process.
This is because you are responsible for the entire process up to when your client receives their goods.
It also denies you the time to specialize in increasing your customer base through marketing. Self-eCommerce fulfillment is expensive.
Self fulfillment model
This is due to the several overhead cost that you have to cover.
For instance, you have to cover the cost of warehousing, packaging, and delivering the products to your customer.
Third-party fulfillment is relatively cheaper compare to self-eCommerce fulfillment.
This is because you pay less on the overhead cost compared to self-eCommerce fulfillment.
Self-eCommerce fulfillment limits your ability to grow your business.
This is because as you grow, your overhead expenses increase.
It also becomes difficult to serve multiple customers in different locations at the same time.
However, third-party fulfillment allows your business to grow since the overhead cost is lower.
For instance, you may be required to hire or have your warehouse costly under self-eCommerce fulfillment.
In a third party, the warehousing cost depends on the space that your cargo occupies.
Choosing a third-party fulfillment provider that has multiple locations allows you to serve different customers simultaneously.
This increases your growth potential.
What is the difference between Third Party eCommerce Fulfillment and Dropshipping?
Third-party e-commerce fulfillment is a process where you engage the services of a third party.
These services include storing your products, picking and packing orders, and planning logistics on how they reach your customers.
Dropshipping is where you sell products that you have not purchased from your supplier.
Once the seller agrees to buy your products, you contact your manufacturer and deliver the goods to your customers.
Dropshipping relieves you of the burden of having a warehouse.
This is because the goods remain with your supplier until you find a suitable buyer.
Dropshipping is relatively cheaper compared to third party eCommerce fulfillment.
There are no costs such as warehousing and logistics in dropshipping since your supplier handles them.
Both third party and drop shipping do not have the element of personalization and branding of the products.
In most cases, the packing takes place in plain packaging material or as per their specifications
The third party allows you to have an inventory; hence you have control of your stock levels.
In drop shipping, you don’t have a list; thus, you have to fully rely on your supplier’s production or stock level.
Relying on your supplier’s stock levels can be dangerous when they want to downsize their production or are out of stock.
In most cases, the earnings from drop shipping are less compared to third party fulfillment.
This is because, in drop shipping, you get a commission on the sales you make.
Dropshipping makes you act like a salesperson.
In third-party fulfillment, you control the goods’ pricing; hence you can sell them as per the market forces and your profit margins.
Third-party fulfillment allows you to be the boss of your products.
However, both drop shipping and third-party e-commerce fulfillment achieve the same objective.
That is, they deliver the goods to your final customer.
Can I Outsource My E-commerce Fulfillment?
Yes. You can outsource your eCommerce fulfillment.
It is advisable to outsource your eCommerce fulfillment when the tasks increase, thus preventing you from satisfying your customers well.
Outsourcing has several benefits.
For instance, it saves you time and money.
By outsourcing, you are leaving certain processes to professionals.
This means that you get to improve your business processes such as packaging and timely delivery of clients’ products.
There are factors that you should consider when outsourcing your eCommerce fulfillment.
These are; timely delivery, low shrinkage allowance, warehouse capacity, and customer relations.
You also have to consider the cost of outsourcing to a particular firm.
What are the Considerations for My Return and Refund Policy Under eCommerce Order Fulfillment?
You can include the following when determining your return and refund policy for your eCommerce fulfillment order:
· Have Easy to Understand the Return Policy
There is a need to set out the return policy you need to have for your order fulfillment.
This helps your buyers understand the conditions under when to return the product and the procedure.
· Place the Return Deadlines
You need to clearly state the durations to accept returns after the client has purchased your product.
This reduces returns in which the client is at fault and also helps your business in moving forward.
This also helps predict the revenue you can earn after a given duration since you can factor in the possibility of returns.
· Label Returns in your Warehouse
You have to separate returns present in your warehouse and label them.
This is to identify the exact quantity of your order returns.
It also prevents mixing these products resulting in other clients receiving the same package.
· Accept Liability for Return Shipping
It is always good to have your clients feel you care for them.
This increases your customer care relations and translates into more sales.
One way of doing that is by accepting to cover the cost of return shipping.
This way, the client knows they won’t have to pay more when the problem is not their own.
Understand your profit margin
A business makes sense when there is a profit.
Therefore, you always have to ensure that your return order is not that high compared to your sales.
A higher return margin reduces the sales level, which translates to a reduced profit margin.
If you have a higher return, you need to check or change your supplier or storage process.
How can I Meet My Clients’ Expectations in eCommerce Order Fulfillment?
If you want to meet the expectations of your clients in commerce order fulfillment, you have to get the following right:
· Be Strategic
You have to be strategic in everything you do in an eCommerce fulfillment.
This is from your location, the product you sell, marketing, and your product’s pricing.
Location is critical in eCommerce order fulfillment.
You have to be strategic as to the position of your warehouse.
Such a position should allow you to ship your goods to your clients within the shortest time possible.
It should also allow for the fast and secure shipping of your goods from your manufacturer.
· Select the Best eCommerce Model to Use
You should carefully study the best model to deploy on your business for maximum returns and efficiency.
Serving your clients to their satisfaction should be your top priority.
If your business is big, you have to outsource part of it to a 3rd party logistic provider.
This ensures effective handling and fast handling of your clients to their satisfaction.
Outsourcing a small business can be a bad idea since it is costly due to the associated overhead cost, leading to loss-making.
· Understand the Entire eCommerce Fulfillment Process
Get to understand all the processes involved for a complete eCommerce fulfillment process. for instance, you must remember that some clients may want returns on their products.
You also have to put into consideration an effective payment method for your goods and communicate that to your clients.
This ensures there is a smooth operation of all the activities in an eCommerce fulfillment process.
How can I Optimize my E-commerce Order Fulfillment?
You can optimize your eCommerce order fulfillment by checking on the following:
· Insist on a Seamless Integration
You need to have a seamless integration of information between your eCommerce order fulfillment provider and your supplier.
This allows you to know when your stock is near replenishment so that you can place an order with your supplier.
This is important because it allows you to satisfy your customers when they need your products and maximize your profit.
One way of doing this is by having an order management system that facilitates this information’s passage.
· Allow for Order Transparency
Order transparency allows for real-time tracking of orders by your customers.
This prevents the thought of purchasing from another buyer.
You also get to know of your order’s progress from your supplier. by understanding this, you remove the burden of worrying about product theft or damage.
Transparency is also important in allowing your customers to know if a certain product is available when browsing your website.
· Selecting the Right eCommerce Fulfillment Provider
Your eCommerce fulfillment provider handles most of your work.
That includes collecting your goods from your supplier, stock taking, delivering them to your final consumer, and accepting returns.
As such, there is a need to have a provider who undertakes these duties efficiently and satisfies your customer.
When you have the right provider, there is a need to evaluate their performance regularly.
This ensures that they perform their work to the best level.
· Have an Alternative Shipping Plan
Most eCommerce fulfillment service providers offer shipping means of your goods to the customers’ location.
However, like any other business, delivery of your cargo may delay due to different reasons.
This should not happen since you are likely to lose your customers or even have a bad reputation for your business.
You, therefore, need to go the extra mile and plan for such eventualities.
Such planning ensures the timely delivery of goods to your customer, which increases your customer base due to satisfaction.
· Be Strategic on the Location of your Warehouse
You can optimize the performance of your eCommerce fulfillment by being strategic on where to locate your warehouse.
Proper location facilitates the quick delivery of your goods to the final customer.
This is ideal as customers feel you are addressing their needs quickly and effectively.
Always carry out market research and check on the available eCommerce fulfillment providers before selecting the perfect one.
· Communication is Key
Customers want to feel they are part of your business, and you are attending to their needs.
This is a key way of improving your eCommerce fulfillment.
You can do this by constantly letting them know of the progress of their order.
That is when you have received their order, when the order is under processing, when shipping begins and when they receive it.
You can also show concern when they call to request a return and always work quickly to address their concerns.
· Accepting Returns
When a customer calls requesting a return, it is appropriate that you accept liability and work towards addressing it.
Returns may be due to different reasons, but you have to admit it when the fault is on your part.
In short, there are many factors you should consider in E-commerce shipping.
We hope, you got all information you have been looking for.
However, in case you have any question or inquiry, contact BanSar team now.