How To Measure And Reduce The Order Fulfillment Cycle

How To Measure And Reduce The Order Fulfillment Cycle

The efficiency of the order fulfillment process plays a vital role for a retailer in customer satisfaction and loyalty.

The order fulfillment process involves storage, inventory, organizing, and shipping items with an efficient operation.

Read on to know more about the order fulfillment cycle time – what it contains, how to measure it, optimizing a supply chain order, and best practices that are helpful for retailers to improve their operations.

 Order Fulfillment process

Order fulfillment process

What Is Order Fulfillment?

Order fulfillment is a process of receiving goods, processing orders and delivering them to customers.

This process begins when a customer places an order and ends once customers receive it. However, if a buyer needs to return the order, order fulfillment also deals with the return transaction.

What Is Order Fulfillment

What is order fulfillment

Here are the steps included in the order fulfillment process:

  • Getting Inventory Shipments
  • Inventory Storage
  • Processing of Order
  • Shipping
  • Processing Returns

The order fulfillment cycle can be complex and expensive. However, some companies handle in-house order fulfillment, and others outsource this process to any third-party logistics company.

What Are Different Types Of Order Fulfillment?

Order fulfillment is a single component of the more effective supply chain process.

There are four significant types of order fulfillment: In-house, Outsourced, Dropshipping, and Hybrid.

In-House Order Fulfillment

It is an order fulfillment model where a business uses its own employees to manage the fulfillment processes.

Employees are responsible for handling all steps of the fulfillment process.

It involves storing and shipping the products on-site in a company-controlled location.

It is an ideal model for established companies looking to have end-to-end control over the complete operation.

However, some home-based startups also use in-house fulfillment processes due to low cost. Mainly for the businesses having small order volumes. Once they are well-established, they can go for a hybrid or outsourced fulfillment model.

Outsourced Order Fulfillment

Outsourced order fulfillment is when a third-party logistics or order fulfillment company handles shipping, storing, and order/refund processing.

Companies having insufficient storage space or staff usually go for this option.

In such a case, the third-party logistics employees are responsible for handling the complete fulfillment process from end to end.

3PL deals with receiving inventory from manufacturers to deliver orders to the customers. Inventory can be stored in a warehouse controlled by a third-party company.

Thus, companies don’t need to have their own warehouse facilities for outsourced fulfillment.

Dropshipping

Dropshipping is a process similar to outsourcing, except there is no need to manage the inventory.

The retailer doesn’t need to keep the items in stock. Instead, when an item is sold, the retailer can buy it from a third-party supplier.

The supplier can be a manufacturer to a company that acquires products from manufacturers and sell them to drop shippers.

The supplier deals with all orders and then ships them to the customers.

You will be billed for the products that you sell. It is a standard process model used by startup retailers and E-commerce businesses.

Hybrid Fulfillment

A hybrid fulfillment model is a mixture of the above order fulfillment options.

For example, a company handles some orders in-house, like custom products or items that need to be assembled before shipping.

They also use dropshipping services for non-custom items.

Some companies choose to use dropshipping model for the products that are purchased occasionally or companies that don’t want to store in-house, like oversized or expensive products.

It is suitable for companies that need more flexibility or looking for speedy expansion.

Understanding The Order Fulfillment Cycle Time

The order fulfillment cycle time is the amount of time between customers buying the products and getting delivered to their doorstep.

It is an essential factor that provides insights to retailers about the effectiveness of their order fulfillment process.

The order fulfillment cycle time involves the following steps:

Order Placement

The order fulfillment process starts once a customer makes an order through the retailer’s social media, website, or a third-party E-commerce platform like Amazon or Flipkart.

Once a retailer gets the order, a confirmation email can be sent to the customer.

Sourcing Required Goods

Depending on the E-commerce platform fulfillment model, the retailer may already have the specific product, and everything else needed.

If required products need to be shipped, this step comes once the order gets placed to ensure that the sourced goods don’t go to waste.

Order Processing

The order manufacturing step comes in different forms, and it depends on the products available in the store.

This step involves storing the products from the shelf, assuring the quality, packaging the product, and sending it to the shipping team for the companies with available inventory.

Order Shipping

The products that are ready to be shipped go to third-party carriers. The best shipping options depend on the size, weight, and dimensions of a product.

Measuring The Order Fulfillment Cycle Time

It is important to keep a low order fulfillment cycle time for staying competitive in the E-commerce industry.

However, measuring the cycle time can be challenging as the sourcing industry and delivery can’t be in retailers’ hands.

Measuring the order fulfillment cycle time is the first step to optimizing the process. Below are the factors that can affect the cycle time in different ways:

Source Time

Source time is known as the amount of time between a customer placing the order and the retailer receiving the raw materials and needed goods to complete the order.

This step shows the importance of having dependable suppliers and an efficient E-Commerce platform in place.

Measure order fulfilment cycle time

Measure order fulfillment cycle time

Production Time

The production time involves prepping, manufacturing, and packing the order. Once this step is done, the parcel will be ready to deliver.

Delivery Time

The delivery time is known as the period between a parcel leaving from the warehouse to the time customer receives it.

Measuring the total order fulfillment cycle time is easy, and it can be measured by taking a sum of the source time, production time, and delivery time.

For example, suppose a customer placed an order on April 5 and received it on April 10, overall order fulfillment cycle time is 5 days.

Improving The Supply Chain Order Fulfillment Cycle Time

Many retailers feel that delivering products on time is only proof of an efficient order fulfillment process.

However, more than 60% of consumers report that a single unpleasant experience is enough to discourage them from buying from a specific brand for a second time.

This fact leaves very little room for errors.

There is always room to improve the order fulfillment cycle times, which goes beyond shipping concerns.

Retailers need to look at the bigger picture of having an efficient system.

Consider Travel Time

The time needed for raw materials to reach the retailer’s warehouse plays a vital role in reducing the overall cycle time.

Sourcing materials from local manufacturers or warehouses can be helpful to minimize travel time, and it will also be beneficial to reduce shipping costs.

However, products from local wholesalers can be expensive, but it’s worth it because it reduces the transit time lowers shipping costs.

Order fulfillment cycle time

Order fulfillment cycle time

Analyze Warehouse Flow

The layout of a retailer’s warehouse affects the overall fulfillment cycle time.

Having an optimized space can be helpful for the workers to operate more efficiently within the area.

There are different ways of optimizing a warehouse. You need to shorten the distance between coordinating teams.

This step is helpful to reduce the travel time of getting a parcel from one team to another.

Moreover, it is also better to move necessary resources to highly utilized areas. Enabling workers to acquire goods within arm’s reach can be helpful to reduce handling time.

Implementing Supply Chain Technology

Supply chain technology has massively enhanced over the last few years. Nowadays, there is no room to track inventory manually and storing in a modern E-Commerce operation.

There are different warehouse management systems that help to automate the sourcing, production, and delivery process.

Implementing technology in the order fulfillment cycle helps reduce errors and move business operations quickly.

Why Is Order Fulfillment Important?

Nowadays, customers are used to two-day or next-day shipping options.

Thus, the quick and on-time shipments are high in demand.

When the order fulfillment process isn’t steady or timely, companies struggle to get the shipments delivered on time which isn’t good for your business.

According to the stats, more than 40% of customers say that they won’t shop from a retailer at least a month again after experiencing a delivery.

More than 35% of customers say they won’t shop from such retailers at all.

Importance of order fulfillment

 Importance of order fulfillment

Order fulfillment options directly affect the buying habits of customers. Customers need delivery options that are ideal for their needs.

Offering a mixture of fast and moderate shipping options can be helpful for customers to choose according to their budget and time limits.

Companies that don’t offer desirable options can lose their customers.

More than 40% of customers abandon their carts due to poor delivery options.

However, more than 50% of customers say they purchased from one company over another because they offered more delivery options.

If you are looking to have a competitive advantage, then it is important to deliver according to customer expectations.

Speedy delivery and return services are helpful to increase your sales. By improving your order fulfillment process, you can:

  • Reduce Shipping Costs
  • Reduce Operational Costs
  • Increase Your Customer Base
  • Focus on Sales
  • Enhance Customer Service

Challenges Of Order Fulfillment Cycle

It isn’t always easy to implement effective order fulfillment processes.

Businesses encounter complex challenges regarding demand, logistics planning, and inventory management.

Here’s a list of the most common aspects:

Inventory Management

Running out of stock is a quick way of discouraging your customers from shopping with you. Companies that successfully maintain optimal inventory levels do not need to worry about losing customers due to stockouts.

Demand Planning

It is essential to understand the demand for the products that you sell. In this way, you won’t risk overstocking.

Demand shaping can be helpful with this, and it involves using promotions and marketing for creating demand.

Logistics Planning

The shipping process is also crucial for retailers as a sale is important to them.

You need to ensure your shipping methods, care, and speed are required to get products delivered to the customers.

Otherwise, the order can be late, missing, or broken, which can be damaging for your sales and reputation.

Supply Chain Execution

Despite having the best planning, retailers run short of inventory, especially during sudden spikes in demand.

When demand reduces your inventories, you should be able to restock those items as soon as possible.

Working with manufacturers that can fulfill your orders quickly is essential.

Order Fulfillment Cycle Best Practices

Creating an efficient order fulfillment process is essential to win over customers and maintain the competitive edge.

There are different best practices to keep in mind that are helpful to improve order fulfillment processes.

Choose What Works Best For You

First of all, you need to use the fulfillment model that is ideal for your business.

The model needs to be flexible enough to handle the order volumes, sales channels, and customer locations.

If you sell tailored or made-to-order products, then the fulfillment process should be able to accommodate those difficulties without adding unnecessary delays.

Using Data For Making Decisions

Your technology needs to be supporting order fulfillment with real-time data, providing you inventory visibility and allowing more accurate demand predictions.

You need to make data-driven decisions for making purchasing and production easier to fulfill the demand and maintain enhanced inventory levels.

Order fulfilment best practices

Order fulfillment best practices

Clear And Effective Communication

With the help of better supply chain visibility, you can set clear expectations with deliveries and customers. You need to be transparent about returns and processes also.

Don’t Be Scared By Automation

Finally, you can influence warehouse automation to improve order fulfillment efficiency and accuracy for meeting your customers’ expectations.

Flexible automation solutions such as mobile robots can optimize picking routes in real-time, reducing travel time and improving picking efficiency.

Collaborative mobile robots help leverage machine learning and AI, guiding warehouse workers through tasks and helping them to work faster and reduce errors.

There isn’t a single fulfillment process that works for every business.

Whether you are moving to outsource the process to a third-party logistics company.

Or using a hybrid warehouse fulfillment model, what matters the most is finding the proper procedure that fulfills the needs of your company and customers.

The goal is to measure and reduce the order fulfillment cycle effectively.

Improving Order Fulfillment Cycle Time Is Important

The order fulfillment cycle can be the major difference between struggling to sustain customer satisfaction and winning customers loyalty for a fruitful business.

Making efforts to optimize this process and repeatedly pushing to enhance the cycle time can increase the growth and scalability of operations.

The pandemic has affected entire industries and the merchants that depended on just one or two suppliers.

Experts predict more diversification across sourcing, marketplaces, fulfillment channels, and carries to avoid this from happening again.

Bottom Line

Taking time to analyze, assess, and enhance your order fulfillment processes and systems by keeping track of your E-commerce fulfillment metrics will be helpful.

It will improve the bottom line. It can be beneficial to make life easier for you and your employees.

However, if you find that fulfillment processing takes too much time and resources, it can be ideal to consider outsourcing with a third-party logistics provider.

There are different benefits of outsourcing order fulfillment to a well-established and reputable 3PL.

It will be helpful to save your time and money, scale your business, and increase conversions while staying at the top of your order management performance metrics.

It can be helpful to make your customers happy with a streamlined fulfillment experience.

More Resources:

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