Most online shoppers don’t think about the wide range of people, technologies, and processes involved between clicking “purchase” and receiving a product at their door. This system is called order fulfillment, and it comes in many different forms—depending on the size and scope of the eCommerce business.
As your company grows, your order fulfillment process will inevitably change, requiring faster and more scalable operations. With recent advances in artificial intelligence (AI) and machine learning (ML), many businesses are implementing modern eCommerce platforms, shipping applications, compliance software, and other third-party solutions that automate internal workflows and ultimately lead to a better customer experience.
To promote growth and scalability for your business, it’s important to understand how order fulfillment works, the common challenges that today’s online merchants face, and the benefits of introducing automation into the process.
Let’s dive in.
How order fulfillment works for eCommerce merchants
Order fulfillment processes look different depending on the business’ size, order volume, customer base, and so on. For example, a manufacturer with three products and a dozen clients in the Midwest will have a less complex approach than a retailer with hundreds of products and a customer base spanning multiple countries. The manufacturer may be able to handle all of its fulfillment in house, while the retailer will certainly require assistance from third-party vendors.
Here are the three main approaches to eCommerce order fulfillment:
- In-house: The organization manages fulfillment internally, which means it’s responsible for receiving the order, packing the item, and shipping it to the customer. This approach is often used by businesses that are just starting out and only have to execute a low volume of orders. But as the business grows, they exhaust their resources and must seek help externally. After all, to make the in-house approach scalable, the merchant must purchase and maintain its own warehouse space, staff, equipment, trucks, insurance, and warehouse management system (WMS)—which will talk more about later.
- Third-party: Rather than managing inventory, shipping, logistics, and analytics internally, the organization outsources these tasks to third-party providers—who already have the tools and expertise necessary to get the job done. Here, the merchant saves significant time and money, but gives up control over the order fulfillment process, which matters more to some companies than others.
- Dropshipping: The organization doesn’t manufacture products, keep inventory, or fulfill orders, and instead focuses entirely on selling and marketing products online. This is the easiest way to start an eCommerce business or test out the viability of new markets, as it requires very low overhead. However, with zero control over product quality, dropshippers often end up leveraging price as they’re selling point, rather than the product itself.
Regardless of your approach, every order fulfillment process goes through these three stages:
- Receive the inventory: The organization—or third-party provider—inspects, verifies, and accepts a shipment of products into its warehouse. Then, each product is labeled with a SKU number or barcode so it can be tracked properly.
- Process the customer order: Once a purchase is made online, the order details are sent to the fulfillment warehouse, manufacturing, or logistics department, where the product is taken off the shelf—or, in the case of customized items, put through production—and made ready for shipment.
- Deliver the product to the customer: Depending on the product’s size, weight, and end destination, the shipping department plans and executes the best method for delivery. Once the customer receives the item, the order fulfillment process is complete.
For many legacy order fulfillment systems, tasks within each of these stages are done manually, often resulting in mismanaged inventory, lost items, delayed shipments, and incorrect deliveries. On top of providing remedies to these problems, order fulfillment automation saves time and money, allowing you to put more focus toward optimizing sales, marketing, and customer service.
Common challenges with the order fulfillment process
Whether you’re selling B2B or B2C, your eCommerce site will need to crack the order fulfillment code by addressing one issue at a time. Companies that succeed in the highly competitive eCommerce landscape implement modern tools and processes to get over the following obstacles:
- The influence of Amazon: Over the past decade, Amazon has shifted the average consumer’s expectations significantly. In a world where you can purchase something online and have it delivered to your home in under 24 hours, businesses must do everything in their power to speed up the order fulfillment process.
- Expensive shipping: Next to cost price, the cost of shipping is a huge driver when it comes to pricing items online—and high shipping fees play a big role in cart abandonment rates. While every business is different, partnering with the right vendors and integrating the right shipping tools will help keep delivery costs low for you and your customers.
- Fluctuations in demand: Predicting increases and decreases in demand is difficult, especially for new businesses or new product releases. And when predictions are wrong, businesses experience over- or under-stocked inventory, extended shipping times, higher shipping costs, and other issues that hinder the customer experience. Luckily, you can now integrate software that intelligently tracks and predicts fluctuations in demand so that you and your team don’t have to.
- Inventory management problems: Your eCommerce business cannot successfully expand to new sales channels and territories without proper inventory management. But with the right tools, namely inventory management and warehouse management software, you can avoid problems like dead inventory and pending orders with no stock.
- Order tracking problems: Today’s consumers expect to receive regular updates regarding the status of their eCommerce orders. This means that businesses must integrate technology—powered by IoT—that tracks items in every stage of the order fulfillment process.
Implementing a warehouse management system
We can’t talk about automating the order fulfillment process without talking about warehouse management systems (WMS).
It’s important to note that WMS is different from inventory management software (IMS), yet often mistaken as the same. WMS controls and automates a wide range of warehouse operations, including inventory management—so IMS is simply a cheaper, more lightweight software. It should also be noted that WMS and IMS don’t always act as standalone systems. They often come as built-in modules with other key business software like enterprise resource planning (ERP) and supply chain management (SCM) systems.
A modern WMS provides the following features and functionalities:
- Barcode scanning and ID tagging.
- Real-time product tracking capabilities.
- The ability to view incoming and outgoing shipments, item locations, stock volume, and employee workloads.
- Automated reordering systems.
- Data analytics and business intelligence tools.
An advanced WMS will help automate many order fulfillment tasks, from receiving inventory, to processing orders, to shipping out products. But remember, to get the most out of this software, it must integrate seamlessly with other technologies in your business’ ecosystem, such as your eCommerce platform, product information management (PIM) system, ERP, and so on. To fully optimize the fulfillment process, growing businesses running on outdated systems must reimagine and revamp their entire technology stack.
Benefits of order fulfillment automation
There are many ways to optimize eCommerce order fulfillment. You can employ third-party services to handle inventory management and shipping, or integrate powerful software with automation capabilities like WMS. Every business is different, so there’s no one-size-fits-all solution. But if you’re constantly implementing and updating new tools and processes that reduce manual work, then you’re on the right track.
With a modern, automation-focused order fulfillment system that’s customized to your organization, you’ll experience the following benefits:
- Eliminating manual processes: With AI- and IoT-driven software, you can reduce the need for manual data entry, which means fewer human errors, lower payroll costs, and higher productivity overall.
- Streamlining collaboration with third-party vendors: By integrating your eCommerce platform with WMS, IMS, shipping applications, and other order-fulfillment-related services, you can establish a system that automatically sends the right information to the right people at the right time. For instance, when a customer places an order online, all the necessary details for that order—such as the product specifications, as well as the customer’s name and address—are instantly routed from the eCommerce platform to the applicable vendor, so that they can effectively move the process forward.
- Delivering stronger customer experiences: If you optimize inventory management, shipping, order tracking, and analytics, you’ll provide superior customer experiences—where buyers don’t get stuck with excessive shipping fees, they receive their purchases on time, and they can track the status of their orders with ease.
Team up with Codal to optimize order fulfillment for your business
For growing businesses in today’s highly competitive eCommerce landscape, order fulfillment automation is a no brainer. With the right tools and process, you can establish a system that saves time and money, while also keeping up with consumer expectations and industry standards.
Here at Codal, we’ve helped optimize order fulfillment processes for many online retailers, ranging from fashion, to outdoor gear, to food and beverage. Recently, we launched an eCommerce storefront for one of our clients in the alcohol industry, which involved building a cutting-edge, highly-automated order fulfillment system from the ground up. You can learn more about that project here.
Our award-winning team has over thirteen years of experience designing, developing, testing, launching, and maintaining eCommerce solutions that help our clients better serve their customers, streamline internal workflows, and maintain a competitive advantage in their niche. In addition to a global staff of the world’s best designers, engineers, QA analysts, and more, Codal has partnerships with many innovative technology providers in the eCommerce space—namely Shopify and BigCommerce. In other words, we’ve got the technical expertise and resources necessary to take your eCommerce business where it needs to go.
Interested in learning more about leveraging order fulfillment automation for your business? Get in touch with a member of our team today!