Order FulfillmentTips & Red Flags to Know for Stellar Order Fulfillment

Ensuring Satisfaction & Protecting Revenue by Optimizing Your Order Fulfillment

An effective online order fulfillment strategy is critical to your success and sustainability as an eCommerce business. Without an efficient and well-organized process, your business could be in serious trouble.

Online order fulfillment is more complicated than the name suggests, though. It encompasses much more than tossing a product into a box and dropping it in the mail.

So, what does order fulfillment entail? What happens when it goes wrong, and what can you do to prevent missteps? Let’s find out.

What is Order Fulfillment?

Order Fulfillment

[noun]/ôr • dər • fo͝ol • fil • mənt/

Order fulfillment describes the process of receiving and delivering goods to your customers. This can include inventory management, order processing, shipping, and return intake, among other facets of your operation.

In simple terms, online order fulfillment is ensuring customers receive goods they purchase over the internet. Packing, labeling, and shipping are all part of the process. That said, fulfillment actually starts long before the sale and continues after merchandise delivery.

Maintaining inventory falls under the umbrella of order fulfillment, as does handling returns and restocking. This makes sense; merchants can’t ship orders for items they don’t have in stock. And, when customers return merchandise, someone must log it back into the inventory to be sold again.

The online order fulfillment chain is actually more of a circle, and fulfillment managers must wear many hats.

Thanks to Amazon, Walmart, and other gigantic online retailers, today’s customers expect more than ever when it comes to these processes. According to one report, 53% of shoppers say that delivery speed is an important consideration when it comes to online orders. Another study shows that 38% of shoppers who’ve had a bad delivery experience will never shop with that retailer again.

The Value of Fast & Effective Fulfillment

If you're looking to stand out in today's competitive market, it's all about easy, convenient fulfillment.

When you get your order fulfillment processes just right, you're going beyond simply meeting customers’ expectations. Instead, you’re seeking to exceed those standards. By doing this, you open the door to a bunch of fantastic benefits:

In short: getting your order fulfillment just right is more than a logistical win; it's a game-changer for your business. You'll see better customer relationships, a wider audience, and streamlined operations that let you focus on growing your business.

Steps in the Order Fulfillment Process

There is no single fulfillment strategy that will work for every business. However, some steps are common to nearly all processes:

Order Fulfillment Models: Is In-House or Outsource Better?

When it comes to online fulfillment, there are essentially three basic models used by eCommerce merchants. You can opt for in-house fulfillment, fulfillment through a third party, or a dropshipping model.

What do each of these entail? Let’s break them down together:

In-House Fulfillment

Going the in-house route for order fulfillment means relying on your own team to handle every part of getting orders out the door, from storing to shipping.

In-house fulfillment can be a smart, wallet-friendly choice, particularly for smaller operations. But, you may want to adjust as you grow and start needing more space. It's all about growing and adapting to what your business needs.

Pros	Cons
You retain control over every step of the process	Much bigger up-front investment (software, packing materials, warehouse, etc.)
Ability to use custom, branded packaging (some providers offer this, as well)	Time- and work-intensive for internal teams
Directly connected to the customer experience	Requires logistics expertise
Directly connected to the internal team	Fewer resources are available to grow other facets of the business

Outsourced Fulfillment

Outsourcing fulfillment means passing the baton for tasks like shipping, inventory management, and returns to a third-party logistics provider. This is a go-to move for companies that are a bit tight on space, or which don't have enough hands on deck to fulfill orders. 

The third-party team has their own warehouse, so you don't have to worry about finding room for all your stuff. It's a tidy solution for businesses not keen on pouring funds into their own storage spaces.

Pros	Cons
Reduces typical order fulfillment time	Loss of direct control
Offload the burden of staffing onto the provider	Merchant is responsible for provider mistakes
Improved scalability; expansion is easier, even into foreign countries	Little, if any, ability to customize packaging
Often leads to lower cost-per-order	Cost-per-order savings may be eclipsed by provider add-on fees
Logistics expertise	Longer-term cost of outsourcing (as opposed to investing in your own system)

Dropshipping

With drop-ship fulfillment, you don’t purchase inventory until after a customer places an order. After the sale, you send the order to the vendor or manufacturer, along with the customer’s name and address. This enables the vendor to ship directly to the consumer. 

This supplier is responsible for processing all orders and dispatching them directly to the customers. The retailer incurs charges solely for the items sold.

Pros	Cons
Requires little-to-no start-up capital	Lower-than-average margins
Less day-to-day hassle for you	Limited supply chain oversight/control
Minimal overhead and warehouse space necessary	Potential for unreliable vendors
Virtually unlimited number and type of product offerings	Greater number of players, which complicates customer service
Easily scalable	Increased risk of fraud, particularly with overseas vendors

A Fourth Option: Hybrid Fulfillment

Each approach outlined above has its benefits and drawbacks. But, you can also adopt a hybrid approach, meaning that you outsource certain operations while keeping others in house.

With this approach, you might handle certain orders internally, like those involving custom products or items requiring assembly prior to shipment. At the same time, you could concurrently engage in dropshipping for standard, non-customized goods.

This model is often chosen by companies for handling items that are less frequently bought or for products they prefer not to store onsite, such as bulky or high-value items. The hybrid model is particularly advantageous for businesses seeking greater flexibility or those experiencing swift growth.

Pros	Con
More control over product shipment	Requires staffing oversight
Offload most acute staffing burdens onto an external provider	Merchant is responsible for provider mistakes
Improved scalability; expansion is easier, even into foreign countries	Most shipments won’t be customizable
Often leads to lower cost-per-order	Cost-per-order savings may be eclipsed by provider add-on fees
Logistics expertise	Hybridized order fulfillment and shipping costs might be uneven or complex

Ultimately, you should seek to make order fulfillment as streamlined as possible for your customers and staff. This is why it’s important to choose the model that works best for your particular vertical, products sold, staffing needs, and shipping expectations. 

What’s at Stake With Order Fulfillment

Consumers have grown accustomed to quick shipping, often expecting two-day or even next-day delivery. This makes it necessary to fulfill orders as quickly as possible. If your order fulfillment isn't up to speed or consistent, it could harm your business and profitability.

The numbers paint a clear picture. Around 40% of customers report they would avoid shopping with a retailer for at least a month following a poor delivery experience. Even worse, another 38% may never shop with that retailer again.

The variety of order fulfillment options you offer can significantly influence customer purchasing decisions. Today's consumers look for delivery choices that align with their specific needs. By providing a range of shipping speeds, from fast to moderate, you allow customers to make choices based on their budget and urgency.

Also, keep in mind that nearly 60% of consumers admit they've chosen one company over another simply because it offered more delivery choices. This underscores the importance of offering appealing delivery options to attract and retain customers.

Lastly, delivery mishaps, defective packaging, and shipping delays lead to 20-40% of all chargebacks issued. Customer satisfaction takes a hit when fulfillment issues come up, prompting chargeback requests and impacting your bottom line. 

5 Common Roadblocks to Order Fulfillment

Implementing an effective order fulfillment process is no small feat. Businesses often grapple with complex issues like fluctuating demand, managing inventory, and strategizing warehouse logistics.

#1 |  Demand Planning

Understanding your product demand is critical. Effective demand planning helps you steer clear of both overstocking and understocking, both of which can be harmful to your business. Employing demand shaping strategies, like targeted marketing and promotions, can also aid in stimulating demand and better aligning your stock levels with customer needs.

#2 |  Inventory Management

Balancing your inventory is a delicate art. Running low on stock can quickly turn customers away from your business and towards your competitors. Mastering inventory management ensures you don't lose out on sales due to insufficient stock.

#3 |  Logistics Planning

The shipping process is more than just a final step; it's a crucial part of your customer's experience. Ensuring that your shipping methods are quick, efficient, and careful is imperative. Mistakes in this area can result in late, damaged, or lost deliveries, harming your reputation and sales.

#4 |  Supply Chain Execution

Even with well-laid plans, unexpected spikes in demand can lead to inventory shortages. Being able to quickly replenish stock is vital. This often involves having strong relationships with manufacturers who can promptly respond to your restocking needs.

#5 |  Return Management

Processing returns, inspecting returned goods for quality, and managing the reverse logistics are all critical components that can impact customer satisfaction and operational costs. Mismanaged returns are one of the leading causes of chargebacks, so you really need to stick the landing here. 

Remember: the transaction isn’t complete until the customer receives their purchase, regardless of your target market. Excelling in order fulfillment is fundamental for completing sales, scaling your business, and ensuring customer satisfaction. It should be a top priority in every transaction!

5 Best Practices for Order Fulfillment

Perfecting your order fulfillment process is a surefire way to captivate your customers and stay ahead in the market race. Here are five key practices to consider to fine-tune your fulfillment strategies:

#1 |  Tailor Your Fulfillment Model

It's crucial to choose a fulfillment model that aligns with your business needs. The model should comfortably handle your order volumes, reach your customers wherever they are, and mesh well with your sales channels. Especially if you deal in custom or made-to-order products, your fulfillment process needs to handle these unique requirements smoothly, avoiding unnecessary delays.

#2 |  Make Data-Driven Decisions

Use technology that supports real-time data tracking for order fulfillment. This offers clear visibility into your inventory, aiding in more precise predictions of demand. Relying on this data for your purchasing and production decisions helps you stay in tune with demand and maintain optimal inventory levels.

#3 |  Prioritize Clear Communication

Enhanced supply chain visibility allows you to set realistic delivery expectations with your customers. Transparency is key in every situation. However, it’s especially important when it comes to your returns processes.

#4 |  Embrace Advanced Automation

Try warehouse automation to boost efficiency and accuracy in order fulfillment. AI solutions adapt in real time, cutting down unnecessary movement and elevating picking efficiency. These tools can help guide your warehouse staff through tasks, enabling them to work more efficiently and make fewer mistakes.

#5 |  Stay Agile & Adaptable

In today’s digital climate, agility is essential. Be ready to adapt your fulfillment strategies in response to emerging trends, customer feedback, or shifts in demand. This flexibility can help you respond quickly to new challenges and opportunities, keeping your business dynamic and customer-focused.

Handled correctly, a good fulfillment experience can solidify your customers’ loyalties and bring them back in the future. However, a bad fulfillment experience may mean losing a customer for life. It can also trigger a customer dispute, which means even more lost revenue.

That said, optimizing order fulfillment can be a complicated, time-consuming process, and mistakes will still happen from time to time. This is why it’s important to know that managing threats like payment disputes resulting from fulfillment missteps requires a multilayered approach.

Chargebacks911® has a wealth of experience-based knowledge and expertise in providing cost-effective prevention and risk mitigation strategies. Contact us today to learn more.