eCommerce Glossary: Order Fulfillment

Glossary

Order Fulfillments: How Do They Work?

What is Order Fulfillment?

If you've landed on this page, possibly, you are also experiencing the Chargeback and related payment disputes. It isn't a new thing; customers encounter such problems but ultimately find a way out. Therefore, in this article, we’ll cover detailed information on the chargeback and subsequently, we will focus on the solutions.

A chargeback is also known as a "Payment Dispute.” In simple words, if a cardholder doesn't want the transaction to be made and request a card-issuing bank to reverse the payment, then this situation will be called Chargeback. It’s done in case of unauthorized transactions to protect the consumers from payment disputes.

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Order fulfillment covers the whole process from when there is a sale to through the product delivery to the customers. It is the process to receive goods, process them, and then deliver them to the customers. So, in simple words, the process starts with the customers placing the orders and ends when they receive them. Nevertheless, if the buyer has to return the product, order fulfillment has to manage the return transaction, too.

To stay in business and build customer loyalty, an e-commerce business needs successful retail order fulfillment. It can be a complex and expansive process. A few companies handle their order fulfillment in-house. However, others outsource the process of 3PL or third-party logistics.

There are mainly four types of order fulfillment processes

Types of Order Fulfillment

In-House Order Fulfillment

The in-house order fulfillment model is the process where the business uses its employees to handle the fulfillment procedures. So, no matter it is shipping or storing the products, it is the employees who take care of all the steps of the fulfillment process.

This order fulfillment type is best for established companies requiring end-to-end control over the whole operation. At times, home-based startups use in-house fulfillment to save money. Nevertheless, as the initial space enlarges, they move on to hybrid or outsourced fulfillment models.

Drop Shipping

Drop shipping is just like outsourcing, except for the fact that there isn’t an inventory to take care of. The retailer doesn’t have the items in stock. Rather, when a customer places an order, the retailer gets it from a third-party supplier. The supplier can be a company or manufacturer that has the product with them and sells them to drop shippers.

It is the job of the supplier to handle all orders and ship them to the customers placing the order. So, you are just billed for the item you sell. This is common for startup retailers and few e-commerce stores.

Outsourced Order Fulfillment

When storing, ordering, refund processing, and shipping are managed by third-party logistics, it is called outsourced order fulfillment. The companies that do not have enough storage space or people to handle the process can opt for this option. Hence, third-party employees handle the fulfillment process. The inventories are stored in the warehouse that is controlled by 3PL. So, when a company invests in outsourced fulfillment, it doesn’t have to worry about warehouse facilities.

Hybrid Fulfillment

Any company using the combination of all the order fulfillment options given above is using the hybrid fulfillment model. For example, a company can process a few orders in-house like customized items that have to be assembled before shipping but using dropping services for all non-customized items. Many companies choose to drop-ship items that cannot be stored in-house or are purchased frequently. Hence, it is best for companies that require more flexibility.

How Does the Order Fulfillment Process Work?

The 4 Steps of Order Fulfillment

At this point, you must have already decided whether to outsource or opt for in-house order fulfillment. But the question is what does the process entail? Take a look at what the order fulfillment process entails after the customer submits the order online.

Receiving

The order fulfillment team needs the inventory in-hand to start fulfilling the orders. Receiving orders refers to accepting and storing the incoming inventory at the fulfillment center. Every order fulfillment team has its process to receive and store inventory. This helps in keeping things organized so that the order can start shipping sooner. As soon as the fulfillment center receives the inventory, the fulfillment center stores the item in the warehouse.

Picking

Picking is the start of the order fulfillment process. When a certain order is pushed to the order fulfillment center, it gets assigned to the picking team. Thereafter, they get a packing slip stating the items, quantities, and storage location at a facility for collecting the items from the respective locations.

Packing

After picking the order, the next step is to pack it. If you are outsourcing, the fulfillment centers might charge for the packing materials. While packing, the fulfillment centers pack materials that protect the products and add minimal weight. The materials that they use for packing are bubble mailers, boxes, bubble wrap, air fills, packing tape, etc.

Shipping

Once the order has been packed, it is time to ship it. A few fulfillment providers prefer carriers that they can partner with. However, others compare the shipping cost from different carriers. The latter helps in making sure that a given shipping option comes at the most affordable pricing

One of the biggest benefits that you can enjoy while outsourcing is the top carriers pick up the order directly from the fulfillment center.

After shipping the order, the fulfillment center sends you the tracking information. You can choose to share the information manually or automatically with the customers.

If the order fulfillment process is not consistent or on time, you might have to struggle to get the shipments delivered on time. This can have a detrimental effect on the business. About 43% of the customers say that they will avoid shopping with a retailer again for a minimum of one month when they have a negative delivery experience. While another 38% say that they will not shop with retailers ever again.

So, order fulfillment options have a direct effect on consumer’s buying habits. If you want to have a competitive edge, deliver as per customer expectation, and offer prompt return service.