Order fulfilment can be defined as how a company processes a customer’s sales order. However, this underestimates its importance. Customers have greater power and are more informed than ever. They also have higher expectations. A company’s reputation, profits, and ability to retain customers depend on efficient order fulfilment.
There is no business without sales. Without order fulfilment, sales are impossible.
The Key Takeaways
- Many product-based companies need to fulfill orders.
- A coordinated order fulfilment operation is possible only if multiple departments are involved and external partners.
- ERPs are often essential in order fulfilment management.
Order fulfilment Explained
Although a new sale is always worth celebrating, the work doesn’t end until the order has been fulfilled and the customer has received the order. The order fulfilment process includes the assembly of the order, shipping it to the customer and supporting processes.
The entire order fulfilment process comprises five main steps, starting with strategic sourcing to ending with shipping. Many companies include order fulfilment, inventory management, supply chain management and order processing.
You can often complete the order fulfilment process under one roof, in a well-organized warehouse. This depends on your business size. Small businesses can handle order fulfilment in-house using a simple process. Larger companies require a multi-layered distribution center strategy. In both cases, the goal is to efficiently get the customer what they want as quickly, reliably and cheaply as possible.
How does the Order fulfilment process work?
The order fulfilment process is performed in one or more distribution centers. It typically includes inventory management, supply chain management and order processing. Quality control and customer support are also involved.
Receiving Inventory
- The goods may be from a third party or another company department, or a company warehouse.
- To ensure that the correct amount of inventory was received and acceptable quality, it must be counted and inspected. The SKUs (or bar codes) on the products arriving are used to receive and store the goods and retrieve them from internal storage.
Inventory Storage
After goods have been received at the fulfilment center, they will be inventoried and either disbursed immediately or sent to long-term storage. It is best to store items for as little time as possible to ensure that goods are distributed orderly for current sales.
Place an Order
An order processing management system determines the product picking, packing and shipping activities for each customer order. Order management software can be integrated into an online shopping cart to automate order processing.
Picking
Picking teams or automated warehouse robots pick items from warehouses according to packing slip instructions. The packing slip includes specific information such as the item SKUs, colors, sizes, number and location of the warehouse’s distribution center.
Packing
- A packing team or automated fulfilment robotics select the best packing materials to achieve the lowest possible dimensional weight. This is calculated by multiplying package height by package length. Optimizing the dimensional weight (or DIM) is crucial to expedite transport and lower shipping costs.
- Additionally, many packing teams include return shipping labels and materials if the customer needs to exchange or return an item for a refund.
Shipping
- The order is sent via a shipping channel to the customer. The U.S. Postal Service (USPS) and all other carriers, whether freight lines, airlines, FedEx or UPS, shippers and carriers. Postal Service (USPS), or any other carrier, determines freight billable costs by the greater of two factors: actual package weight and dimensional weight.
- Even if the item is light, such as a t-shirt or a shirt, it is worth packing it in the lowest DIM to prevent the package from increasing significantly in weight. To maximize their profits, carriers often have packaging rules. If you fail to comply with these requirements, carriers may refuse to ship your order.
Delivery
Shipping routes may include multiple carriers. FedEx might pick up a package from the fulfilment center and have it delivered to the customer by the USPS. These hybrid shipping options can be used for many reasons. One reason is that the USPS can deliver to remote areas, where other commercial carriers cannot. It is more practical to use USPS as the last mile of delivery in these cases.
Returns Processing
The return process begins by including the shipping materials and a label for the original customer. To ensure that the product is restocked, a customer must carefully return it for an exchange or refund. It is not possible to restock a product that has been damaged. A soiled product cannot be restocked. Quality control checks are performed on all returned items and sorted accordingly. Return products can then be restocked, returned by a manufacturer or vendor for a credit or a distributor refund, or sent to an office that recycles them.
Businesses make money selling products, services and goods to customers or businesses. Whether you are B2B or direct to consumers, the sale does not end until the customer receives the items. Order fulfilment is the core of any business.
Order fulfilment Challenges
There are many challenges in order fulfilment. These include inventory management and supply shortages and logistics planning and failures.
Inventory Management
Stock shortages can lead to customer dissatisfaction and a poor customer experience. This can also cause damage to the brand’s reputation. Companies can’t repair the damage done once it is done. There are exceptions. Customers are more forgiving when delays or shortages are caused by severe weather, natural disasters, or a Black Swan.
Demand Planning
However, too many stocks can lead to higher storage and transport costs. You also risk losing your items if there is a drop in demand. You need to be able to predict demand and plan accordingly to ensure adequate stock levels.
Logistics Planning
Broken or late deliveries, missing or delayed orders, damaged items, and wet packaging can all be detrimental to a company’s reputation, sales, and ultimately, profitability. It is important to manage logistics to ensure that shipping goes smoothly and that items don’t get damaged. Simply put, logistics greatly affects customer satisfaction, so keep a close eye on end-to-end–or warehouse to mailbox–performance.
Execution of Supply Chain
A supply chain strategy involves weighing the cost-benefit tradeoffs for operational decisions. A company might use a single supplier for a product to get price breaks and a higher volume of products. This strategy can also help a company gain priority status with the vendor. It can make a big difference in getting goods on-time during high demand. But, if the vendor experiences any difficulties (e.g. strikes by employees, natural disasters or supply shortages), using a single supplier model could backfire.
Supply chain execution (SCE), is the flow of tasks within the supply chain. Software applications can be used to manage all activities within the supply chain. Specifically, material management, tracking the physical status and movement of the product, tracking data shares and data feeds, and managing financial information–particularly transactions among all parties.
SCE involves using multiple applications such as order management software, warehouse management software, transport management software, and inventory management software.
Order fulfilment Best Practices
Great organization is key to maximizing efficiency and order fulfilment. The best practices are to organize, organize, and organize.
Get started with the basics. Ensure that your receiving process is efficient so that incoming shipments can be processed quickly and damaged goods are promptly returned to the manufacturer for replacement. This will help you avoid back-orders and long wait times for customers.
Make your warehouse more efficient by organizing it. Keep hot-ticket items in front of robot or human pickers and packers. Other items should be placed in the warehouse according to their demand. Items that are less in demand should be at the back.
Get the best shipping and logistics to ensure the fastest delivery possible to your customers. You should also prepare a backup plan in case of an unexpected increase in shipping rates by carriers or something goes wrong.
Make operations more efficient and safer by automating.
How do you choose an order fulfilment strategy?
There are many options available to businesses when choosing a strategy for order fulfilment. You can choose to have your order fulfilled internally or externally, depending on your company’s resources and skills.
You can have more control over your operations and cost by outsourcing fulfilment if you have the resources. You may consider a hybrid model if your company has the resources and talent to handle the middle.
You may find it more cost-effective to outsource fulfilment if you have limited fulfilment and logistics skills. It allows your team to concentrate on the product and sell it more efficiently. Internal fulfilment means you have to hire the employees, manage the warehouse, and ensure that every order is delivered on time. Many of these challenges can be eliminated when you outsource order fulfilment.
You need to consider the product, fulfilment options, and costs to make the best decision for your company. You should conduct a detailed financial analysis to determine the best solution.
Order fulfilment Models
Although order fulfilment models have evolved over the years, the fundamentals remain the same, and this is due to very sound business reasons.
What are the different types of order fulfilment?
There are four options for order fulfilment: outsourcing, drop shipping, hybrid, and in-house. Each model is tailored to meet specific business requirements.
- In-house This model means that all steps of order fulfilment are done internally.
- Third-party This model involves outsourcing all order fulfilment activities to a third-party or order fulfilment vendor.
- Drop shipping The manufacturer produces and ships the order. This lowers barriers to entry and reduces overhead costs. This is a key advantage for startups and ecommerce businesses. The buyer can also save money by eliminating the middleman. It can also take control away from merchants to manage inventory and fulfill orders. This can cause delays in shipments to customers as many manufacturers are located far away from merchants’ customer base. Shipping may be more expensive and take longer, or items can ship from a distribution center.
- Hybrid:A hybrid is simply a combination of one or more models. A company might choose to fulfill all orders internally or only the most popular items. Still, it may also outsource fulfilment during peak times, such as holidays, and drop-ship large and bulky products directly from the manufacturer.
7 Tips to Increase Order fulfilment
It is important for companies that manage their order fulfilment processes to plan and automate where possible. A fully-featured ERP allows you to track orders, inventory and shipments from every step of the order fulfilment process. This will allow for better visibility, customer and employee satisfaction, and ultimately maximize profits.
- Select the best order fulfilment ERP software: Start by selecting a system that provides end-to-end tracking of orders, inventory, and all aspects of your business. Oracle NetSuite is an ERP that allows you to track your entire business including orders fulfilment and finances. It also features useful modules that you and your team can use to manage human resources.
- Connect with suppliers and manufacturers:Modern ERP software allows you to connect directly with vendors and suppliers. Your entire restocking or accounts payable process can be linked together, and it runs without any human intervention. Establish your rules and connect with suppliers and vendors. Your systems will handle everything from there.
- Clear customer expectations: Most businesses know that customers are willing to work with them and follow your timeline, especially in this post-COVID age where delays are not uncommon. Set clear expectations when you receive an order and work hard to meet them. If there is a delay, let your customer know immediately so they aren’t disappointed.
- Optimize inventory control: If you have too much inventory, you run the risk of running out and not being able to fulfill a customer’s order. Your working capital and storage costs can spiral out of control if you have too much inventory. An ERP inventory management module can greatly assist this task.
- Choose the best order picking strategy. If an order arrives, there’s a good chance that you don’t have automated warehouse robots available to pick up and pack orders. It is crucial to use your human capital efficiently to keep costs low and increase efficiency in order fulfilment. There are several order picking methods that are common: discrete order pick, where each order is picked individually, zone and batch pick, where multiple orders can be picked at once, as well as other strategies to reduce travel time and speed up picking speeds.
- Treat your shipper like an important partner. Organizations such as the United States Postal Service (USPS), FedEx, UPS and DHL all play a crucial role in your fulfilment process. Treat your shipper as a vendor. To avoid any delays, spend time and effort negotiating the best deal and delivery date for your fulfilment needs.
- Be prepared for customer service and returns: Even though you strive to provide a flawless experience to every customer, there are bound to be mistakes and delays. It doesn’t matter if the problem was yours or your customer’s. You should be ready to fix it.
Order Management Software can improve order fulfilment
High-quality order management software and fulfilment software are essential for order fulfilment. These systems can seamlessly integrate, making creating a smooth sales process easier.
You may not be aware that your online shopping experience involves interacting with multiple interconnected systems. These systems include shipping estimates, payment processing, warehouse fulfilment, delivery, and payments. While some companies use various tools to accomplish these functions, others choose order management software that is compatible with a larger ERP strategy.
NetSuite order management allows owners, managers, fulfilment teams, and administrators quick access to important information. The system tracks every order from the sales process through the fulfilment process. The system allows users to securely view any order and handle complex orders such as split orders or outsourced drop shipping.
The Order Management module allows you to order, fulfill, and return orders from any location using a single data set. It also automates your order management process. This module is a huge help to any business dealing with order fulfilment.
It doesn’t matter if you are just starting in a startup, or have years of order fulfilment experience. You can still look at your order fulfilment and management systems from a fresh perspective. There are many ways to reduce costs and provide a better customer experience. This is a win-win situation for both the business and its customers.
Order fulfilment FAQs
What does fulfilment mean?
This usually means that the order has not yet been shipped but is in the fulfilment process.
What is the order fulfilment rate?
The order fulfilment rate measures efficiency by dividing the total number ordered by the number processed orders. This is also known as the order fill rate.
Order fulfilment rate = Total order processing / Total orders
What is the order fulfilment procedure?
The typical order fulfilment process involves receiving goods, short term storage in the distribution center, customer order processing (picking, packaging, shipping and logistics), and ordering.
What are the seven steps involved in order fulfilment?
These seven steps include receiving inventory, storage and order picking.
What does it mean to fulfill an order?
When the customer receives an order, it is considered fulfilled.
How can I start a business that fulfills orders?
A solid business plan will be necessary to outline all details. These include location and facility costs, business prospects, sales projections, and estimated capital. Identify your goals and create detailed shipping, receiving, storage, and order processing plans. You can refine your business and make changes to improve customer satisfaction and maximize profits.
