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Order fulfillment

Order fulfillment involves many steps—from receiving inventory at a warehouse to shipping orders to customers and everything in between. Many DTC brands opt to outsource their order fulfillment to third-party logistics (3PL) companies that store inventory and pick, pack, and ship orders on behalf of the DTC company.

Why is order fulfillment important?

Successful order fulfillment is important for maintaining customer satisfaction and business success. When errors or delays occur in the fulfillment process, the company's reputation could take a hit. Lost deliveries and returns will also impact a business' bottom line. On the other hand, fast and dependable order fulfillment encourages customers to make more purchases—driving customer loyalty and the bottom line. Shipping is especially important in today's world where consumers are often used to next-day or even same-day deliveries.

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How does the order fulfillment process work?

Order fulfillment can be a complicated process with many moving parts. While specifics vary between industries, the process remains similar. In a nutshell, the order fulfillment process includes four steps:

  • Receiving
  • Picking
  • Packing
  • Shipping

Step 1: Receiving

Each third-party logistics provider will need to receive inventory to begin the process of order fulfillment. After all, without a product available in the warehouse, there’s nothing to fulfill the orders with. During this stage of the process, the inventory arrives via freight carrier at the warehouse and is identified and stored appropriately.

Step 2: Picking

Once an order is received at the fulfillment center, the warehouse crew will locate the items in order within the warehouse. Generally, a warehouse employee—the picker—has a packing slip that identifies the items in the order and their location in the warehouse.

If you’re not familiar with the process of pick and pack, you can find more information here. 

Step 3: Packing

Packing refers to any procedures used to prepare the items for shipping after they’ve been picked. Special packing procedures might apply to some orders. This could include bubble-wrapping, shrink-wrapping, or stuffing the box with another appropriate packing material. Alternatively, some brands will want to include inserts, stickers, or coupons in the packaging for the customer to receive upon opening as part of the brand experience.

Step 4: Shipping

After the product ships, the customer will get a tracking number to monitor the progress of the item until it arrives at the final destination. The order is considered fulfilled when the package is delivered to the customer's address.

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What are the challenges of order fulfillment?

During any of the four stages of order fulfillment, obstacles and problems may arise. The biggest challenges revolve around maintaining speed and accuracy with so many moving parts in the process. Seasonal fluctuations, learning curves of new hires, and space limitations introduce additional layers of difficulty. To help ensure customer satisfaction, it’s essential to understand and overcome fulfillment challenges.

Incorrectly filled shipments

Incorrectly filled shipments are usually the result of incorrect order recording or picking and packing errors. Regardless of the cause, correcting an order can be time-consuming and lead to disappointed customers. That’s why it’s so important to implement a SKU and barcode system that accurately tracks orders. Third-party logistics companies can help prevent such mistakes using software.

Slow packing

The faster you ship out packages, the sooner customers can use your products and (hopefully) order more. Unfortunately, poor planning can make the packing process take longer than it should. Companies should utilize best practices to streamline picking and packing as much as possible. This includes using better warehouse organization, inventory tracking, and goods-to-person (G2P) technology. 

Processing refunds

Returns are an inevitable part of doing business. To prevent inefficiencies, companies should be prepared with restocking strategies and shipping rates that cover returns, as well as means of tracking returns to ensure they make their way back to the warehouse. 

Stocking issues/inventory management

If a product is out of stock, you’re missing out on sales opportunities. The key to preventing stocking issues is to implement an inventory management system that meets your business’ specific needs. Keeping enough product in stock is essential to avoid backorders, but holding too much inventory can be expensive and wasteful. Order management software provides solutions for keeping track of inventory as it moves through the supply chain.

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What are the different order fulfillment models?

Though not entirely clean-cut, there are generally three models of order fulfillment. Depending on the type of products you sell and your business size, owners may use any or a hybrid of the following models.

Dropshipping

In the dropshipping order fulfillment model, the customer can place an order with a seller even if the seller doesn’t have the inventory on-site. Under the dropshipping model, the order is fulfilled by the supplier, not the retailer that made the sale. Wayfair is a good example of a retailer using dropshipping. 

In-house fulfillment

This fulfillment model means that the business manages the storage of inventory, picking and packing, and handing orders over to a shipping carrier. This model offers more control than the dropshipping method. In addition, it’s possible to brand orders by utilizing custom wraps or packaging. This can build a personalized relationship with repeat customers. The downside to this model is that it is time-consuming and costly and difficult to scale.

Outsourced fulfillment

Under this model, the responsibility of fulfillment is outsourced to another company, most over a 3PL or 4PL. The third party holds inventory, picks and packs orders, and hands the orders off to a shipping carrier to be delivered to the consumer. Many DTC brands opt to outsource fulfillment to free their time and capital in order to grow their business. 

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The cost of outsourcing fulfillment can vary depending on the third party’s pricing model.

How to improve your order fulfillment

Common problems in the order fulfillment process can be solved by adopting warehousing and logistics best practices. Identifying a problem can mean analyzing every point along the supply chain from the point of sale to the final delivery of the product. There are various solutions available in management software, and robotic pickers can minimize errors in the warehouse. Optimizing your order fulfillment operations for maximum efficiency will go a long way in helping you to grow your business.

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Take the complexity out of order fulfillment

There are numerous ways to simplify the order fulfillment process. This can benefit the company by reducing freight costs, streamlining orders, enabling less-than-truckload deliveries, and enacting other cost-reduction measures. Find out the best ways to take the complexity out of your order fulfillment process by contacting Airhouse today.

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