Key takeaways:
- Order fulfillment is the backbone of every successful eCommerce business. With the right strategy, you’ll keep happy and loyal customers.
- A solid approach begins with effective inventory management. The trick is to make smart predictions by anticipating shifts in customer demand and product availability.
- Order fulfillment is all about giving your customers a great experience and showing them that you care. Be upfront about return policies, make tracking easy, and always offer the option to add shipping insurance.
Order fulfillment is a vital part of every eCommerce store but getting it right can be tricky. Overstocking, understocking, or delays can lead to missed sales, unhappy customers, and extra costs. The good news? It doesn’t have to be a struggle.
In this guide, we’ll break down eCommerce order fulfillment, show you the different options, and share some straightforward tips to help you avoid the common mistakes new businesses often make. With the right strategy, you’ll ship smarter, not harder.
What is eCommerce order fulfillment?
You know how when you click “Checkout,” you expect your order to show up in a few days? Well, what happens behind the scenes is eCommerce order fulfillment. It’s the process of getting online orders from the seller to your door.
In a nutshell, eCommerce fulfillment is simply completing an order. It starts when the seller grabs the item from their storage, packs it up, slaps on the shipping label, and ships it off. Sounds simple, right? It is until you start selling and shipping yourself.
Order fulfillment goes beyond stocking and shipping items. It’s about managing your inventory, setting reasonable expectations, and forecasting trends.
How the fulfillment process works
The fulfillment process starts long before a customer places an order. It begins once you’ve decided what products to sell. Here’s how it works from start to finish:
- Source and order products
- Manage your inventory
- Pick, pack, and ship out orders
- Communicate timelines for fulfilling orders
- Manage expectations for returns and refunds
While it appears easy, it’s important to cover all your bases. If you’d like to do that, we’ve broken down each step in detail for you to explore.
1. Source and order products
The first step in order fulfillment is finding suppliers. Whether they’re local or overseas, it’s important to get to know their systems and timelines. How stable are their prices? How quickly can they deliver the products you need?
Understanding how your supplier’s order management helps you stay stocked up when you need it most. If a supplier can’t meet your demand, it’s time to look for alternatives. By working with suppliers that align with your inventory management needs, you can keep everything running smoothly and ensure your fulfillment strategy is always on track.
2. Manage your inventory
Now that you have products, your next step is figuring out where and how to store them. If you’re new to eCommerce, this could be your spare room, garage, or even a storage unit. What matters most isn’t the size of the room but how organized your products are.
Keep everything accessible and create your own storage system to make it easy to keep track of and pull-out merchandise. Doing these makes it easy to spot if you’ve received damaged or faulty items, or if products have gone bad.
If you want to take things up a notch, use stock keeping units (SKUs). An SKU is a unique code that you can use to update your stocks and manage returns.
3. Pick, pack, and ship out orders
Shipping is the most important aspect of eCommerce order fulfillment. Mastering this ensures customers have a great experience. Whether you’re using a fulfillment center or handling things in-house, efficiency is key. Here are the things you need to look into to make sure your orders get to your customers quickly and safely:
- Logistics company. Choose a reliable logistics company that offers plans tailored to businesses. You want a provider that can get your orders out on time, every time. Slow shipping can hurt customer satisfaction, so pick a fulfillment provider known for speed and reliability.
- Packing materials. Invest in durable packing materials. Use fillers, sturdy cardboard, bubble wraps, and styrofoam boxes if your product needs extra protection. Your logistics company may provide these, so check with them to keep your shipping costs manageable.
- Documentation. Make sure you document each order before shipping. Take clear pictures and record serial numbers (if applicable) and make sure your packing slip is accurate. This protects you against disputes and shows your customers that you care about getting their order right.
You might want to offer shipping insurance to give your customers peace of mind and help cover any damage during transit. And don’t forget to look for shipping discounts. They can help keep your eCommerce fulfillment costs under control as you grow.
4. Communicate timelines for fulfilling orders
Setting estimates in eCommerce shipping can be tough. Anything can happen but it’s important to take charge where you can. Familiarize yourself with your carrier’s timeline. This will help you set reasonable customer expectations.
A good rule of thumb is to add a small buffer, like 1-2 extra days, just to be safe. But don’t overdo it—no one wants to wait too long! It’s always better to under promise and overdeliver than to risk disappointing your customers.
Also, make sure to provide a tracking number so your customers can stay in the loop. People love to check their orders and see when they’re moving from one warehouse to the next. This gives them a sense of control and excitement. If there’s any issue along the way, they’ll be more understanding if they know exactly where the order is.
5. Manage expectations for returns and refunds
Returns will always be a part of eCommerce, but they don’t have to be a headache. Create a clear return policy. Tell customers how long they have to return items, which ones qualify, who covers return costs, and how much they’ll get back.
It’s important to note that some items should never be returned as well. While these are publicly known, it’s still best to mention non-returnable items such as:
- Undergarments and swimwear
- Perishables
- Opened hygiene products
- Intimate products
- Hazardous material
- Clearance items
If one of these arrives damaged, check your tracking to confirm delivery, then ask the customer for photos or other documentation. Explain you need that info to file an insurance claim before you can refund it.
Being transparent helps protect your business. With documentation, tracking, and insurance, you ensure a smoother returns process and build trust with your customers.
Which fulfillment option is the right one for you?
There’s no one-size-fits-all approach. Start by thinking about your customers: where are they located? How strong is the demand for your product? And how much are they willing to spend on shipping?
Knowing the answers to these questions will steer you in the right direction. If it feels overwhelming, don’t worry. In eCommerce you can mix & match or test different fulfillment options until you find the one that clicks.
That said, here are the different types to explore:
- In-house fulfillment
- Third party logistics (3PL)
- Dropshipping
- International eCommerce fulfillment
Before you start exploring, let’s take a closer look at each order-fulfillment type so you can ship with confidence.
In-house fulfillment
In-house fulfillment is when you or a small team handle everything. For small startups, it’s a great place to start. You keep costs low, learn your true timelines, and get to know your customers’ needs firsthand. You’ll hit bumps and make mistakes, but that hands-on trial and error is how you build a rock-solid foundation.
Once you’ve mastered the ropes and order volume starts to spike, think about outsourcing a few tasks. That way you can keep growing without letting logistics slow you down.
Third-party logistics (3PL)
A third-party logistics (3PL) service is great for growing eCommerce companies. It can streamline the core shipping steps: picking up your products, packing them, invoicing customers, and shipping orders out the door.
If you’re up for splurging a bit more, these extras helps protect product quality and level up the customer experience:
- Warehousing. A 3PL can lighten the load in storing inventory, especially for products that need special infrastructure.
- Kitting & bundling / Light assembly. If products need to be put together or if you have bundled packages, these services are great add-ons.
- Returns management. Your 3PL inspects returns, restocks good items, and keeps your inventory accurate.
- Inventory analytics. This extra feature is something you don’t want to pass up. While you can certainly make your own market predictions, 3PLs have the data and expertise to make smarter restocking decisions.
- Scheduled pickups and same-day delivery. These services make it so 3PLs work around you and your customers times. Though this is at a premium for a very competitive customer demographic and particular occasions, this can help increase sales.
Dropshipping
Dropshipping is the ultimate hands-off fulfillment model, which makes it perfect for businesses that want to keep their costs low. With dropshipping, you don’t need to keep any products in stock or handle any shipping. All you need to focus on is customer experience and driving sales.
However, since you’re not directly involved in the shipping process, you can’t guarantee the experience. Delays or poor packaging from suppliers could negatively affect customer satisfaction. But despite this, many businesses still invest in dropshipping, which shows that, for the right type of product or market, it can be a successful strategy.
International eCommerce fulfillment
Handling international eCommerce fulfillment yourself can get tricky. Global shipping has extra steps, stricter rules, and plenty of paperwork.
Even a small mistake can drive up your costs, cause delays, and cost you customers. To avoid that, you can work with a customs broker who knows import and export laws. But for most small businesses, a full-service 3PL is an even better choice.
Providers like DHL Express, FedEx International, and UPS Worldwide offer in-house brokerage and can handle the entire fulfillment process for you. Plus, by signing up for their supply-chain services, you get access to their global distribution centers and warehouses.
How to choose your order fulfillment method
When it comes to order fulfillment, trial and error can quickly eat into your budget. Fortunately, asking the right questions can help you decide which method and process you can do yourself or outsource. Here’s a step-by-step guide to help you figure that out:
- Evaluate your products
- Look at your storage capabilities
- Test your picking and labeling speed and accuracy
- Check your packaging technique
- Time drop-offs and pick-ups
You can use this list to narrow down your choices, but if you want to identify which areas to consider outsourcing, here are a few questions and insights to explore.
1. Evaluate your products
Take a long, hard look at the products you’re selling. Do they have a shelf life? Are there handling requirements? Can you manage the size and weight of your products?
What matters is that you can keep them in tip-top shape before they leave your doors. If your products need extra care, consider whether you can manage that in-house or if a 3PL might be a better option to ensure product maintenance and quality.
2. Look at your storage capabilities
Do you have enough space to stock up? If you do, is it enough to meet customer demands? Is there enough breathing room to move around and check labels? If your space feels cramped, it may be time to look for a bigger space. Efficient storage helps you manage inventory and fulfillment smoothly, so make sure your storage setup supports your needs.
3. Test your picking and labeling speed and accuracy
These two factors determine how quickly you can get orders out the door and to the right address. Check how fast and accurate you are when picking, packing, and labeling. A mislabel could lead to running out of stock or, worse, sending a customer the wrong order.
If you’re struggling with this, it might be worth getting some help. Hiring someone could lighten the load, or if it’s more cost-effective, you could consider working with a 3PL instead.
4. Check your packaging technique
You don’t want to overspend on packing materials, but damaged items in transit will hurt your sales. Ask your local carrier for tips or have them evaluate your technique. If you’ve got it figured out and can keep up with demand, handling it in-house could save you money.
However, if your technique needs improvement, it’s best to leave it to an expert. Consider hiring someone to assist or outsourcing this part of the process.
5. Time drop-offs and pick-ups
The final step in shipping is getting orders from your store to your carrier. Is the carrier’s location close to you? If it’s far, does travel time take away from productive hours that could be spent on marketing or customer outreach? Consider whether you can apply for a pickup service to save time and reduce the hassle of dropping off shipments.
With this, you’re one step closer to creating your own eCommerce order fulfillment strategy. Just be honest with your evaluations. There’s no need to stick to just one method or even use them all at once. It’s about finding what works best for your business.
eCommerce fulfillment best practices to optimize your operations
To build a solid fulfillment strategy, start by asking a few key questions:
- What are you selling?
- Who are you shipping to?
- How often will you be shipping?
Answering these will help you understand your business needs and set clear goals.
Note that your order fulfillment strategy evolves with your business. As customer demand and multiple sales channels change, it’s important to stay flexible. Here are a few tips to guide you:
- Always make smart predictions. Consumer demand can shift at any time, and every season is different. Monitor trends to stay ahead. If you’re not dropshipping, you’ll need to determine how much to order, when, and at what price. Making smart predictions should be the foundation of your strategy.
- Track fulfillment costs and speed. Monitor how much is spent on order fulfillment and how long it takes to complete. Doing so will give you insight you need to meet customer demand while managing warehouse space. This information also helps you adjust your approach, determine pricing, and decide whether promotions are feasible.
- Set up low-stock alerts. Once your strategy is in place, use an order management software to set alerts when you need to restock. Being out of stock can negatively impact your business, so ensure you’re always ready to replenish inventory when needed.
- Start small with fulfillment partners. Focus on building a solid relationship with your supplier, so you’re always in the loop if things change. It wouldn’t hurt to have a backup in mind, too.
- Automate order handling. Many fulfillment mistakes occur during manual processes. Automate your process with an order management software to reduce errors and ensure accurate delivery.
- Use tools to lighten the burden. Set reminders, automate emails to notify customers of their order’s progress, and leverage your 3PL’s order management system if you decide to partner with one. These tools help you stay organized and efficient.
- Stay transparent with your inventory and tracking. Offer real-time tracking and maintain clear inventory transparency. This builds customer trust and improves the overall customer experience.
Grow your online store with confidence
You’ve learned the basics of order fulfillment—how it works, how to approach it, and how to stay ahead. Now it’s time to take action! If you don’t have an eCommerce site yet, Network Solutions is here to help you get started. We have all the tools you need to build your online store.
And if you’re looking to scale your business, we’ve got what you need to look professional and grow your sales. From professional email accounts to integrated marketing tools, we’ll help you manage your operations smoothly and boost your reach.
Frequently asked questions
Order fulfillment covers every step of completing a sale. It’s the whole process of getting an order from your store to the customer’s door. That means ordering the product from your supplier, storing it, packing it, and finally sending it off (and sometimes handling returns). Shipping is just one part of the process.
Doing order fulfillment in-house is the best way to start. You have full control over your products, restocking, and shipping. It’s the first step to building your fulfillment process. Once you’re familiar with it, working with a 3PL becomes much easier.
You don’t need a 3PL service if your order volume is manageable, but it could be worth considering. You don’t have to commit to a full package right away. Instead, look into specific services that can help, like storage or packing. If a 3PL can help you get orders out the door more efficiently, outsourcing some parts of your process might be a smart move.
Costs vary based on your order volume and shipping destinations. To keep them down, open a business account with major carriers early on, or lean on a basic 3PL service to handle pickup, packing, and shipping.
Absolutely! Many businesses use a hybrid approach. You can store popular products in-house for faster shipping while dropshipping the rest. This way, you get the best of both worlds: control over high-demand items and convenience for the rest.
Keeping track of inventory is simple when you add an SKU to each product as it arrives. It makes it easier to stay organized and know where things are and what’s going out.
Don’t be afraid to try out different setups until you find what clicks. Once you’ve got it all figured out, you can improve your process with an inventory management software or an order management tool.
Look for a fulfillment partner with flexible storage and handling. Different products have different needs, and your partner should be capable of getting your orders out quickly and safely. The more fulfillment locations they have, the better. With multiple locations, your products spend less time on the road, and customers can easily schedule redelivery or pick up from the nearest site.
