Order fulfilment is crucial to any eCommerce strategy, particularly as customers demand faster and easier access to products. But to be able to provide consumers what they want when they want it, a successful fulfilment process starts long before someone places an order.
In this ultimate eCommerce fulfilment guide for SMEs, we cover the essential elements for your fulfilment process, identify the challenges you may face, look at different types of fulfilment, and offer tips on how to plan your businesses fulfilment strategy.
What is eCommerce fulfilment?
Ecommerce fulfilment is the logistics required in order to get your products to the people who have purchased from you. It’s the last step in the supply chain, but is probably the most important if you want to build a community of satisfied, loyal customers.
Returns are also a key part of fulfilment – commonly referred to as reverse logistics. A straightforward return process is crucial for not only your customers, but to ensure you don’t experience loss of products or lose the potential for resale.
What is involved in the order fulfilment process?
There are a number of key steps to the order fulfilment process, all with their part to play to ensure the final customer destination is reached as effectively and efficiently as possible.
- Receiving the goods and/or materials for your store from a supplier, which should include checking you receive what was ordered, and remedying any discrepancies immediately.
- Ensuring adequate, organised storage for your inventory, so it can be easily accessed for quick picking and packing.
- Order processing when a purchase is made online. Depending on the size of your business, you will likely have a specific procedure for this to run smoothly.
- Arrangements for shipping after an order is made. Again, this will depend on the size of your business – whether you have a daily shipment pickup, or an on-call courier.
- A simple yet structured returns process. With an estimated 25% of eCommerce orders returned to the retailer, this is the crucial final step of order fulfilment.
Outside of the above steps for fulfilment, you also need to consider demand planning and inventory management. You can’t order and receive goods from suppliers if you don’t know the quantity required – too little and you’ll miss out on sales, too much and you’re at risk of product loss or having to discount to move stock.
And you’ll also struggle to manage your inventory if you don’t have a system in place to control adequate warehousing space for your stock, as well as have a real-time view of stock levels, stock-outs and oversupply. We’ll come back to this idea below.
Why is ecommerce fulfilment so important for SMEs?
The reason accurate and timely eCommerce fulfilment is crucial for SMEs is that it lowers costs, ensures customer satisfaction and retention, and improves your competitiveness.
Let’s have a closer look at the advantages of efficient fulfilment for SMEs.
1. Customer satisfaction
The number one reason ecommerce fulfilment is so crucial for SMEs is that your whole business relies on customers being satisfied with your stock levels and delivery.
63% of customers expect a standard delivery to arrive within three days of ordering, which means your ecommerce fulfilment has to be fast and efficient.
And perhaps even more critical, 94% of customers blame retailers for a poor delivery – which places the onus on you to have control over what happens to your packages once they leave your premises.
2. Picking and packing
Having an effective picking and packing strategy will allow you to move quickly from receiving an order to having it ready for dispatch and shipping. Accuracy is key, as mistakes will cost money – and customer loyalty.
3. Minimising loss of returns
Ecommerce fulfilment also includes returns, and handling these in the right way will help you to put these items back into circulation (if possible), as well as remedy the request of the customer, whether they want a replacement, refund or store credit.
If you are unable to keep track of where stock is, you could be losing out on potential resale, and you could be risking losing your customer due to a confusing return process.
4. Having stock on hand
Ecommerce fulfilment also relies on the right stock levels being held in storage, so you’re able to fulfil orders as soon as they come in.
5. Lowering costs
With the right eCommerce fulfilment process in place, there are many opportunities to reduce operational costs overall – from shipping, to restructuring your picking and packing, gaining insights into where greater efficiencies can be achieved, and optimising your supply chain for better stock performance.
6. Improving your competitive advantage
By focusing on all the ways you can improve your eCommerce fulfilment, you’ll be able to expand your customer base. This can be done through offering multiple shipping options, giving people a real-time view of where their order is, and free returns and exchanges.
What are the challenges of eCommerce fulfilment for SMEs?
Growing pains are real in SMEs, especially when it comes to the varied challenges of eCommerce fulfilment. Do you recognise any from the list below?
- Lack of resources to set up the required fulfilment operations. Small growing businesses often can’t afford the financial outlay of setting up sufficient fulfilment operations.
- Difficulty sourcing a provider who can meet the needs of the business today, but flexible enough to grow and scale as sales increase.
- Minimal in-house expertise and lack of staff resource to take responsibility for fulfilment.
- Not being prepared or able to quickly scale for fluctuations in demand (e.g. over holiday periods).
- Inability to cope with supply chain disruptions. As a small operator, your orders may not be prioritised over more substantial businesses.
- Time spent on fulfilment ends up reducing the time you could be spending on more strategic and operational tasks within the business.
- As an SME, it’s hard to compete with bigger companies like Amazon that have huge budgets and resources to invest in their eCommerce fulfilment.
- Understanding what is required to researching the right software that will work for your business can be extremely time-consuming and stressful – especially if it requires a significant financial investment.
- High cost of fulfilment being passed onto the customer. When you’re competing against the big guys, it’s hard to get discounted courier/shipping, but making your customers pay the full price could have a negative impact on your business. This 2018 study found that 54% of customers abandoned their online shopping cart because of the high fulfilment costs.
What are the types of fulfilment?
There are a few different ways to embrace eCommerce fulfilment, allowing you to choose the one that works best for you and your business.
Here’s a breakdown of the three most common ones, along with their advantages and disadvantages.
1. In-house eCommerce fulfilment
This is the DIY option, where your business is solely responsible for the end-to-end eCommerce fulfilment process, from ordering products, to storage, picking and packing, fulfilment and returns. For startups and small operators, this is where most businesses start their eCommerce journey, with good reason. It allows you to have complete control over every aspect as well as minimising costs by not outsourcing.
Example: Despite being a global conglomerate – and able to easily afford the outsourcing of fulfilment – Swedish furniture giant Ikea has kept its fulfilment operations in-house. They have hundreds of warehouses and fulfilment centres worldwide to manage orders, but all of the processes remain in-house.
Advantages of in-house
- There is minimal financial outlay by keeping the process in-house.
- You’re able to have complete control over fulfilment, allowing you to reduce the risk of inaccuracy and delays in shipping.
Disadvantages of in-house
- As order numbers grow, it may start to negatively impact other areas of the business due to more resources and time spent on fulfilment.
- You could be missing out on optimisation of the fulfilment process, due to not having the right in-house expertise or specialisation in place to ensure efficiencies and strategies for cost reductions.
2. The dropshipping eCommerce fulfilment model
Dropshipping is a lot more ‘hands off’ in terms of running an eCommerce store. You don’t buy stock or inventory, but you simply establish relationships with manufacturers who will hold onto the merchandise until you make a sale.
When you receive an order, you pass this information onto the manufacturer, who will then carry out the complete process of fulfilment and shipping to the customer. Your profit comes from splitting costs with the manufacturer.
Example: Many businesses use well-known dropshipping suppliers – such as Aliexpress, eBay or Amazon – to create their eCommerce store. They establish a relationship with suppliers so they have access to the products they want to sell, and then set up their website to sell these items directly to consumers.
Behind the scenes, it is actually Aliexpress or one of the other suppliers that then fulfils orders for the business.
Advantages of dropshipping
- You don’t have to invest in stock and storage, minimising outgoing costs.
- Less risk involved by not having to hold and maintain stock that doesn’t sell.
Disadvantages of dropshipping
- Your profits are lower than when you own the stock yourself.
- You have no control over the fulfilment process, putting you at greater risk of not meeting your customers’ delivery expectations.
3. Third-party logistics for eCommerce fulfilment
Third-party logistics (AKA 3PL) works by your business purchasing or manufacturing products that will be sold online, with you paying up front for the merchandise. Then all of your stock is sent to a 3PL fulfilment service, which is then responsible for fulfilling and shipping items to customers when they place an order.
The revenue you receive is the difference between the sale price and your wholesale cost, plus overheads.
Example: Fulfilment by Amazon (Amazon FBA) is a well-known 3PL provider. You get the sales through your online eCommerce store, then picking, packing, shipping and delivery are outsourced to Amazon. They also take care of customer service and returns.
Advantages of third-party logistics
- With 3PLs here is less process for you to resource – no need for storage, setting up picking and packing, or employing staff for fulfilment.
- Specialist 3PL providers will be able to expertly streamline the fulfilment process and reduce overhead costs from their large-scale operations.
Disadvantages of third-party logistics
- As with dropshipping, you don’t have control over the dispatch and fulfilment process, which if done wrong impacts directly on your business.
- There are often high fulfilment costs, meaning you receive less profit from products you sell.
Planning your eCommerce fulfilment strategy
After gaining a solid understanding of what’s involved with eCommerce fulfilment, now you can begin to plan your own strategy. Here are some of the questions you should be asking yourself.
1. Should you outsource your eCommerce fulfilment?
This can be a tricky one to consider, and making the right decision will come down to each individual business and their financial situation. It will also hinge on the kind of products they are selling: are they highly specialised, or more of a generic commodity?
Some advantages that come from outsourcing include that you are able to expand and scale operations quickly, that you can leave fulfilment to the experts so you can concentrate on other aspects of business development, and that you can reduce some of your larger overheads (like warehousing space).
2. Where should your fulfilment centre be located?
Remember, a fulfilment centre is not the same as a warehouse. A warehouse is where your stock is stored, while a fulfilment centre has the primary purpose of dispatching orders to customers as soon as possible. That’s why it makes sense to ensure your fulfilment centre is centrally located in terms of where your customers are. It means orders will reach them faster.
3. What fulfilment time should you aim for?
This will depend on your products (e.g. are they made to order?), but generally for an in-stock item, consumers have an expectation that it will be between two to five days. The longer it takes, the less of a good impression you’ll be making on your customer.
4. What technology do you need for eCommerce fulfilment?
For fulfilment to run efficiently, you need to have integrated eCommerce technology to cover order management, inventory, shipping and tracking. What kind you need will depend on your business and its size, but end-to-end visibility is not just a nice-to-have; it’s imperative for total control over fulfilment.
5. How will your warehouse and fulfilment centres be organised?
Where and how you fulfil orders needs to be set up in a way that allows for fast and easy picking and packing.
6. How will you handle returns and exchanges?
What will this process look like and how will it work for your business? And how will you ensure this remains uncomplicated for your customers?
7. Are you leveraging the power of shipping?
Some businesses use shipping as a customer acquisition tool – that’s how important it is to consumers. In fact, 54% of consumers say delivery will define who they shop with. If free shipping is too costly as a startup, can you build it into the price of your products? Or could you offer free shipping on orders over a specific amount?
Why is inventory management crucial for eCommerce fulfilment?
When you consider that two-thirds of inventory or fulfilment issues are caused by human error from manual processes, automated inventory management crucial for achieving successful eCommerce fulfilment. Even for small-scale operations, having inventory management in place is important for minimising issues and allowing for a real-time view of stock.
It will also give you the ability to make informed decisions for your operational requirements. How much stock did we sell last Christmas? Were there any peaks throughout the year that put greater demand on our fulfilment? How quick are we fulfilling orders, and is there any way to improve this while keeping high levels of accuracy?
With your customers’ experience as the number one priority of your eCommerce fulfilment, can you afford to not have seamless software integrations that allow you to not only meet fulfilment expectations, but ensure the process leading up to an order being placed is efficient and results-driven?