HOW DOES ECOMMERCE FULFILLMENT WORK?
Fulfillment is the lynchpin of your eCommerce operations. When you understand each of the steps in the process, therefore, you’ll be better able to manage your outsourced eCommerce fulfillment provider.
OMNICHANNEL FULFILLMENT CENTER INTEGRATION
When you think of a fulfillment warehouse, you might imagine rows of shelves filled with products. At its core, however, every good order fulfillment center is a technology company.
Your eCommerce store should integrate seamlessly with your fulfillment center. Your orders should flow directly to the people who will pack and ship them. Here are three important features of a good eCommerce fulfillment center:
- Your 3PL company should integrate with every platform on which you sell. Your fulfillment center should create a custom app to connect incoming orders for any sales channels it doesn’t support.
- The IT staff is just as important as the people who pack and ship your orders. Make sure your fulfillment provider has a robust IT department.
- Look for a fulfillment center with minimal downtime. In addition, look for responsive support to help smooth any glitches quickly.
RECEIVING AND INVENTORY MANAGEMENT
Pallets of your merchandise ship to your fulfillment warehouse. Then, those pallets get logged into inventory and placed on shelves, ready to fill your orders.
Receiving is the spot where many fulfillment warehouses fall short. When pallets sit on a loading dock, your products aren’t in inventory. Of course, no inventory means no sales. This, as you may have guessed, is bad.
Another inventory management challenge is shrinkage. Shrinkage is a nice way of saying “loss, theft, and breakage.” Most e-fulfillment centers have an allowance for shrinkage in their contracts. This means that you will eat the cost of the lost merchandise, up to a certain amount. In general, shrinkage allowances range from 2 to 10 percent of your warehoused inventory.
Look for these three qualities in your order fulfillment provider:
- Your eCommerce fulfillment center should place your stock into inventory within one to two days of receiving it.
- You should be able to log into your inventory management system. This real-time data is critical for maintaining Goldilocks stock levels. That is, not too much (which ties up all your capital in inventory). And not too little (which puts you at risk of running out before you can restock — a good way to lose sales).
- Your 3PL provider should have a low shrinkage allowance. Some fulfillment centers make inventory management a top priority. These providers are responsible for items lost or broken while on the shelves. In this case, you don’t have to account for shrinkage when you calculate ideal stock levels.
ORDER FULFILLMENT: PICK, PACK, AND SHIP
When an order comes in, your fulfillment warehouse will pick the right items to put in the box. A floor worker will pack them in the perfect box. Your 3PL provider will ship them to your customer. This is the pick, pack, and ship process.
With centrally-located fulfillment warehouses, shipping to your customers is speedy. (See more on warehouse location below.) It’s important that the 3PL provider turn your orders around quickly, too. Otherwise, you will lose the benefit of that shorter shipping time.
Accuracy is vital. Mistakes in picking and packing orders can cost you customers.
Here are three ways your eCommerce fulfillment center can help you meet customer expectations for fast and low-cost shipping:
- Look for a 3PL provider that offers next-day turnaround, or even same-day shipping.
- Choose a fulfillment warehouse, or warehouses, that are centrally-located. The fulfillment center should ship to most of your customers within two days or less.
- Ask for data on the fulfillment center error rates.
RETURNS PROCESSING: REVERSE LOGISTICS
You can’t avoid eCommerce returns. Ease of returns is important to eCommerce shoppers. This can be a major factor to drive your sales. Logging in returns is an important function of eCommerce fulfillment.
The more quickly your fulfillment provider processes returns, the more quickly your customer will get a refund. Efficient returns also get your stock back on the shelf so it’s available to sell again.
Here are three ways your eCommerce fulfillment partner can make returns a breeze for you and your customers:
- Find a warehouse that will put returns back on the shelf within one to two days. Returns that sit on receiving docks are a drag on your business and consumer confidence.
- Let your 3PL provider handle customer service for returns, so you can focus on increasing your sales.
- Create a process for handling damaged goods. Consider setting up a secondary site to sell returned merchandise at a discount. Make sure your eCommerce fulfillment provider can help evaluate returns and process orders for discount goods.
How is 3PL different from drop shipping?
The term drop shipping gets confused with traditional eCommerce fulfillment. However, these two models of getting products to your customers are very different.
What is a third-party fulfillment service?
The terms 3PL, eCommerce fulfillment, and order fulfillment refer to traditional fulfillment.
Here’s how eCommerce fulfillment works:
- You purchase or manufacture products to sell online.
- Before you start selling your products online, you pay up front for the merchandise.
- You ship your stock to a third-party fulfillment service.
- When a customer places an order, your fulfillment center ships it to the customer. The fulfillment center pulls the order from your pre-purchased inventory.
- All the money from your order flows into your business.
- Your profit is the difference between the sale price and your wholesale costs plus overhead.