The e-commerce fulfillment process starts when an online shopper places an order and ends when they receive their package, but several steps occur along the way. These steps can be handled in-house, outsourced or a combination of both.
In this guide, we’ll cover everything online retailers need to know about e-commerce fulfillment, including:
- Receiving and inventory management.
- Order processing.
- Picking and packing.
- Kitting and assembly.
- Returns processing.
- When to outsource e-commerce fulfillment.
E-Commerce Fulfillment: Receiving and Inventory Management
Receiving is the process of accepting and managing inventory. Once inventory is received at a warehouse or storage facility, it will be inspected (quality assurance), assigned a SKU, and placed in an appropriate and efficient location in the warehouse.
For optimal efficiency and to reduce the time it takes to process orders, online retailers should:
- Place top-selling items closest to packing stations.
- Store items that are often packed together close by (for example, shampoo and conditioner).
- Arrange items from top-selling to least-selling.
Inventory management involves monitoring inventory levels to know how much you should have on hand. Too much inventory and you risk paying too much for storage or having outdated products. This results in poor cash flow. Too little inventory and you risk missing out on potential sales and frustrating customers. This results in lost business.
It’s critical that your inventory management system integrates with your e-commerce platform to process orders as fast as possible for customers. This also provides online retailers with real-time reporting of inventory levels, orders and returns.
E-Commerce Fulfillment: Order Processing
With inventory received and integrations complete, you’re ready to start processing orders.
Ideally, e-commerce businesses should be able to manage all orders in one system. This helps to keep track of the individual status of each order and trends over time, including dips or spikes in order volume.
Pick and Pack
After an online order is placed, the first step of order processing is to pick items from the warehouse, and then pack the items in a box or envelope (a.k.a. pick and pack). There may be additional steps prior to shipping the package, such as kitting and assembly, which we’ll hit on in the next section.
Pick and pack is one of the most important parts of order processing. It’s also one of the most expensive.
While order accuracy and delivery times are both dependent on an efficient and flawless pick and pack system, this part of the e-commerce fulfillment process accounts for 50 - 65% of labor costs when handled in-house. And since order accuracy and timely shipping are critical to customer satisfaction, many online retailers decide to outsource fulfillment.
>>>Related Resource: 6 Benefits of Outsourcing Pick and Pack Fulfillment
Kitting and Assembly
Kitting is when you combine two or more products, and assign them with a single SKU, such as shampoo and conditioner. Kitting can also refer to the items associated with a product, like support marketing collateral for an air fryer and recipe booklet. Assembly is the process of arranging the individual items in the kit.
A well-orchestrated kitting and assembly process can save substantial amounts of time and resources. For example, kitting and assembling items ahead of time, rather than as orders come in, streamlines the entire fulfillment process.
>>>Related Resource: What is Kitting and Assembly in E-Commerce Fulfillment?
The packaging process deserves substantial thought, as it directly impacts customer satisfaction and shipping costs.
Customer satisfaction: While ornate and beautiful packaging will delight customers, it means little if its contents are damaged during shipping. Be sure to choose durable packaging that ensures, without a doubt, that items will be delivered without damage. If profit margins don’t allow for ornate packaging, delight customers with thoughtful, well-designed and personalized marketing materials. Guides, tips, instructions, recipes and other helpful resources will make customers feel like you went the extra mile to ensure their satisfaction.
>>>Related Resource: Marketing materials every e-commerce shipment should include.
Shipping costs: Online retailers need to be aware that shipping costs are calculated by carriers based on the dimensional weight or the actual weight of a package. Many are surprised to learn that carriers always charge the higher price of the two. Shipping carriers will use the dimensional weight of a package for lightweight and bulky shipments since they need to make up for the loss in income that they would receive from a heavier and smaller package. Knowing how to navigate the nuances of dimensional weight and actual weight can substantially reduce shipping costs, which is why it helps to partner with a fulfillment company.
>>>Related Resource: Guide to dimensional weight shipping.
E-Commerce Fulfillment: Shipping
After an order is processed and packaged, it’s ready to be shipped.
As all online retailers know, shipping can be a headache–and international shipping can be even more frustrating.
The number one cause of shopping cart abandonment is due to shipping. Nearly half of all shopping carts are abandoned due to shipping-related issues, including:
- High shipping costs.
- Slow delivery times.
- Shipping costs exceeded the cost of the items they wanted to purchase.
- Complex or non-existent return policies.
- Limited shipping options, such as expedited or overnight delivery.
- No international shipping options.
Consumers expect fast and free shipping these days, and often purchase from stores that offer those options.
Shipping is complex and nuanced. There isn’t a one-size-fits-all carrier for e-commerce businesses, and international shipping is even harder to navigate. To find the optimal shipping solution, online retailers need to factor in the size and weight of their products, customer demographics, shipping method and profit margins to create the perfect “formula.”
Unfortunately, the optimal shipping solution often requires a combination of air, ocean, or ground transportation, in addition to the use of multiple carriers (a blend of postal and commercial carriers) and access to a global distribution network.
The good news is that e-commerce businesses can mitigate all of these challenges by partnering with a fulfillment company that specializes in e-commerce logistics.
An e-commerce fulfillment center with extensive logistics experience will have long-standing relationships with global carriers and networks to help create a custom shipping solution that saves you and your customers time and money.
>>>Related Resource: What E-Commerce Businesses Need to Know About International Shipping.
E-Commerce Fulfillment: Returns Processing
It’s important for e-commerce businesses to establish and post a return policy that simultaneously protects your business and keeps customers happy. While returns are an unfortunate side effect of doing business online, there are easy ways to lower your return rate and increase profitability. These include:
- Be clear and transparent about items that cannot be returned.
- Prominently post details about the return policy, including the time frame, who pays for shipping, and if a refund or credit is issued.
>>>Related Resource: Guide to E-Commerce Returns
When to Outsource E-Commerce Fulfillment
As your online business grows, you may find that the fulfillment process requires more time, resources and labor. Ask yourself the following questions. If you can answer yes to any of these questions, it might be time to outsource fulfillment.
- Is fulfillment becoming a burden on my business?
- Am I running out of space to store my inventory?
- Do I want to invest in buying more equipment or hiring more staff?
- Are order errors, high shipping costs or slow delivery times resulting in lost business?
>>>Related Resource: How to Find Right Fulfillment Partner
About GLF E-Commerce Fulfillment
With 20 years of experience in e-commerce fulfillment, GLF takes pride in offering transparent pricing, unmatched reliability and personalized services.
Since no two e-commerce companies have the same needs, our team takes the time upfront to learn about your business and work with you as a proactive partner to create personalized solutions that meet your business needs.
From global logistics to marketing fulfillment, GLF can seamlessly orchestrate supply chain solutions that go beyond just fulfillment, including:
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For more information, contact our team of e-commerce fulfillment experts today.
Editor's Note: This blog was originally published in July of 2021, but has been updated to reflect current information.