Successful eCommerce businesses all have one thing in common: terrific ecommerce fulfillment.
You might have the best product in the world, an epic website, and a shopping cart that slides your customers effortlessly to checkout. If your eCommerce fulfillment operations don’t run smoothly, however, your web-based business will be all splash and no cash.
ECommerce fulfillment isn’t sexy. But it’s just the thing that can tip your eCommerce business into success or failure.
Predictable and accurate fulfillment equals happy customers and positive reviews. Robust e-fulfillment processes can save you time and money and help you expand your business.
A successful eCommerce fulfillment process involves multiple vendors and schedules all lining up to run like a well-oiled machine. The better you manage all these moving pieces, the greater your chance to win at eCommerce.
What is eCommerce fulfillment?
Though you may not have put a name on it, eCommerce fulfillment has been an integral part of your business from the start. When you were packing boxes in your garage, you were your own e-fulfillment provider. Now that your business has grown, you probably outsource your fulfillment to a third-party logistics (3PL) service.
ECommerce fulfillment is the part of your eCommerce operation where you actually deliver your product to your buyers. Your e-fulfillment processes include everything from getting product onto fulfillment center shelves to picking and packing orders to shipping times and methods.
What’s involved in the eCommerce fulfillment process?
There are four basic components of the e-fulfillment process:
- ECommerce store and fulfillment center integration
- Receiving and inventory management
- Order fulfillment
- Returns processing
ECommerce Store and Fulfillment Center Integration
Your eCommerce store should integrate seamlessly with your fulfillment center, so orders flow directly to the people who will send them out. If you are a multichannel seller, your 3PL company should integrate with every platform on which you sell. For any platforms that aren’t supported, your fulfillment center should be able to create a custom app to easily connect your incoming orders to your stock.
The IT staff at your e-fulfillment services company is just as important as the people who pack and ship your orders. Look for a fulfillment center with a track record that includes minimal downtime and responsive support to help smooth any glitches.
Receiving and Inventory Management
Pallets of your merchandise ship to your fulfillment warehouse. Those pallets are logged into inventory and placed on shelves, ready to fill orders.
Receiving is the spot where many fulfillment warehouses fall short. A backlog of pallets sitting on a loading dock means your products aren’t in inventory. No inventory means no sales. This, as you may have guessed, is bad.
A top-notch e-fulfillment services company will move your goods from the loading dock into inventory within one to two days.
You should be able to log into your fulfillment center’s inventory management system and view your merchandise. This real-time data is critical for maintaining Goldilocks stock levels: 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).
Another aspect of inventory management 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. Shrinkage allowances range from 2 to 10 percent of your warehoused inventory.
Some fulfillment centers make inventory management a top priority and will take responsibility for any items that are lost or broken while on their shelves. In this case, you don’t have to account for shrinkage when you are calculating ideal stock levels.Order Fulfillment: Pick, Pack, and Ship
Order Fulfillment: Pick, Pack, and Ship
When an order comes in, your fulfillment warehouse will pick the right items to put in the box, pack them carefully, and ship them to your customer. That’s the pick, pack, and ship process.
Look for a 3PL provider that offers next-day turnaround, or even same-day shipping.
With strategically located fulfillment warehouses, shipping to your customers is speedy (see Fulfillment Center Location, below). It’s important that your orders are turned around quickly at the warehouse, too, or you’ll lose the benefit of that saved shipping time.
Returns Processing: Reverse Logistics
Ease of returns is important to eCommerce shoppers and can be a major factor in driving your sales. Receiving returns and putting items back into inventory for you is a crucial component of eCommerce fulfillment.
The more quickly returns are processed, the more quickly your customer will get a refund. Efficient returns processing also puts your stock back on the shelf so it’s available to sell again.
Hate them or love them, returns are an inescapable part of eCommerce. A good e-fulfillment center can make returns as easy for you as they are for your customers.
How is this different from drop-shipping?
The term “Drop-Shipping” get’s used in place of a traditional ecommerce order fulfillment, but the two models of getting a product in the hands of your customer are very different. traditional ecommerce fulfillment versus drop-shipping.
Resources: How to find the best eCommerce fulfillment service for your store
Fulfillment Center Location
There’s an old saying that only three things matter in real estate: location, location, location. The same is true of e-fulfillment services.
Your home base for your business may be tucked into one of the more remote corners of the country, but your inventory should be centrally located. Ideally, you should be able to ship to most customers within two business days.
“Shipping times of a 7-days or more may be acceptable for boutique or niche eCommerce companies. If you’re selling on one of the big platforms, such as Amazon or eBay or competing with those platforms, however, fast delivery is a must.” – See our article on: Choosing the Location of Your Fulfillment Warehouse
When you aim for national distribution, one warehouse location is probably not going to get you close enough to all of your customers. A bicoastal eCommerce fulfillment strategy with strategically placed fulfillment centers will allow you to ship to almost every part of the contiguous 48 states in two days or less.
The other benefit of well-placed fulfillment centers is lower shipping costs. Most carriers calculate shipping based on zones. The farther an order has to travel, the more zones it crosses and the more expensive it is to ship.
High shipping costs are one of the top reasons for eCommerce shopping cart abandonment. Fast, cheap (or free) shipping is critical to eCommerce success for most businesses. Analyze your sales trends and look at your projections for market expansion before you choose a 3PL company. Review the zone chart for all the warehouse locations of each e-fulfillment services company you consider to make sure that you’re getting the coverage you need.
Evaluating Fulfillment Services: Questions to Ask
You’re the boss of your eCommerce fulfillment center. It’s okay to ask a lot of questions to make sure you choose the 3PL fulfillment provider that best fits your business. That said, it’s not always easy to know what questions you should be asking to ensure this is the right fulfillment service for your company. Fortunately, we’ve outlined some questions to get you started:
- What types of products do you ship? This may seem like an odd question, but it’s one of the most important. If your product is large or heavy, you need a fulfillment warehouse that specializes in large and heavy items to give you the best advice on how to properly pack and ship your products. On the flip side, if you sell something very small, your products probably won’t get the best handling in a fulfillment center full of bulky items. The same can be true for hazardous materials or fragile merchandise. A fulfillment center that specializes in the types of goods you sell can save you money on packaging and shipping.
- Do you offer shipping discounts? Because e-fulfillment services providers are volume shippers, they often qualify for discounted shipping rates from FedEx, UPS, and other major freight companies. Make sure that discount gets passed on to you.
- What is the charge for setting up my account and integrating my sales platforms? The right answer to the question is free. Ask about all the charges relating to your account from beginning to end. Hidden fees can turn a reasonable quoted price for e-fulfillment services into a profit margin-busting expense.
- Who pays for fulfillment mistakes? What kind of guarantees does the fulfillment center offer if they pack or ship an order incorrectly? Will they waive the fulfillment and shipping fees when they make a mistake? A guarantee like this is a sign of a high-quality e-fulfillment provider one that doesn’t make many mistakes.
- Does your warehouse have backup power? People in other parts of the country still expect their orders to arrive on time, even if your fulfillment center is hit by a blizzard that knocks the power out. Ask how recently they have tested the backup system, too; a generator that doesn’t work won’t help you when extreme weather hits.
- What value-added services do you offer? A warehouse that can kit your merchandise has the potential to add value to your eCommerce business and increase your profit margin. Additional e-fulfillment services can include things such as adding custom lettering or assembling parts.
- Do you offer international shipping? Even if you sell only to domestic customers now, why limit your future? The growth potential of eCommerce is worldwide sales. Choose an e-fulfillment provider that can help take your online store to the next level.
- What inventory management and inventory control services do you offer? To avoid shrinkage, look for a fulfillment center that provides continuous inventory management, rather than spot-check inventories.
- What is your policy on inventory shrinkage? Find out the shrinkage allowance up front. A top-notch fulfillment warehouse will guarantee your inventory and protect you from the costs of inventory shrinkage and damage.
- What is your system for shipment tracking? Make sure that shipment notifications go directly to your customers and to you. Notifications should include tracking numbers so that you and your customers can follow up on shipments with the carrier and troubleshoot when needed.
- Do you have ISP backups in place? The power may be on, but an internet service provider outage can take a fulfillment warehouse down for the count. If your orders aren’t transmitted from your eCommerce shop, they won’t get shipped to customers. Make sure your e-fulfillment services provider uses more than one ISP so its internet service won’t be interrupted.
- What security measures do you take? You should be concerned with both internet security and the physical security of your merchandise. Find out what kind of controls the 3PL provider places on access to the sensitive and proprietary information that you’ll share with them. They should also conduct background checks on employees and use security cameras to prevent theft.
- How fast can you ship my orders? Find out what percentage of the country the fulfillment provider can ship to in two days or less. You’ll want to reach at least 70 percent of the country within that time frame via ground shipment to keep your customers happy. Ask about their turnaround as well. A fulfillment center that can ship same-day on orders received by a certain cutoff is an important asset to help you grow your eCommerce business.
- What are your customer service practices? Your e-fulfillment company can take much of the customer service burden off your shoulders. Make sure that they have systems in place to respond quickly to customer inquiries.
For more questions to ask potential eCommerce fulfillment providers, check this list.
ECommerce Fulfillment Reviews
There are numerous reviews online that compare eCommerce fulfillment companies. To choose from the top-rated 3PL providers, remember to match their service expertise to your needs. E-fulfillment isn’t a one-size-fits-all service. Check out these websites to help narrow your search and identify your shortlist of ecommerce fulfillment providers who can help your business grow
E-fulfillment reviews can help you narrow down your list, but they are no substitute for doing your homework. Ask the companies you’re considering for detailed information about the services they offer and their security practices.
Fulfillment is a core component of your eCommerce success. It may sound like a pain to vet your fulfillment center so carefully, but just do it. You’ll thank us later.
Fulfillment Center Core Competency
Even among the best eCommerce fulfillment providers, there are differences in core competencies that will make one a great match for your business and another a total mismatch.
The size and shape of your products is key to determining your fit with a fulfillment warehouse. If your merchandise presents any shipping challenges, because of size, weight, (is DIM weight an issue for your products?) or other qualities, you need a 3PL provider with expertise in delivering similar merchandise safely and economically.
At Red Stag, for example, we specialize in shipping heavy and bulky items. We understand how to pack bigger products so they arrive safely. And we use strategies to ship large items for the lowest cost, so we save you money. If you’re an ecommerce business shipping small parcels less than 1 pound, simply put, we’re not the solution for you. But if you’re shipping larger products, or have an average parcel weight of 5+ pounds, let’s talk!
Key Terms: Fulfillment Glossary
3PL: See third-party logistics.
Backorder: An order that can’t be shipped on time because one or more of the products in the order is out of stock.
Bar Code: Bars, such as those seen on most consumer goods, that can be scanned by a scanner. Bar codes can be used to track inventory.
Bill of Lading: The paperwork that details the particulars of a package, including weight, dimensions, contents, and destination address.
Blind Count: The person conducting an inventory isn’t told how many of each SKU is supposed to be on the shelves in a blind count. This makes the process of checking physical stock levels more accurate, because the checker counts what is in stock, not what they expect to be in stock.
Carrier: Shipping companies such as FedEx, UPS, DHL, and the U.S. Postal Service are all carriers. These shippers are also referred to as common carriers.
COD: Short for cash on delivery. The carrier collects payment for the order when the delivery is made and sends those funds to the seller.
Dead Stock: Those dusty items that sit on the back of the shelf for months waiting to be sold.
DIM Weight: Shirt for dimensional weight, also known as volumetric weight, this system for determining shipping costs is used by UPS, FedEx, and most major U.S. carriers. Dim weight determines shipping costs based on a combination of package weight and dimensions, so larger shipments are more expensive than smaller ones of the same weight.
Drop-Shipping: A product ordered through an eCommerce site is shipped directly from the manufacturer to the end customer. Drop-shipped items never go to the seller’s warehouse or become part of the seller’s inventory.
Dunnage: Packing material. Dunnage can include packing peanuts, air pillows, shredded paper, molded Styrofoam, or cardboard.
E-Fulfillment: Warehousing and processing of eCommerce orders.
E-Logistics: The data management part of third-party logistics operations.
ECommerce Fulfillment: Fulfillment of online orders, also referred to as e-fulfillment.
Electronic Data Interchange: Sometimes shortened to EDI, this is the transfer of your order data to your fulfillment warehouse and the exchange of data between you and the warehouse.
FIFO: Short for first in, first out. This inventory management system ships the oldest items first, so you don’t end up with dead stock.
Gross Weight: Total package weight, including all packaging materials.
Handling Charge: A charge for picking and packing an order. Handling charges may be passed along to the buyer or considered a cost of doing business by the seller.
Intermodal: Shipping that uses more than one mode of transport, for example container ship and truck.
Inventory: The products you have in stock at any given time.
Inventory Accuracy: The match (or mismatch) between the inventory that the computer says the warehouse has and what’s actually on the shelves.
Inventory Management: All of your decisions and actions to make sure you have the inventory you need, from setting reorder points and minimum stock levels to keeping accurate inventory records. Read more about inventory management tips here.
Just-in-Time: An inventory management practice where goods arrive right before they are shipped and very little stock is warehoused.
Kitting: Packaging multiple SKUs into a new item with a separate SKU.
LIFO: Short for last in, first out. In this inventory management system, the first inventory shipped will be the most recently received.
Light Assembly: A value-added service provided by the fulfillment warehouse. Light assembly requires unskilled or lightly skilled labor to put components of a product together before shipping to customers.
Logistics: All of the procedures required to manage inventory and move it from warehouse to consumer.
LTL Shipping: Short for less-than-truckload shipping covers most of the orders shipped to consumers. Shipments that are less than a full truckload are aggregated together onto trucks by common carriers such as UPS and FedEx. Some carriers only handle full truckloads, or FTL shipments.
Manifest: Also called a shipping manifest, driver manifest, or waybill, this is a list detailing what is in a shipment—whether it’s a truckload or just one package.
Minimum Stock Level: The smallest amount of stock that you can have in inventory before you need to order more. See also reorder point.
Net Weight: The weight of the contents of the package without the packaging.
Order Fulfillment: This refers to everything needed to send out an order, from receiving the order through picking and packing to shipping.
Order Tracking: The use of tracking numbers and software to track the progress of an order from the warehouse to shipment.
Packing List: The list placed in the box with the order, which lists every item in the package.
Pallet: A platform of wood slats onto which products are stacked. Pallets are designed so that forklift prongs can be inserted in the middle to lift and move goods. The amount of merchandise that can be placed on one pallet is also sometimes referred to as a pallet.
Pick and Pack: Picking the items to be shipped together in one order. Rather than shipping each item individually, orders are picked and packed into a single box to save shipping costs and get inventory to buyers most efficiently.
Pick Ticket: A list of products to go in an order.
Picker: The warehouse employee who picks items off the shelf to fill orders.
Reorder Point: The point at which you need to order more of an inventory item to ensure that you never run out of stock.
Replenishment: The process of adding more inventory when stock levels become low.
Return Merchandise Authorization (RMA): The ticket that allows products to be returned to you. The RMA has its own tracking number, so you can manage returns.
Returns: Merchandise sent back by customers.
Reverse Logistics: The process for accepting returns back into the warehouse and placing them into inventory again.
RFID: Radio frequency identification, or RFID, is a tracking mechanism that uses radio frequency-emitting chips attached to inventory to track it in the warehouse.
Safety Stock: Extra stock beyond minimum stock levels. Safety stock is insurance against supply chain disruptions due to bad weather, etc. Setting safety stock levels ensures that you will never run out of product.
Shipping Container: The large metal boxes used to ship products. These are often sent by boat or container ship from manufacturing hubs for distribution around the world. Containers are often loaded onto freight cars or trucks for multimodal transport.
Shipping Cutoff Time: The time of day by which an order must be received to be shipped the same day.
Shopping Cart Integration: The connection between your eCommerce shopping cart and your fulfillment warehouse’s order processing software. Orders in your online shop translate to pick tickets and bills of lading at the warehouse, as your orders are picked, packed, and shipped.
Shrinkage: The loss of inventory stored in a fulfillment warehouse due to breakage, theft, being misplaced, and other types of damage.
Skid: A skid is another word for a pallet.
SKU: This stands for stock-keeping unit. Each product is given a unique SKU. These numbers help you and your fulfillment warehouse track your inventory.
Supply Chain Management: Management of the flow of your products, from manufacturer or supplier to fulfillment warehouse to your customers. This includes management of the physical items, as well as the data that tracks those items. Read more about Supply Chain Management here.
Tare Weight: The weight of the packing materials of a package. You can calculate the tare as the difference between gross and net weight.
Third-Party Logistics: Outsourcing your warehousing, packing, and shipping to a third-party vendor who specializes in logistics.
Value Added Services: Anything from engraving to assembly. Many fulfillment warehouses can do more than pick and pack.
Zone Skipping: The practice of trucking packages closer to their shipping point before giving them to a carrier to deliver to the customer. You can also effectively skip zones by using two or more fulfillment warehouses, thus placing your goods within a zone or two of most consumers.